Numbers of the Week

12.2 billion yuan

The Chinese aviation industry recorded a total profit of 12.2 billion yuan ($1.78 billion) in 2009, according to the Civil Aviation Administration of China.

280 million yuan

The U.S. 3D blockbuster Avatar brought in more than 280 million yuan ($41 million) in box office returns in the first week (January 4-10) after its debut on the Chinese mainland, a Chinese cinema record.

TO THE POINT: The government vows to control the real estate market after a year of robust growth. To diversify financial investment tools, the regulatory authorities approved the launch of stock index futures, and short selling and margin trading to allow investors to hedge against risks. China overtakes the United States to become the world's biggest auto market in 2009. The country is also expected to become the largest consumer market in the world by 2020. Google threatens to halt its China operations if it cannot reach a censorship agreement with the government.

By LIU YUNYUN

Property Trap

The Central Government is sparing no efforts to prevent housing prices from increasing too rapidly.

On January 10, the State Council issued a notice "promoting the stable and healthy development of the real estate market," intending to guide the "rational housing consumption," and restrain speculative apartment and house purchases. The government also pledged to restrict land stockpiling and frequent land transactions between developers, according to a press conference held January 13.

But the question is: who is responsible for the property price surge? While many blamed developers for their greediness and applauded the government's determination to crack down on the bubbling real estate market, few took into full consideration the government's actual role.

Selling land has become one of the major sources of income for many local governments. The land use right transfer fee accounts for almost 50 percent of Beijing's and Shanghai's fiscal revenue, according to E-House (China) Holdings Ltd., a real estate services company. Competition among developers for land is intensifying, since whoever makes a larger offer at land auctions gets the land. Land transfer fees in 2009 stood at 1.5 trillion yuan ($220 billion), double those of 2008, according to figures from the China Index Academy, a real estate research institute.

Analysts agree the increasing fees are a risky signal, as land has not only become a major source of government income but also a source for the government's investment in public welfare. Many guess the government will not allow property prices to fall too much.

But any bubble will take time to burst. In 2009, the problems concerning property use for commercial purposes began to emerge. On January 11, about 20 property owners protested at the gate of SOHO's latest project—the Nexus Center—accusing the property developer of failing to lease the office space as it had promised.

SOHO projects used to be best sellers in the Beijing market, but became more of a burden than a benefit in 2009.

"Affected by the financial crisis, commercial properties contracted, arousing conflict between buyers and property developers," said Wang Qiong, a property analyst at Savills China—a real estate service provider.

Eye on the Futures

After years in the making, the China Securities Regulatory Commission (CSRC) finally on January 8 kickstarted a trial program for short selling and margin trading, as well as the stock index futures in the Shanghai A-share market, giving traders a vehicle to make profits from falling markets.

Margin trading allows investors to borrow money from brokers to buy shares, while short selling lets them sell securities that they do not own, but have borrowed from securities firms. Short sellers then try to buy back the stock at a lower price, attempting to profit from an expected decline in the stock price. Stock index futures are agreements to buy or sell an index at a preset value on an agreed date.

No timetable was given for the program, but the CSRC said preparations for the stock index futures will take at least three months.

Despite the uncertainties, analysts believe this will open a new chapter for the country's equity market, though the trial program is expected to involve tight restrictions on margin requirements and the size of short positions.