The Forest City project developer will refund money to mainland China buyers following China's tighter policy on capital controls.

"We have completely stopped our (Forest City) sales in China," Country Garden Holdings vice-president Zhu Jianmin is reported as saying by South China Morning Post (SCMP) today.

Zhu said buyers who had made down payments on Forest City properties but are no longer able to transfer the rest of their payments out of China "can cancel the transaction and there is no need to pay for a forfeit fee".

The project has always abided by Malaysian and China's rules and regulations, he stressed, and that only five percent of buyers were considering withdrawing their purchase.

Country Garden, which is China's third largest developer, closed all its Forest City sales centres in China in March, after its government's crackdown on capital outflows.

Beijing rolled out policies on capital controls since the second half of last year, to prevent a large drop in its stockpile of foreign reserves triggered by the yuan's devaluation, SCMP reported.

Developers such as Country Garden and mainlanders dreaming of a home overseas were dealt a big blow when China implemented new barriers to stop people converting the yuan into other currencies for overseas property purchases.

Developers must follow rules

Country Garden chairperson Yeung Kwok-keung said developers must follow the new rules, otherwise the government would "give you a spanking".

Beijing's crackdown on capital outflows has got China buyers very worried, SCMP said.

Hailing from Zhuhai, 42-year-old Vicky Wu said she has asked Country Garden for a refund of her RM69,300 deposit for a 59 square-metre flat at Forest City.

Since this year, Country Garden is requiring all China buyers to make payments in Hong Kong or Singapore to bypass Beijing's capital controls, SCMP said.

"The salesman is chasing me for instalments but I'm hesitating. I'm worried about being put on the government blacklist," Wu said.

There are more than 50 buyers in a WeChat group called "To quit Forest City and get refunds" who were waiting for refunds, she revealed.

Johor Menteri Besar had previously been reported as saying China's capital controls would not affect Forest City.

China's State Administration of Foreign Exchange (Safe) said its citizens are not allowed to buy properties, make security investments, buy life insurance and such starting early 2017.

However, China's envoy to Malaysia, Huang Huikang, reportedly said China's capital flight control policy would not stop its citizens from making real estate investments overseas.

There has been an ongoing debate over the Forest City development project in Johor.

Former prime minister Dr Mahathir Mohamad has repeatedly claimed that the project could undermine Malaysia's sovereignty.