http://www.iht.com/articles/2006/06/22/bloomberg/bxchina.php

China plans to restrict purchases of real estate by foreign investors in order to reduce speculation and prevent a property bubble, a government official said Thursday.

New rules defining what type of overseas investors can buy property could be announced this month, Lin Zheying, deputy director general of the Commerce Ministry's foreign investment administration, said in Beijing.

The regulations may threaten plans by investors like Citigroup and Morgan Stanley to increase holdings of Chinese real estate after prices rose 7.1 percent in Beijing through May. Prime Minister Wen Jiabao has curbed lending to cool an economy that grew 10.3 percent in the first quarter and to prevent a drop in land prices from causing loan defaults.

"The government is worried that overseas investment is bringing too much foreign currency into China and that it will cause property bubbles," said Liu Yang, a fund manager at Atlantis Investment Management in Hong Kong. "But people are buying because they see real growth prospects and real returns from Chinese real estate."

Policies to cool foreign property investment come amid a raft of other measures that Wen is implementing to cool a credit-fueled investment boom driven by swelling inflows of foreign capital.

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