People are wondering if cracking down on property bubbles will hurt macroeconomic stability. In my opinion, now that the property industry has become the culprit of inflation, we must totally burst its bubble and deal with it seriously. If we take action early on, we can minimize the losses. I believe now is the best time to crack down on property bubbles.

First, from the perspective of banking risks, some people argue that 80 percent of developers' money is borrowed from banks. Therefore, if anything goes wrong with the property market, banks will suffer from losses on huge non-performing loans.

But the truth is, the banks issued most mortgages to developers for houses and land before 2005 when properties were quoted at very low prices. At present, if the real estate developers cannot repay the loans, the banks can rescind the mortgages, which now are valued at a much higher price. The banks would face no risks even if the developers went bankrupt.

But if we are determined to bring the property market under control in the next two years, the risks will be much higher, because mortgages now are quoted at much higher prices. At that time, banks will face disastrous risks.

Second, from the perspective of the macro-economy, it is better to take action now to rein in the real estate bubble rather than later. On the one hand, overall economic development is safe and sound at present. Even if there is fluctuation in the property industry, we can still maintain an 8-percent GDP growth rate. On the other hand, housing demand from citizens is high. If we burst the bubble caused by property speculators, homes will be more affordable so that ordinary citizens can buy them.

If we stick to State Council No. 24 circular [which says 70 percent of homes must be affordable for average income earners] issued last year, we not only can keep the property market prosperous, but also drive the healthy development of 60 related industries.

Will there be any resistance to cracking down on inflation starting with the property industry?

Of course. Any reform will affect the current profit distribution, and resistance will be unavoidable.

The biggest resistance comes from real estate developers. Their greediness for profit is clearly evident. Last month [June], some Beijing property developers went to Shanxi Province [which is rich in coal and has many millionaires and billionaires] to promote their housing projects. They showed that they were building houses for rich people to invest in and speculate on in Beijing.

Some resistance comes from rich people who have already bought a number of houses and are waiting for home prices to surge to engage in arbitrage.

Banks are also likely to oppose the property market correction. Currently, about 80 percent of the money invested in property is borrowed from banks. Hence, the banks and property developers have become joint stakeholders. Under such circumstances, it is even harder to correct the real estate market.

Local officials and those who are corrupt also will resist. The property industry has become a pillar industry in some provinces. The higher home prices are, the higher the local GDP will be. Some developers often bribe local officials in an attempt to maintain higher home prices at the administrative level. As a result, those people will be sparing no efforts in obstructing the property market correction.

With so many obstacles, what kind of actions should be taken?

Bringing housing prices down is the key to resolving this round of inflation. We should take the following measures. First of all, we should pass legislation on land supply. We must strictly separate commercial houses from affordable houses, and make sure ordinary citizens can have a place to live.

Second, the government must crack down on those who stock up on land to gain larger profits. For instance, after a real estate developer purchases a piece of land, if he fails to begin construction within half a year, he will be fined, and his land will be confiscated if he does not start building within two years.

Third, the government must control bank loans for property developers. Those with little cash flow should not get loans from the banks. The banks, however, should lower their interest rates for average-income buyers and serve the people at large.

Fourth, we can learn from developed countries and cut relevant taxes for or subsidize first-time homeowners.

Fifth, the government should restrict speculative home investments as well as hot money investments in the real estate market. Those who buy homes in other cities should be strictly controlled.

As long as relevant government departments take the property industry more seriously and prevent bribes and corruption, China can certainly bring its property market and inflation under control.