FIREE recordals track foreign capital


Since May 2007 any injection of foreign capital in foreign-invested real estate enterprises (FIREEs) must be recorded with the Ministry of Commerce (MOFCOM). These “FIREE recordals” provide a useful perspective on the trend and pace of new foreign capital inflow into China’s real estate sector. However, the FIREE recordal statistics do not disclose the actual amount of foreign capital involved in transactions.

firee-recordals-track-foreign-capital-1Baker & McKenzie has been tracking FIREE recordals announced by MOFCOM since May 2007. Set out below are statistics and data up to the end of February 2012. In summary:

  • The total number of FIREE recordals for February 2012 was 42, down from 46 in January 2012
  • The total number of FIREE recordals in 2008, 2009, 2010 and 2011 were 1,051, 991, 1,094 and 767 respectively
  • Since May 2007, cumulatively, there have been 5,809 FIREE recordals up to the end of February 2012. This includes 2,554 cases of new project operating entities being established, 2,674 cases of capital increase or M&A transactions (involving capital increase) related to existing project operating entities, and 253 cases of M&A transactions that do not involve any capital increase

About the regulations

The regulatory regime for recording FIREEs was first established in May 2007 by MOFCOM and the State Administration of Foreign Exchange (SAFE). This FIREE recordal regime was part of a scheme of regulatory measures introduced between 2006 and 2007 to monitor and control foreign investment in the real estate sector at a time when the central government considered the real estate sector to be overheated.

This regime controls all types of foreign capital inflow being injected into the real estate sector for purposes such as the setting up of new entities, capital increases, and mergers & acquisitions. Foreign capital flowing into China cannot be converted into renminbi (China’s legal currency) unless and until the FIREE recordal process has been completed with MOFCOM and SAFE.

Since July 2008, the provincial-level commerce authorities have been charged with the primary responsibility of vetting the legal compliance of FIREE-related transactions. MOFCOM reserves the right to conduct random checks on the recordals filed by the provincial authorities.

firee-recordals-track-foreign-capital-2Generally, within one to two weeks of receiving an electronic submission from a provincial-level commerce authority, MOFCOM will release the new FIREE recordal on its public website. Only then can the local bureau of SAFE and the local commercial bank credit the foreign currency funds into the accounts of the transaction parties concerned. In December 2008, MOFCOM further simplified the local recordal procedures such that the general office of the provincial government is no longer required to jointly endorse the recordal form with the provincial authority.

In December 2010, MOFCOM announced Notice 1542, which requires local bureaus of MOFCOM to use the FIREE recordal regime to slow down new foreign investment into the real estate sector.

Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Zhang Danian (Shanghai) at: