Client Alert

China Real Estate Update: Foreign-invested Partnerships — New Vehicle for Real Estate Investments?

18 Jan 2010

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Since China’s State Council publicly released new measures to govern the establishment of foreign-invested partnerships (“FIPs”) last month, there has been considerable discussion about the new structuring opportunities that FIPs offer to foreign investors in a variety of industry sectors. This Client Alert discusses the key features of an FIP, with a focus on investments in the real estate sector.

Promulgation of the FIP Measures (as defined below) raises as many questions as it answers, and whether an FIP can be used to invest in real estate projects in China and what the benefits of doing so may be will remain unclear until implementing rules are issued.

Introduction

The General Office of the PRC State Council publicly released the Administrative Measures for the Establishment of Partnerships by Foreign Enterprises or Individuals in China State Council Decree No. 567, the “FIP Measures”) on December 2, 2009, which will be effective as of March 1, 2010.

Operating in conjunction with the provisions of the revised PRC Partnership Enterprise Law, the FIP Measures permit for the first time the establishment in China of partnerships that include foreign companies or individuals as partners.

Promulgation of the FIP Measures is potentially significant both because the FIP Measures appear to represent a marked departure from the current approval regime for foreign investment in China and because an FIP offers greater flexibility with respect to investment structuring than what is currently available foreign investment vehicles. We discuss both points in this legal update, and also address briefly the possible use of FIPs for the establishment of onshore investment funds.

In This Issue:

  • Foreign-Invested Partnerships — New Vehicle for Real Estate Investments?
  • Rules Tighten for China Real Estate
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