Economic reform and the future for real estate in the People′s Republic of China

Examines the development of China′s land management system and the hidden constraints within which a socialist market system is striving to get established. Also examines the rationale behind investment in geographical areas of the PRC and the different trends in foreign investment observed to date. The establishment of real estate markets in China really only commenced in 1978 as a result of China′s drive for modernization. They are, however, struggling to develop against a legacy of central economic planning and the allocation of land by the State to state‐owned enterprises. This legacy eschewed the principles of communism by allocating land without compensation, where the terms of years were deliberately unspecified, where any rights of transfer were left unclear and where the obligations and rights of land users were not clearly defined. Since 1988, successive legislation and new regulations have sought to drive out these old principles and replace them with laws and regulations with which the West may be more familiar. As they relate to construction and land ownership the new regime of legislation is now sufficiently clear to have encouraged foreign investment in China′s real estate development. This period of transition from the old system to a new system of land tenure has nevertheless been a confusing one that has left many pitfalls of which overseas investors should be aware and beware. Markets have developed, however, specifically investment opportunities related to geographical locations, in particular the Pearl River Delta, Shanghai and the Yangtse River Delta and the area in and around Beijing. But other areas are emerging as provinces which will begin to compete.