Government Suspends Asset Management Plans for 16 Cities’ Commercial Housing

(Beijing) — China has banned the registration of privately offered asset management plans (AMPs) that channel funds to commercial housing projects in 16 cities where home prices had been rising fast — the country’s latest effort to curb investment in the real estate market.

The regulation, which took effect Monday, said that the Asset Management Association of China (AMAC), a government-affiliated industry group, has suspended the registration by fund companies for five types of AMPs that provide funding to real estate developers, according to a post on the industry group’s website.

These AMPs are often used to circumvent restrictions on whom fund companies can make loans to. Money raised by fund companies through these AMPs has poured into the property market in 2016, inflating a potential bubble.

The targeted AMPs include entrusted loans — a loan from one company to another routed through a bank, securities companies or some other sanctioned financial firms — and debt passed off as an equity investment in a property developer.

Fund companies are also barred from issuing AMPs that indirectly invest in the real estate sector through trust plans and other financial products managed by other institutions.

The regulation is the latest effort to tighten regulation of investments in the real estate industry and quash potential asset bubbles in major cities, although house prices have fallen across the country.

The new policies “stick to the belief that houses are for habitation, not speculation,” according to a notice published on the WeChat account of the asset management association. The statement echoes a previous pronouncement by the country’s top leaders after the 2016 Central Economic Work Conference in December, an annual three-day meeting of China’s leadership to set the national economic agenda.

Regulators have adopted a slew of measures to curb the country’s overheated housing market since late last year after home prices in big cities rocketed.

The new restrictions apply to cities that include Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin and Xiamen, AMAC said.

According to the National Statistics Bureau, investment in property development in China totaled 10 trillion yuan ($1.45 trillion) in 2016, up 6.9% from the previous year.

Contact reporter Chen Na (nachen@caixin.com)