Chinese efforts to stem housing bubble show promise

AMONG the biggest fears for investors globally is the health of China's real estate market. The concern is that after one of the biggest speculative booms in history, the market will come crashing down and take the global financial system with it. Outstanding credit at the end of 2016 in the world's second-largest economy amounted to 258 per cent of gross domestic product, up from 162 per cent a decade earlier.

Investors can breathe a little easier. The early results by the authorities to stem the speculative bubble are encouraging. After a series of trials and errors, the regulatory and monetary tightening policies that have been announced in the past six months are starting to rein in developers and speculators.

Based on data recently released by the National Bureau of Statistics, new home sales by value rose 8 per cent to 855 billion yuan (S$174 billion) from a year earlier, the smallest gain since March 2015, according to Bloomberg News. Since President Xi Jinping said at the annual Central Economic Work Conference in December that "houses are built to be inhabited, not for speculation", the central government's plan to get housing under control has been strong and clear.