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Staying on Target (6)

(Beijing Review)

14:03, August 22, 2012

Expanding domestic demand should be the focus to promote economic growth in the second half, said Zhang. The government should improve the policies of stimulating consumption, such as subsidies to energy-saving products, and supporting new energy products to be applied by public facilities and households. The government has arranged more than 26 billion yuan ($4.11 billion) to subsidize sale of energy-saving home appliances.

A report by Anbound, a Beijing-based independent consulting firm, warned the government of a rebound of housing prices in the second half, which could affect sound economic development. In June, a blowout of transaction volume and slight housing price hikes in major cities intensified such worries.

Yi Xianrong, a researcher at the Institute of Finance and Banking of the Chinese Academy of Social Sciences, said housing prices in major cities stopped dropping in June. This is not because of so-called "rigid demand" of home purchases, but that a series of measures to stabilize growth has changed expectations on the real estate market.

If China's housing market sees a simultaneous increase of transaction volume and prices, macro-control measures on the market implemented two years ago will ultimately fail, said Yi.

"If the central bank further relaxes the monetary policy in the second half, the already big real estate bubbles will continue to expand, while risks brought by the bubbles will be much larger than the benefits brought by stabilizing economic growth," Yi said.

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