Is there a bubble, is there not? Economists will debate forever. Meanwhile, the Chinese government seems to take the threat seriously. In January, it first raised short-term interest rates a couple of times, then increased banks reserve requirement and, now, it is ordering banks to simply stop lending for a while.
(…) "Asset price rises bear more risks than consumer inflation". (…)
"If the price in a grocery store goes up, then demand comes downs; but if the housing price goes up, then actually demand might increase because people expect further increases," he said. "This is a much more dangerous phenomenon."
Housing prices in 70 major Chinese cities increased by 7.8 percent year-on-year in December, the fastest pace in 2009, according to official data. But many people complain that price rises are much higher than indicated in the index and have become unaffordable.(…)
"I can’t say there are (asset) bubbles at the moment," Timmer said. "But there’s a risk it is an area where you have to keep your eyes peeled."
Dong Yuping, senior economist at the Chinese Academy of Social Sciences, said: "Although house prices rose very fast in some big cities last year, it is hard to say if bubbles have already formed. There are few widely-agreed standards for us to decide whether there are bubbles or not."(…)
Timmer said the Chinese government has taken appropriate measures to keep the risk under control. "The first step is to recognize this is a potential issue and be willing to act, and the Chinese government does both."
The government has raised taxes on sales of second-hand homes and tightened land transfer rules, among others, to hold back surging prices.
(…) "However, in an overall environment of weak global demand, the government will be cautious very careful to avoid dampening overall activity in the sector."(…)
Related posts:
- China’s Housing Bubble Trouble
- DATA FEED FEARS OF BUBBLE IN CHINA. HOUSING ON FIRE.
- NO HOUSING BUBBLE IN CHINA
- Vanke Sees China Bubbles
- China Housing Market Risk Worse Than US
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