(China Daily)
Updated: 2007-10-27 14:24

The accelerated rise of housing prices in major Chinese cities proves that the fight against property inflation can be a much tougher job for policymakers than reining in consumer price hikes.

Latest statistics show that Chinese economic growth slowed a touch in the third quarter while the consumer price index (CPI) inflation edged down to 6.2 percent in September from the 11-year high rate of 6.5 percent in August.

The moderation of gross domestic product growth and CPI inflation last month has sparked optimism that the Chinese economy is turning toward a slower and more sustainable growth track.

Related readings:  Property starts to slow  Property tax issue  Buyers go cold on property market  Property market to stay robust

However, even before Chinese policymakers can breathe a sigh of relief, new housing prices have put them on pins and needles again.

Housing prices in 70 large and medium-sized Chinese cities rose by 8.9 percent year-on-year in September. The rise, 0.7 percentage points higher than that of August, hit a new high, shrugging off the government's efforts to curb surging housing prices.

Worse, the rising trend shows no sign of stopping.

Unchecked property inflation can hurt the Chinese economy in many ways.

On one hand, soaring housing prices will inflame real estate investment against the country's macroeconomic control.

In the first three quarters, investment in the country's property development reached 1.6 trillion yuan, up 30.3 percent from the previous year. As a result, the country's fixed-assets investment rose 25.7 percent, pushing the national economy to the verge of overheating.

On the other hand, the ongoing property inflation has not only made housing less affordable to the majority of consumers but also forced many of them to squeeze consumption to save more. Increased domestic consumption is essential to shift China's growth pattern away from relying too heavily on investment and export for economic expansion.

Besides, rocketing housing prices will lead to higher living costs in major cities, inflate labor cost and thus undermine their long-term competitiveness.

In view of these serious consequences of excessive increase in housing prices, the Chinese authorities have adopted more and more measures to rein in property inflation.

Nevertheless, lack of appreciable progress in taming the wild property market, as new housing price data show, only makes it more urgent to prevent them from further shooting up.