Between 2005 and 2007, foreign investors purchased almost 60% of prime real estate assets in China. Now, however, that may be all over. In addition to the expected drop in purchases because of the global real-estate downturn, the Chinese government has also implemented new, tighter regulations on prospective buyers.

The research firm Jones Lang LaSalle concludes that state firms, insurers, national and provincial pension funds, the country’s sovereign wealth fund and the State Administration of Foreign Exchange will take up the slack from the loss of foreign investors by making purchases themselves.

The Jones Lang LaSalle report shows that the domestic share of total property investment grew to 70% in the first half of 2009, up from 36% in 2008.

China is deregulatibg its insurance industry. A new law will allow insurers to invest in the real estate market. It’s expected that this could pour 236 billion yuan ($35 billion) into the real estate market.

Recently, China Investment Corporation, the country’s $300 billion sovereign wealth fund, has indicated its intention to increase its investment in real estate.

The Corporation has already put money into Morgan Stanley’s new global property fund which will invest in China.

In addition, this report concludes that the global commercial real estate market will recover in about nine months.