An economy with its per capita GDP in China's current range - around 15,000 yuan, or $2,000 - is in an era of building new houses.

So it sounds absurd for scholars from an ivory-tower research office in Beijing to have reportedly proposed last week that real estate development should no longer be given the status as a pillar industry of the economy.

The purpose of this proposal, as I can figure out from the context of the report, was to restrict investment money, which is in oversupply, from moving about in the marketplace and jacking up the prices of stocks and housing units in big cities.

But instead of simply restraining the real estate business, Beijing should make a better use of it and embark on some massive city building projects in which private investors can participate, on various levels, under the supervision of some central government committee.

This would serve to open up new investment channels in an economy featuring too much investment money and too few worthy projects and increasingly so with the stock market index surging more than three times since the beginning of 2006.

A stock market that "defies the law of gravity," as Gao Xiqing, a top executive of China's social security fund, said last week, when combined with a heavily restricted real estate business, can only work in such a way as to either push the stock index over the edge or drive away domestic funds to overseas investment markets, and perhaps both, more quickly than China could able to manage.

Houses are what people need after all. And those who own houses will in time need better ones. There are still millions of people in rural China waiting to move to urban jobs and homes, and some of them, who already have jobs, are still waiting for homes.

The problems in the housing market cannot be attributed to the very existence of this demand, but to the poor and often corrupt relations between the developers and municipal officials.

Efforts should concentrate on revamping some of the rural towns nearby such large cities as Beijing and Shanghai and converting them into residential areas for low-income families, connected to the cities by decent and free transportation services.

Such New Deal-like plans can never work when they are carried out by officials in just one or two cities, and can only be properly managed and supervised when in the hands of the central government. And only when the central government takes the initiative, can such projects be attractive enough to divert part of the money that is being wasted in the "irrational exuberance" game in the stock market.

Actually, naming or not naming a business as a pillar industry has been a pretty boring game in China since the era of the planned economy.

During the 1960s, when this columnist was still in primary school, almost daily, official radio broadcasts would be blasting out announcement of seemingly exciting records from the iron-and-steel industry. But when compared with the amount that China either produces or consumes today, those numbers pale into insignificance.

In one straightforward example, Chinese media managers have all learned about the real estate industry's importance. In 2006, developers forked out a total of 160 billion yuan ($20 billion) for advertising, and were by far the largest source of media revenue.

Many media products, the increasingly popular "city papers" in particular, depend to a great extent on real estate advertising for their lively format and reporting.

So both in reality and in logic, the call for pure control and restriction of an economic activity, especially such a massive one as real estate development, makes poor sense indeed.

E-mail: younuo@chinadaily.com.cn

(China Daily 04/30/2007 page4)