Why China's efforts to cool its property market won't work

Hong Kong

FOR Beijing's policymakers, taming China's ever-growing property sector presents a challenge. While problems with the country's overheating housing sector are nothing new, the fact that real estate prices are climbing so fast when wider economic growth is slowing raises a big red flag.

In a country where stock markets are underdeveloped and capital is tightly controlled, abundant liquidity injected by previous monetary stimulus has flowed into alternative assets including bonds, commodities and the housing market. Weak investment appetite due to a slowdown in the real economy has accelerated cash flows into the real-estate market, explain China-watchers.