Despite a promising economic outlook, China still has some problems in its economy, and one of them is surging home prices.

Over the past month the government has rolled out measures to curb soaring property prices and stop speculation, but they would take time to work, according to economists and industry insiders.

Heading for crash?

A recent New York Times story sternly warned that China's economy was headed for a crash, citing James S. Chanos, a Wall Street hedge fund investor.

"Its (China's) surging real estate sector, buoyed by a flood of speculative capital, looks like 'Dubai times 1,000 -- or worse'," said Chanos.

Wang Xiaoguang, a reseacher with the Chinese Academy of Governance, said nobody would believe China's property market did not have bubbles.

He said that a record surge in bank lending in 2009 coupled with the government stimulus package had created a relatively big bubble in China's economy.

"China's real estate market is plagued with big bubbles, creating great risks for the financial sector," Yi Xianrong, a researcher with the Chinese Academy of Social Sciences, had said.

Wang Zhaoxing, vice chairman of the China Banking Regulatory Commission, said Wednesday at a conference that currently loans to property developers and residents to buy homes accounted for 20 percent of total new loans. He did not mention the time period.

However, Wang Xiaoguang, among other experts, expressed disbelief in Mr. Chanos's "crash theory".

"Bubbles do exist, but China's economy is not heading for a crash. And the claim that China's property sector is more inflated than Dubai's is a huge exaggeration," Wang said.

"China's property market and Dubai's are not comparable," said Yang Hongxu, a property researcher at E-House China R&D Institute.

Yang gave the exmaple of Shanghai, a major city in east China. He said price hikes in Shanghai mainly stemmed from rapid economic growth, population expansion and increased residential income, factors which Dubai lacked.

Policies to deflate bubble

Also Dubai did not have a series of government policies implemented to stop the bubble at an early stage.

China had made several moves in the last month to do just this, including reimposing a sales tax on homes sold within five years of their purchase from this year and increasing the down payment requirement for property purchases to at least 50 percent of the total price.

The latest one came from the State Council, China's cabinet, which issued guidelines over the weekend that raises the down payment requirement to no less than 40 percent for those families applying to buy a second or more houses backed with loans, and the mortgage rates should be strictly settled on the basis of loan risks.

In another move to cool the property market, the People's Bank of China, the central bank, announced on Tuesday to raise the deposit reserve requirement ratio by 0.5 percentage points from Jan. 18 this year.

The government also renewed its pledge on Wednesday to stabilize home prices by providing more affordable housing and cracking down on speculation.

"Such moves demonstrated the determination of the government to constrain the rising property prices," said Yang.

Awaiting the effects

A sharp fall in sales of second-hand houses resulted from previous policies.

In Beijing, only 19 second-hand homes were sold daily from Jan. 1 to Jan. 3, right after a sales tax was extended to homes sold within five years of their purchase, which was well below the number sold at the end of last year, according to data from Beijing Municipal Commission of Housing and Urban-Rural Development.

However, experts have pointed out that the property market still needs time to react, especially in terms of prices.

Besides, it was one matter that the policies were made, but it was another as to whether they would be fully implemented, said experts.

Pan Shiyi, chairman of China's leading property developer, SOHO China, said of the 11 specific measures included in the State Council guidelines, the last one was important as it emphasized the responsibility of local governments to carry out the previous ten.

"Whether the desired effects can be achieved would depend to what extent and with what intensity the policies would be enforced," said Yi Xianrong.