An Analysis Of Policy Regulation Towards The Funding Of Commercial Property Development Through Innovative Financial Methods

As of 2004,a series of macro-regulatory policies were implemented by the Chinese Central Government in order to control the exploitation of residential property investment. As a result,property developers have since shifted their focus towards commercial property resulting in rapid growth in this field. However,stakeholders still face three major issues:(1) Commercial property relies heavily on the collection of rent,which can be a relatively elongated form of capital return; maintaining these projects also requires continuous investment due to management and operation costs.(2) Increased financial pressures due to government restrictions on the sale of ownership via strata- title(3) Restrictions in policy have made it difficult to obtain funding through much more traditional methods such as line of credits and high costs and strict regulation of trusts and PE funds have made it even more difficult to raise capital. Under these circumstances,a series of innovative methods of funding such as preferential shares, REITS, financial leasing, crowd-funding(and CMBS underway) were introduced and have recently been constituted into the state-regulatory system. Yet,the actual effectiveness and efficiency of these regulatory practices under the current system remains questionable due to a number of issues, such as overlaps in jurisdiction,lack of transparency and relative legislation,etc. These are all issues that the current financial administration needs to resolve.