Figures from the National Bureau of Statistics (NBS) showed that in 2006, investment in China's real estate development increased 21.8 percent, 0.9 percentage point higher than the rate in the previous year, but 2.2 percentage points lower than that in the first 11 months of 2006. The investment in real estate development kept falling month by month in the second half of 2006, but the growth rate of housing prices was still high for the whole of 2006. December 2006 saw a year-on-year increase of 5.4 percent in the selling price in 70 large and medium-sized cities of the country, 0.2 percentage point higher than that of November. Cities with high growth rates include Qinhuangdao, Beijing, Shenzhen, Fuzhou, Xiamen, Chengdu and Guangzhou, with the increase rates ranging from 11.8 percent to 8.3 percent. The high growth rates of cities like Beijing and Shenzhen indicate that the previous macro control measures in the real estate sector failed to gain results as expected.

The housing price continued to go up in January 2007, according to a joint survey by the National Development and Reform Commission and the NBS. The selling price of houses in 70 large and medium-sized cities nationwide grew 5.6 percent over the same period of last year, 0.2 percentage point higher than the previous month.

"It's a general pattern of China's real estate industry that supply cannot meet demand, which is the root cause of the fast growth of the housing price and the real estate development craze," said Zhang Liqun, Director of the Department of Macroeconomics of the Development Research Center of the State Council.

According to Zhang, the macro control policy must grasp two links at the same time to stabilize the demand and improve the capacity of supply. Zeng Peiyan's approach to the real estate market suggests that curbing the surging housing price by increasing housing supply will become the key point of macro control measures in the real estate sector.

New policies to be advanced

Beijing will build 10 million square meters of economical housing and 10 million square meters of price-limited housing in the next three years, said Liu Qi, Secretary of the Beijing Municipal Committee of the Communist Party of China. And construction of 300,000 square meters of low-rent housing will also begin this year. The completed area of economical housing in Beijing totaled 3.56 million square meters in 2005.

The Ministry of Land and Resources released a circular on February 27 to carry out the seventh inspection of land use in 90 major cities, including Beijing, with stress on changes in the use of newly increased construction land between October 2005 and October 2006. The number of cities to be checked nearly doubles that in the previous inspections.