Foreign investors are trying to quench the thirst of capital-hungry mainland real-estate developers by buying into investment funds that target the domestic housing industry.

The China Housing Industry Elite Fund (CHIEF) is one such fund that is expected to be formally launched next month - initiated by the China Housing Industry Association (CHIA), it will have an initial scale of US$200 million, sources with the association said.

Overseas investors, especially from Hong Kong, Europe and the United States, will subscribe to half the fund while domestic investors will account for the other half.

Due to policy obscurity in the industry fund sector, the fund will be first registered in Hong Kong, said CHIA assistant chairman Wang Hailian.

She told China Daily yesterday that parties are still in final negotiations and preparations for the launch of the fund; and a press conference will be held in Beijing on September 20 to reveal details.

Other sources said that the fund, which has been in the planning for nearly a year, would mostly target real-estate development projects, new material and technologies used in housing industry and the mergers and listings of relevant enterprises.

It has been largely subscribed to by private funds over the past few months; and should be launched next month.

"We hope that apart from the Hong Kong-registered fund, we can also establish a special investment management company in the mainland to operate the fund," said another CHIA official.

China is currently drafting a law on industry funds, which will provide more comprehensive regulation.

So far, the Chinese Government has only approved one Sino-foreign joint-venture industry fund management company - between China Development Bank and a Switzerland entity two years ago. But that is only an isolated case, while faster and larger-scale approval of similar joint ventures will wait till the new law comes out, said Cao Wenlian, director of the finance division of the State Development and Planning Commission.

But the law is still waiting its turn in the legislation schedule; and is unlikely to come out in the near term.

Before that, domestic and overseas investors can only manoeuvre around the policy-permitted sphere.

As China's real estate industry booms, the sector is obviously a big magnet for industrial fund investors. While launching an investment fund within China is difficult, more domestic companies are turning to foreign partners to initiate such funds abroad.

Beijing Capital Group, for example, recently jointly launched an industry fund targeting real-estate development in China with ING from the Netherlands.

The major shareholders of the fund are big real-estate companies and financial institutions from Europe, the United States, Southeastern Asia, Hong Kong and Taiwan.

An increasing number of such joint efforts in real-estate development funds reflects the eagerness of foreign investors to enter the domestic market under existing policy curbs, said Liang Bei, director of the international real estate research centre of the University of International Business and Economics.

Meanwhile, the government is also trying to create new financing channels for real-estate companies that have relied too much on banking loans. The central bank, announcing its recent move to tighten control on real-estate loans, which is aimed to curb lending risks and cool down the overheated property market, has urged the authorities to widen other financing resources for developers.

Launching trust projects and such housing industry funds are feasible moves, experts said.

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