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...October (by volume of floor space) from the same month a year earlier. There is also concern percolating that home prices in major cities are rising out of the reach of the average Chinese. Not only could that cause social discontent, it may also dampen consumption - which China's policymakers desperately need to increase. If families need to allocate more and more of their income to housing, that drains away the cash that's available to buy other consumer goods. (See pictures of the best-selling cars in China...
...more prices rise, the more pressure China's central bankers come under to tighten up monetary policy and curtail credit . Some observers in China are already getting nervous. "If the Chinese central bank does not respond quickly to rein in credit growth, unchecked asset bubbles can seriously distort allocation of resources and thereby undermine the country's long-term growth prospects," a Nov. 5 commentary in China Daily warned...
Still, policymakers must tread carefully. With exports improving but still weak, exiting stimulus measures too soon could derail the economy's recovery. Even restraining the property market could affect growth, since investment in the sector - which accounts for a full 10% of GDP - has been a key driver of China's overall economic rebound. Investment in property jumped nearly 18% in the first three quarters of 2009 from the same period in 2008. (Read "China's Own Version of the Real Estate Bust...
...China's policymakers are indicating that pro-growth policies will stay in place. Economists don't expect the central bank to hike interest rates until next year. Instead, analysts think the government will try to avoid a real estate bubble by implementing sector-specific measures in the coming months to cool down property prices, like tightening access to mortgages for buyers of second homes - who are more likely to be purchasing apartments as speculative investments. (Read "Will China's Consumers Save the World Economy...
...economists believe that the longer Beijing keeps the stimulus tap open, the greater the danger that the good times in Chinese real estate could turn ugly. Louis Kuijs, a China economist at the World Bank in Beijing, commented in early November that even though Chinese policymakers may not need a "major tightening" right away, "risks of asset price bubbles and misallocation of resources in the face of high liquidity need to be mitigated." Kuijs concluded that "the overall monetary stance will have to be tightened eventually." Beijing's big test is to make sure that doesn't happen too early...