China's house price dilemma – how to sustain the economy but not the housing bubble
La economic policy of the Chinese government it has been positioned on a narrow ridge for months. On the one hand we need to slow down the pace of the economy: the toxins that are formed in periods of prolonged booms must be expelled from the body, and the most dangerous of these toxins are real estate bubbles, as the Western world sadly learned on the occasion of the Great Recession, triggered by excesses in the housing sector. On the other hand, however, we must avoid that the slowdown becomes a retreat, that the bubble is deflated all of a sudden with deleterious effects for the financial sector and for the negative wealth effect on household spending propensities.
The problem is that, while the economy is indeed slowing down, house prices, according to the latest data, have started to rise again: A major real estate complex in Beijing sold its 1462 apartments in one day last month. In China's 100 largest cities, house prices rose for the 14th consecutive month and reached, on average, 10347 yuan (€1185) per square meter. In the month of July alone in the 10 major cities, including Beijing and Shanghai, prices rose by 1,34% compared to June.
It is therefore likely that the Chinese authorities will maintain restrictive measures on credit conditions, and credit volumes, related to the real estate sector, even at the cost of a further economic slowdown.
http://www.chinadaily.com.cn/business/2013-08/15/content_16897126.htm
