Economists suggest the Chinese government adopt tougher policies to curb the rapid development of the real estate industry, whose investment grew 26.7 percent year-on-year during the first quarter of this year.

The government could impose heavy taxes on those who frequently buy and sell homes in a short period of time, said Tang Min, chief economist of the Asian Development Bank's (ADB) resident mission in China.

The government's macro-control measures, which had an impact on housing supply and demand, seemed not so effective in curbing soaring prices, he said, quoting by the Beijing-based English newspaper China Daily on Friday.

Zhuang Jian, a senior economist with the ADB, suggested a further rise in interest rates to rein in the investment, if the government wants to keep economic growth at 8 to 9 percent this year.

He said that currently, the interest rate for savings is not high. The inflationary pressures are still there, although the consumer price index (CPI), a key inflation measurement, is not so high.

CPI rose 2.8 percent year-on-year during the first quarter of this year, according to the National Bureau of Statistics.

Vice-Minister of Finance Xiao Jie said last month that the government is considering imposing a unified real estate tax to curb speculative buying, one of the reasons for the present high prices of houses.

The unified tax could help regulate the market and lower prices, according to Peng Longyuan, a senior economist of the ADB.

Earlier figures from the National Development and Reform Commission indicate that housing prices for the country's 35 major cities grew 9.8 percent year-on-year during the first three months of this year.

House prices in cities such as Shanghai and Hangzhou rose more than 10 percent during the period.

The housing prices will become stable this year because the supply and demand situation will improve, said Liao Yingmin, a senior researcher with the State Council's Development Research Center.

The housing industry has become a new growth area in China's economic development. The strong demand for housing, backed by increasing incomes, will last for decades, she said.

(Xinhua News Agency April 22, 2005)