Cooling down housing boom


Updated Wed, 21 Jul 2004 00:00:00 GMT

Measures should be taken to dilute the real estate industry's leverage over China's economy, according to an article in Beijing News. An excerpt follows:

Due to efforts to corral its red-hot economy, China has attained some notable achievements. Loan frequency, fixed asset investment and the industrial economy have all been slowed. But it might be too optimistic to think these measures should be curtailed.

Different sectors vying for a piece of the economic pie led to this round of overheated economy, with the real estate industry being most to blame.

In recent years the real estate industry has been the engine driving domestic economic growth, as well as an exorbitant profit-making sector.

It has not only boosted banks' business of releasing loans but also pushed forward related industries. Steel, cement, electrolytic aluminium and building materials, which are now under the government's disciplining, have all been booming thanks to the real estate industry.

Meanwhile, limited resources like power, water and transportation have bottlenecked further economic development. They have been consumed in large scale by the real estate industry.

It could be judged that the overheated real estate industry has led to this round of red-hot economy.

In this way, during macroeconomic control, the real estate industry has earned special attention. Land use and loan releasing have been taken under control. But despite strict measures, the real estate industry has had little influence on either investment or the price of housing.

If the real estate industry is not shifted in a healthy way, a serious financial crisis will be inevitable. Once the real estate bubble is broken, domestic banks might be the final victims.