While China’s population and economy are booming and migration to the cities is increasing, its status as a Communist country might impact its real estate exchange traded fund (ETF) in ways that remain to be seen.

Xinhua News reports that China will not end its decades-old policy regarding rural land ownership, which in effect says that farmers do not actually own their farmland. The land is instead owned collectively by villagers. The Property Law states that farmers do own their houses and they have the right to use and manage their farmland, despite not owning it. Instead, farmland is held in 30-year land contracts. Once 30 years is up, contracts can be extended for another 30 years.

What will these strict land ownership laws mean for the Claymore/AlphaShares China Real Estate ETF (TAO)? The fund launched on Dec. 18, so it’s far too soon to tell if there’s been any impact, but this could be an interesting one to watch in 2008.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.