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China faces tough decisions on its real estate market

Los Ageles Times
Despite the Chinese government’s efforts to rein in rising real estate prices, housing remains expensive and out of reach for the vast majority of Chinese. Above, people walk by a property billboard in Shanghai. (Peter Parks, AFP / Getty Images / August 27, 2012)

Despite the Chinese government’s efforts to rein in rising real estate prices, housing remains expensive and out of reach for the vast majority of Chinese. Above, people walk by a property billboard in Shanghai. (Peter Parks, AFP / Getty Images / August 27, 2012)


The curbs aimed at cooling China's overheated housing sector worked, but they also put the brakes on rapid growth. But boosting home sales could trigger class tensions.



BEIJING — Rising home sales and prices are cheered in the U.S. as keys to an economic recovery. But in China, the prospect of a housing surge is fraying the nerves of policymakers.

Alarmed by ballooning values — and the growing frustration of average citizens fearful of never owning a home — China'scentral government in 2010 introduced curbs to cool the nation's overheated real estate market. It worked. Tighter credit, a crackdown on speculators and limits on purchases of second homes slowed price rises and stopped some developments cold.

But those moves also put the brakes on China's hard-charging economy, which, like the U.S.', relies heavily on construction and real estate activity. On Thursday, China said its third-quarter gross domestic product growth had slowed to 7.4% from a year earlier, the slowest pace in 31/2 years.

China's leaders now face some tough choices. Do they rev up the housing market to create jobs and boost economic growth, even if it means fueling class tensions and a potentially dangerous real estate bubble?


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