China’s easy money policy risks property bubble – PBOC’s Adviser Bai

In an interview reported by Bloomberg, PBOC Adviser Bai Chongen noted that the easy money policy adopted by China has inflated real estate prices and increased the risk of a property bubble.

Bai is one of three outside academic advisers on the PBOC’s 15-member monetary policy committee led by Governor Zhou Xiaochuan.

Key Quotes:

I can’t say whether there are bubbles right now, but we’re worried about such a problem

Government goals to cut oversupply in smaller cities and controlling the bubble in bigger ones are contradictory

Interest rates have gone down a lot, and it would certainly boost asset prices in tier-one cities, but that doesn’t help tier-three or four cities with their overly high inventories

There won’t be new investment in tier 3 and 4 cities, and there shouldn’t be any new investment -- there’s already so much in inventory.