– December 28, 2010

“The over-fast growth of the domestic real estate market has been the result of the country’s unusual monetary policy since the start of the global financial crisis. The latest rate hike indicates the central bank’s resolve to restore the emergency monetary policy to normal and bring the red-hot real estate market back onto the track of healthy development.

Despite being downplayed by some, a 0.25 percent increase in interest rates will play an inestimable influence on the real estate market. It will not only increase speculation costs in this sector, it will also change investor expectations of the future market. Any fundamental changes in investor expectations will change the trend of China’s speculation-prone real estate sector.

More importantly, the latest rate hike is expected to produce an accumulated effect on the domestic real estate market, one that heavily depends on credit. For a real estate market in which the down payment practice is widely applied, any rate hikes will increase the cost of borrowing and thus deter some from entering the market.” Read more

“Central Bank Targets Inflation” 
Xinhua News, December 27, 2010. 

Image by Daniel St.Pierre / FreeDigitalPhotos.net.


Tom Duncan

Get notified of new articles from Tom Duncan and AIER. SUBSCRIBE

Related Articles – Business-Cycle Conditions, Central Banking, Inflating, International, Monetary Policy, Sound Banking, Sound Money Project