11 September 2006
Xinhua Financial Network (XFN) News
(c) 2006 Xinhua Financial Network, Ltd. All rights reserved

SINGAPORE (XFN-ASIA) - China's property market is still experiencing healthy growth and further tightening measures by the government will be needed to prevent the sector from overheating, an economist said at a conference here organised by Singapore property developer CapitaLand. 

"I'm confident that the property sector still has large room for growth," Professor Xu Xiaonian, an economist with the China Europe International Business School said. 

He noted that strong investment demand is driving growth and absorbing the supply of residential and retail space. 

"I'm not worried about the future of the market in China ...(But) the near-term challenge is how to slow the growth rate," Xu said. 

He noted that the current rapid pace of expansion is not sustainable. 

"We need to raise interest rates more aggressively than what we have done in recent years," Xu said. 

So far, China has raised its benchmark one-year deposit and lending rates twice by 27 basis points this year, placing the benchmark one-year deposit rate at 2.52 pct and the lending rate at 6.12 pct. 

"(But) the long-term challenge is to change the growth model of China from quantity growth to efficiency improvement growth," Xu said. 

Xu said China also has to further revalue its currency to address the large surplus in its balance of payments accounts. 

"We don't have many choices, we have to revalue our currency," Xu said. 

While further revaluation of the yuan is generally perceived to be necessary to curb the huge speculative inflows and reduce imbalances in the country's international balance of payments, Xu noted that policymakers remain uncertain about the implications of such a revaluation. ( 1 usd = 1.56 sgd)