A series of factors, including a loose monetary policy, strong housing demand and supply insufficiency, its high-speed economic development, local governments' excessive dependence of their fiscal revenues on land sales, as well as the influx of international capital betting on the yuan's appreciation, have altogether bolstered the soaring of domestic home prices over the past decades. However, all these engines have started losing power since the start of 2014. The confirmed phasing out of the years-long quantitative easing policy by the US Federal Reserve will inevitably accelerate the outflow of international capital from China. The country's irreversible economic deceleration in the years ahead, increased efforts to build government-subsidized lower-price homes as well as recent yuan's depreciations will also weaken the previous dynamics for home price rises.

The combined influence of these factors has increased the possibility of a decline in house prices this year. The fast price rises following a series of stimulus measures adopted after the 2008 global financial crisis have tightly bound China's economy to the housing market. Thus, a housing market collapse will inevitably be a drag on the whole national economy. China's fragile economic growth model and its per capita income, which is far below the world's average, also decide that the drastic fall of home prices will cause much fiercer negative effects to its economic and financial system and people's living conditions than those to Japan in the 1980s.

The year of 2008 offered the best time for China to prick its real estate bubbles, but it failed to do so. The country will have to endure much more serious negative effects if it now takes such action. The only option ahead for the Chinese government is that it should change the current real estate regulatory policy, from how to curb home price rises to how to prevent their decline from sparking a systematic economic collapse, and seek more time for efforts to reduce the impact of the busting housing bubbles.

The author, a member of the 12th Beijing Municipal Committee of the Chinese People's Political Consultative Conference, is director of the Private Economy Research Center under Renmin University of China.

(China Daily 03/29/2014 page5)