Solely foreign-funded companies will continue to be banned from the real estate management business in China, it was revealed yesterday.

China did not promise to open the market in its commitment to the World Trade Organization (WTO), said an official with the China Real Estate Management Association.

"We have to be very careful, because the business is related to the improvement of people's living standards and the stability of social order," said the official, who declined to be named.

A number of foreign companies have applied to enter the business after China's membership to the WTO was accepted, he said.

Relevant government departments are considering whether to allow solely foreign-funded companies to do business in coming years, he added.

Yao Li, managing director of Yinda Property, said China should open the business to solely foreign-funded companies, because these companies would help improve the overall quality of China's real-estate management industry.

"A more open market will also require the government to provide improved regulations," she said.

China's real-estate management business started in 1983, when the first agency was established in South China's Shenzhen Special Economic Zone.

Now the country has more than 20,000 real-estate management companies, including Sino-foreign-funded ones.

"Real-estate management has become known among common people, because many developers and owners began to employ reputable companies to provide professional and quality services for their properties," said Mo Tianquan, secretary-general of the China Real Estate Index System.

"Quality management has become a necessity when marketing a property," Mo said.

All major Chinese cities such as Shanghai, Beijing and Guangzhou have established a modus operandi for property management.

However, problems still exist in the current property management industry, experts said.

According to the Property Management Regulations for Residential Districts, management fees cannot be treated as the income of the management company. The maximum amount of remuneration is limited to 15 percent of revenue from management fees.

But according to the government's taxation regulations, the income from management fees is regarded as the income of the company and a sales tax of approximately 15 percent will be levied.

Management companies have the authority to control the operating expenditure and use of such fees.

The disparity between the two regulations has generated conflicts between the owners-occupiers and management companies.

The government should try to upgrade current standards with reference to international practice.

(China Daily March 5, 2002)