A welder works on the 42nd floor of the Shanghai World Financial Center in the city yesterday. The tower, which will stand 101 stories and 492 meters when it's completed in 2008, aims to be the tallest building on China's mainland.(Photo: Shanghai Daily)

    BEIJING, July 25 -- Foreigners won't be allowed to buy homes or apartments in China until they've been here at least a year, the central government said yesterday as it issued a series of new policies designed to dampen the flow of overseas capital into the red-hot property market.

    Among the other measures, overseas institutions and individuals that want to purchase property for purposes other than their own use must set up a company in China, according to a joint circular issued yesterday by six government agencies. Details on the new regulations were published on the Xinhua news agency Website, which did not specify when the measures would go into effect.

    The State Administration of Foreign Exchange said in an April report that overseas institutional investors bought US$3.4 billion worth of property on China's mainland last year, but many analysts believe the real figure was bigger.

    Several policymaking bodies have expressed concern that uncurbed foreign investment may have negative effects on financial stability and property prices.

    "Large purchase deals by overseas investors in the residential sector have offset government efforts to cool the surging housing prices," said Feng Hongrui, general manager of the real estate services firm Midland Shanghai.

    The city's housing prices remained high in the first half as the result of the acquisition of several large apartment blocks by foreign firms such as Morgan Stanley and Goldman Sachs.

    "The new regulations, which make the investment procedure more complicated and harder for companies to take their profits home, are set to discourage foreign firms from pouring in more money," said Gu Zhenfei, an associate with CMS Bureau Francis Lefebvre, a law firm that has just helped a European manufacturer purchase warehouses in Shanghai for leasing.

    The new rules also make it harder on individual investors to buy a residence here. Foreigners who have been in China less than one year are barred from buying houses. Those who meet the residency rules must purchase property only for their own use and cannot lease it to others.

    Chinese residents of Hong Kong, Macau and Taiwan and overseas nationals can buy houses for personal use up to a "certain" size, which the document didn't specify.

    At the corporate level, overseas investors must obtain a foreign investment permit from the Ministry of Commerce as well as an operational license from the State Administration of Industry and Commerce.

    Developers planning investment of more than US$10 million must place at least half that amount as registered capital in their mainland-incorporated enterprise.

    Companies at present can invest in Chinese real estate through firms registered abroad.