Right now, one of the hottest economic debates in China is about housing.

The majority of the people involved loudly complain of the soaring housing prices. For within two years housing prices went up by as much as 50 to 70 percent, and even higher in big cities like Shanghai, Beijing and Hangzhou.

A couple of economists in Beijing have talked about Chinese banks having been "taken hostage" by the housing market and mortgage loans, and they are not far from the truth.

On the other side, there are people, believed to be land developers and their friends, who strongly argue that these prices are reasonable in the sense that they reflect the market, un-connected to the profit grabbing they are accused of.

Some even cited the price levels of foreign metropolises like London to justify the pricing levels in Shanghai. Isn't Shanghai already vaunted as a modern metropolis?

Well, when all is said and done, there must be something wrong with the housing situation today.

If not, how come the wide-spread national debate and the strong and emotional accusations flying around?

Then, what's wrong? It seems more helpful to find out what's wrong than who's wrong. To seek an answer, perhaps there is something that people have failed to notice.

Ironically, the trouble comes as the flip side to the rapid economic development.

Chinese people, particularly the urban dwellers, buoyed by their seeming affluence and lured by the mortgage money they have never seen or even heard of before, suddenly show an eagerness in bringing their housing up to the Western standards.

Improving housing itself is not wrong. But by how much and how fast, few people stop to think. The people as a whole are actually shooting at a target years before they can actually afford it.

Roughly speaking, white-collar workers in major Chinese cities who want to take possession of a "nice" apartment have to borrow more than 1 million yuan (US$124,400) in mortgage. This plus the 30-year compound interest payments and also high furnishing costs will come to somewhere between 1.5 to 2 million yuan.

That would mean that the happy newly weds have to pay a monthly installment of roughly five thousand yuan for 30 years. That means that they will have to set aside, for the overwhelming majority of them, 50 percent to 80 percent of their monthly income!

To put it another way, their financial plan looks grossly questionable, if not hazardous. What intoxicates these young and smart heads?

Meanwhile, older folks are not much better. They, under the social pressure to keep up with the Joneses, show similar eagerness.

What is far more relevant is the larger picture. If the eager wishes of the Chinese for "decent housing" were to be fulfilled within a short time, then China would have to face an impossible picture: Vacant land in the urban area used up and most of the farmland disappearing for good before we even blink our eyes. Even the space for roads and parking cars would be unavailable.

There are about 500 million Chinese, that is about 150 million families, living in urban areas in China. Let's do a simple calculation: If each family borrowed 1 million yuan, the supply of total funds would be astronomical: 150 trillion yuan. Then when this demand showed on the market, the prices would rocket.

Our media, perhaps innocently, have been painting a picture to their Chinese audience of the happy life in those developed nations: Houses, cars, electrical appliances, etc.

But, the media seldom if ever point out what that happy life would cost in physical terms for China, a country with 20 percent of the global population and only 4 percent of global GDP.

Have we been paying attention to this unrealistic and excessive consumerism that some media are fanning up?

That is not to say that people must not buy their own new housing. But the pace has to slow down and desires must become more rational.

Of course, it is not just the mismatch between the "natural" wish for a happy life and the limited supply that has produced the housing market woes troubling Chinese families.

The market is also subject to manipulation and fraud.

The most harmful is the induced fever of speculative investing in housing in the expectation of excessive profits.

It is hard to believe that the self-fulfilling prophecy that it's possible to make good money in trading housing could get around so quickly. But many cities did witness this rumor spreading like wild fire. That is truly dangerous if allowed to continue.

Finally, governmental provision for "budget housing" for the needy is no solution. The system operating now does not guarantee that the goal of this policy can be reached as planned.

It goes against the market in that this "cheap housing" has a higher market value, and the value premium would lead to unfortunate operations contrary to the original designer's wish.

Putting a lid on the housing prices is no solution, either, for the same reason: It goes against the market.

It may soon shift the blame and the eventual responsibility onto the government agencies, which by nature are not in a position to decide on a definitive fair price.

The government hands doing that will push China back to the time of a planned economy.

The solution, if it is a good one, has to come with the sincere and serious cleansing of the housing market's bad operations, punishing and stopping illegal and harmful practices.

The national realization of the "scientifically feasible living standards enhancement model" has to receive strong emphasis from now on.

It takes insistence and patience to sink this idea into people's minds. That of course takes time.

The woes came pretty fast and such woes will go away slowly. Slow is not bad: Allowing the housing prices to steadily return to their natural levels is the optimal policy choice.

Drastic measures may prick the bubbles and result in dangerous economic fluctuations.

To turn away from these serious challenges and hope to muddle through will only postpone a even bigger crisis.

(Shanghai Daily March 17, 2006)