China's Property Bubble and More Stimulus Due

The Financial Times runs a candid interview with Li Daokui, who serves on the Chinese central bank’s monetary policy committee, re the state of China’s housing market.

From the Financial Times:

“The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,” he said in an interview. “It is more than [just] a bubble problem.”…

Mr Li said the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of the property market.

“When prices go up, many people, especially young people, become very anxious,” he said. “It is a social problem.”

On the other hand, Wen Jinbao said more stimulus was due.

From Reuters:

Striking a more optimistic note, China’s Wen said the world’s third-largest economy and its prime growth engine remained on course to meet its growth targets this year, though he added it would require Beijing to “maintain a certain level of intensity in its economic stimulus.”

http://www.reuters.com/article/idUSSGE64U0B320100531

It is widely known that there has been 25% credit growth over the last 2-3 years in China, resulting in intended/unintended consequences.

People differ in their view on China: the next economic superpower or the next big bubble. In any case, we would hope that the bottom line is how policy actions would be aimed at serving the interests of the general public in China in either long or short term.