According to a report by Shanghai Securities News, overseas capital has not been carefully watched over as a source of funding for real estate development.

But it was understood that China's Securities for Foreign Exchange Administration (SAFE) has begun to strengthen its supervision in this arena and it is probable that strict rules against foreign speculation in real estate will be enacted in short order.?

In the second half of April, SAFE's capital account supervisory deputy chief Sun Lujun said that SAFE has been on a high state of alert regarding the sharp increase in foreign capital in China's property market and "other investments" and is actively discussing appropriate countermeasures.

Prior to this remark, statistical bureau spokesperson Zheng Jingping has publicly called for the appropriate adjustment of policies governing the direct entry of foreign capital into real estate arenas.

Afterwards, in the end-of-April SAFE International Balance of Payment Annual Report, mention was made of the high-level attention paid to the role of foreign capital in China's property markets in order to "preserve the economic and financial security of the nation."

Statistics show that in 2005, foreign capital bought US$3.4 billion worth of Chinese property. However, due to imperfections in methods of collecting these statistics, a large amount of foreign funds invested in China's real estate have escaped recognition and the latter has directly contributed to the endless rise in China's property prices.

Numerous Chinese scholars have called for tighter controls by supervisory departments of these "back-door" entries into China by foreign capital through real estate investments.

Some scholars warned that the entry of foreign capital into industries during their inflationary stage would accelerate the formation of bubbles and the subsequent withdrawal of foreign capital could trigger financial panics, leading to the bursting of these bubbles.
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(China News Service June 3, 2006)