Housing prices in 35 large and medium-sized cities are 29.5 percent overvalued on average, with Fuzhou, capital city of southeast China's Fujian Province, topping the list. The woes in Beijing and Shanghai are no less acute, with their houses overpriced 49.6 percent and 36.5 percent, respectively, said the CASS.

In an attempt to let air out of the bubbles, policymakers are making every effort to limit speculation. In its latest move, the government on November 3 ordered to raise the mortgage rate of public housing fund by 10 percent for second-home buyers. Looking ahead, next year will see the house prices stabilize, said the CASS.

But Ashvin Ahuja, an economist at the Asia and Pacific Department of the IMF, downplayed the risks, citing that there is no sign of a broad-based and significant over-valuation of residential property prices in China. But a number of coastal cities, most clearly in Shanghai and Shenzhen, may be in the early stages of excessive price growth, he said.

Property prices in China will continue to have a strong propensity to rise rapidly due to low real interest rates, lack of a property tax, increasing availability of mortgage financing and insufficient alternative investment options, he added.

China should raise interest rates further and impose a property tax to curb the risk of asset bubbles, he said.

Successful IPO

Two Chinese Internet companies swept the U.S. IPO market with their share prices soaring on the first trading day.

On December 8, the online video website Youku saw its share price surge to $33.44. It sold 15.8 million American depositary shares for $12.80 each on the New York Stock Exchange, raising about $203 million.

This represented the best first-day pop for a U.S. IPO since the Chinese search engine company Baidu.com gained 354 percent on its debut in August 2005.

The same day, the e-commerce company Dangdang closed at $29.91, up 86.9 percent from its IPO price of $16. It raised $272 million by selling 17 million American depositary shares.

Investors are looking for "high quality, high growth" companies in China that can scale their businesses as more Chinese consumers come online, said Conor Chia-hung Yang, CFO of Dangdang.

Youku founder and CEO Victor Koo said listing in the United States could "help elevate the local brand and solidify our leadership position in the video market."

Despite their dominant market positions, both companies would face challenges of how to maintain sustainable profitability, said Dai Lei, a senior analyst at the Southwest Securities Co. Ltd.

Youku controlled more than 30 percent of the country's online video market and generated 234.6 million yuan ($35.3 million) in revenues from January to September, skyrocketing 135 percent year on year. But the company has yet to turn a profit due to the heavy expenses of professional video content.

Dangdang has fared slightly better. After spilling red ink for years, it jumped into the black for the first time in 2009. Its profits totaled $2.4 million in the first three quarters of this year.

Wealth Boom

China boasts the third largest number of dollar millionaires in the world after the United States and Japan at 670,000 in 2009, soaring 60 percent over the previous year, said the international research firm Boston Consulting Group (BCG).

"The fast increase is driven by China's strong economic growth, the rise of private-sector enterprises and the development of capital markets," said Frankie Leung, partner and managing director of BCG.

Entrepreneurs account for the majority of China's high-net-worth population worth over $1 million. But there are growing numbers of wealthy Chinese, such as executives, professional investors and the independently wealthy, who have different sources of wealth.

In addition, the mix of entrepreneurs is diversifying beyond real estate, manufacturing and commodities into industries such as pharmaceutical and hi-tech sectors. Also, wealth is spreading beyond coastal regions to second- and third-tier cities throughout China, BCG said.

Despite the remarkable growth, the country still has a long way to go before catching up with Western countries.

As for millionaire households, they account for only about 0.2 percent of all Chinese households, a far lower concentration than in the United States (4.1 percent) and Switzerland (8.4 percent), said BCG.