Don't play for keeps

Tempting but treacherous, China's real estate market has attracted foreign investors of all stripes. Some institutional players from North America and Europe have prospered; others have not. Individual investors, meanwhile, rushed in during the first half of the last decade but have spent much of the second half on the sidelines, frozen out by a government concerned over asset bubbles. To a large extent, the foreign love affair with Chinese property has been a slave to regulatory maneuverings. And as this affair continues – confidence may have taken a hit when the property bubble burst last year, but China is still the strongest economy in the developing world – investors look for ways to smooth their path. One strategy that has recently received attention – certainly among small developers targeting small projects – is the use of a long-term lease. A long-term lease is a contract, not a transfer of an ownership interest in property, and so approval can be...

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