Foreign investors in China will find that the filing process for real estate projects could become swifter. A new notice, dated June 13th 2008 (“New Notice”) was promulgated by the Ministry of Commerce of China (“MOFCOM”) stipulating that the authority in charge of the filing procedure for new foreign invested real estate projects shall be transferred from MOFCOM to its local counterparts at the provincial level (“provincial departments of commerce”) as of July 1st 2008.
Until the adoption of the New Notice, the joint Circular adopted in May 2007 by MOFCOM and the State Administration of Foreign Exchange (“SAFE”) applied (Circular on Further Strengthening and Regulating the Examination, Approval and Supervision of Foreign Investment in the Real Estate Industry [Shang Zi Han  No. 50] (“Circular 50”) . According to Circular 50, all new foreign invested real estate projects approved by local counterparts of MOFCOM at the provincial or lower levels had to be reported to MOFCOM for filing within one working day following the issue of a certificate of approval for the project irrespective of the amount of total investment. Without the green light of MOFCOM, foreign enterprises were not able to open a foreign currency bank account and convert foreign currency into Renminbi. Upon completion of filing, MOFCOM would publish the names of the successful companies on its website. Foreign invested real estate companies have struggled with the bottleneck created at MOFCOM level which had to review hundreds of project application documents. Several foreign investors have delayed or were even forced to cancel their investment plans due to the endless procedure and the corresponding impossibility to finance real estate projects.
With the promulgation of the New Notice and the delegation of powers at provincial level, it can be expected that the timeframe of the filing procedure and the timeframe for the related subsequent injection of capital will be substantially shortened.
However, it is unlikely to see provincial departments of commerce necessarily adopt a more lenient attitude although they historically have been vested with the responsibility to attract foreign investment to boost the local economy. Firstly, according to the New Notice, the filing criteria will remain strictly the same. Furthermore, if MOFCOM finds any provincial departments of commerce twice or more in violation of the New Notice, the delegation of powers may be withdrawn. This Damocles sword will undoubtly lead a large number of the provincial departments of commerce to adopt a cautious approach.