ON APRIL 1, the Ministry of Housing and Urban-Rural Development together with China Construction Bank jointly issued a notice on providing financial support to promote the development of "small towns with their own characteristics". Beijing News comments:

In October, the ministry announced a list of 127 small towns with their own characteristics, of which 64 are tourist towns. While it is safe to conclude that these tourist towns will benefit greatly from the financial support that is being provided, there is the worry that the capital raised this way might flow to the real estate markets in these towns.

As all the big cities have taken measures to control their real estate markets, some developers have been reportedly investing heavily in these tourist towns and speculators are betting on property prices in these towns rising, especially now the ministry is offering such financial and policy support.

However, developers and speculators always invest in residential apartments pushing up prices, rather than the hotels, restaurants, shopping malls and holiday villas needed to boost tourism. Such investment in residential properties offers little benefit to the local economy or tourism market. Instead, the speculation only increases the burden on local residents, who have to pay higher prices to own a home.

That's where the concern is.

In order to realize their goal of helping small towns with their own characteristics prosper, the ministry and China Construction Bank must make their plan more detailed so the raised capital will be guided to the tourism markets of the towns helping them prosper, instead of simply flowing into their real estate sectors.