China is right to extend a warmer welcome to foreign investment

China announced last week that it has relaxed the rules for foreigners investing in its weakening property market. The move is timely in arresting declining prices.

As many Chinese stock investors face margin calls (the Shanghai A-share index has dropped to the 3,000 level from 5,000 just a month ago), some are having to sell their property holdings to raise cash. If the property market suffers a rout, Beijing leaders might find themselves in hot water.

Last week, six Chinese ministries - including the People's Bank of China - issued a statement scrapping rules requiring foreign investors to pay to the authorities the full amount of registered capital for their mainland entities before they could take out any property loans. Without a loan, most people - Chinese or foreigners - can't afford to buy a flat or an office.

Foreigners can now also buy more than one apartment. The previous rule was designed to nip any speculation in the bud. Moreover, the previous requirement that foreigners had to live in China for at least a year has been scrapped. These are all positive measures that will boost demand and stabilise the property market.

In July, 29 of the mainland's 70 cities reported falls in property prices. reported that, since the end of July, some investors there had put their properties up for sale at a 3-5 per cent discount on prevailing market prices. Some may be needing cash quickly to cover their stock market losses.