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Joel Rothstein, Paul Hastings
Joel Rothstein, Paul Hastings
CHINA ROUNDTABLE
26 March 2013
Presented by:
Joel H. Rothstein Partner Paul Hastings LLP
THE PRESENTER
Joel Rothstein
Chair Beijing Office
of Paul Hastings
Head Asia Real
Estate Practice
15 Years in Asia
GOALS OF PRESENTATION
1. How has Chinas macro real estate policies evolved over the last few years? What is expected next?
2. In the current policy environment - what are the opportunities and challenges currently facing foreign players that want to invest in China?
3.In the current policy environment is there a meaningful role for outbound investment?
AGENDA
Macro Policies
Foreign Investment Outbound Investment Q&A
MACRO POLICIES
Cooling and Heating
The Problem
Urbanization
Rising Wealth
Limits on multiple residence purchases Stricter mortgage qualification requirements/higher down payments Property tax pilot programs Limit bank financing to developers Crack-down on informal lending market
Cool
Frigid
Icy
Glacial
Arctic
Cooling
> Deflate Bubble > > > > Housing Affordability Social Harmony Tame Inflation Banking System Risk Rational/Efficient Land Use
> Stable Economic Growth > Housing and Other Policy Goals > Local Government Forces
Heating
Heating and cooling of varying degrees. Goals: Guide Healthy Development and Stabilization of Market.
Limits on Ownership of Multiple Residences Capital Gains Tax Mortgage Loan Restrictions Development Land Zoning Affordable Housing
Development Land
Local governments should make land parcels available for development to increase supply.
Limits on Ownership of Multiple Residences Capital Gains Tax Mortgage Loan Restrictions
Development Land
Starting in 2006 laws/regulations have been enacted to make it more difficult to directly invest in China real estate CIRCULAR 171.
All direct foreign investment into Chinese real estate is subject to a complex regulatory approval regime ALL DEALS MUST BE APPROVED BY THE GOVERNMENT.
In last two to three years no major changes in foreign investor laws/regulations involving real estate FIEs.
THE DOOR
Sometimes more open sometimes more closed.
In or Out
IN
IN
Specialty Real Estate PE Fund Initiatives
OUT
High-End Residential Speculative Strata Title Deals High-End Office vary by location
OUT
YAP
Yap
An island in the in the
Yap
Deng Hong Chinese
Go Global!!
Chinas 12th Five Year plan and recent regulatory developments confirm Chinas determination to realize its go global policy and enlarge the scale of overseas investment. The governments announced intention is to encourage domestic enterprises to look outbound to:
Gain access to new markets and advanced technologies Secure energy, mineral and precious natural resources Tap opportunities in distressed markets in Europe and the United States. Expand sphere of influence.
Agency
NDRC
Date
July 2012
SAFE
July 2012
NDRC, MOFCOM, MFA, PBOC, CBRC, CSRC, SAFE, etc. General Office of the State Council
June 2012
Notice of the General Office of the State Council on Forwarding the Guiding Opinions of the National Development and Reform Commission and Other Relevant Departments on Accelerating the Cultivation of New Advantage in International Cooperation and Competition Interim measures for the Supervision and Administration of Outbound Investments by Central State-Owned Enterprises Measures for Administration of Verification and Approval of Overseas Investment Projects
May 2012
SASAC NDRC
Points to trend of simplifying and relaxing the approval regime. Increasing delegation of approvals to lower level provincial authorities away from central government authorities. Emphasis that the projects commercial aspects (economic feasibility, profitability etc.) should be determined by the investor on its own and not by the government approval authorities.
Caution:
While current policies are making outbound investment easier there is still a comprehensive legal approval process that needs to be complied with.
Policy: Go Global
Reality:
Chinese outbound investments are subject to a restrictive regulatory onshore regime
China has a comprehensive regulatory regime governing outbound investment by Chinese parties. There is no one outbound investment law instead there are a variety of laws and regulations which need to be consulted. No one approval authority controls. Multiple governmental authorities are involved.
MOFCOM
Ministry of Commerce
SAFE
State Administration of Foreign Exchange
SOEs
SASAC
State-Owned Assets Supervision & Administration Commission
Industry Specific
CSRC
China Securities Regulatory Comm.
CBRC
China Banking Regulatory Comm.
CIRC
China Insurance Regulatory Comm.
MOF
Ministry of Finance
MOC
Ministry of Construction
Other
Ministry of Culture Ministry of Health Etc.
CDB: China Development Bank China EXIM: China Export Import Bank
PRC Developers
Debt Providers
A Chinese Proverb
There are many paths to the top of a mountain but the view is always the same..
Q&A
Questions and Answers
Joel H. Rothstein is a partner with the international law firm of Paul Hastings LLP and is based in the firms Beijing and Tokyo offices. His practice focuses on real estate, banking and structured finance. He serves as Vice Chair of the Beijing office and head of the firms Asia real estate practice. With over fifteen years' experience serving clients in Asia, Mr. Rothstein is the firms longest serving real estate attorney in Asia where he has played a leading role in the establishment and expansion of the firms market leading real estate practice in the region. In his practice, he routinely advises and assists international and domestic investment banks, financial institutions, private equity funds, and real estate developers and investors in Asian as well as in other global markets in the following areas:
PRESENTER
Joel H. Rothstein Partner Paul Hastings LLP
19/F Yintai Center office Tower 2 Jianguomenwai Avenue Chaoyang District Beijing 100022 PRC t: +86.10.8567.5380 f: +86.10.8567.5400 joelrothstein@paulhastings.com
real estate venture formation and fund vehicle formation and management; real estate and other asset-based financing; asset securitization and secondary market trading of loan assets; real estate debt and equity capital market transactions, including REITS; NPL and hard asset portfolio acquisitions and dispositions; distressed asset and company restructuring and workouts; property acquisitions and dispositions; construction and development; and hotel and resort finance, development and management.
Mr. Rothstein has participated in structuring, documenting and implementing a number of landmark transactions and investment programs in both the United States and in Asia, including the first NPL securitization transactions completed both in the United States and Japan, cross-border joint ventures, and innovative conduit lending and non-recourse real estate financing programs in the United States, China, Japan and Korea. In addition to being a lawyer, Mr. Rothstein is also an architect and urban designer and a graduate of Columbia University's Graduate School of Architecture. He has previously worked on a number of architecture and urban design projects in diverse locations ranging from Cartegena, Colombia, South America, New York City and Los Angeles. Mr. Rothstein received his J.D. degree from New York University School of Law and was the editor of the publication New York University Review of Law and Social Change. Mr. Rothstein is a frequent lecturer and author on real estate finance and Asia real estate investment.
www.paulhastings.com
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