Recently, many Chinese cities released their housing regulation goals but this led to a the public outcry. Some cities linked maximum house price increases to GDP growth or to the average resident disposable income.
The goals of the local regulation seemed quite different to the public's expectations. Sharp-minded critics believe that the intent was not to control house prices, but to provide new space for the price increase.
Obviously, local governments have not cooperated well with the central government. Premier Wen Jiabao recently said to China National Radio that he had confidence that house prices could "return to reasonable levels." From the released price increase control, we can clearly see hesitation, dodging and even an evasion of responsibility from local governments.
Governments at all levels should be aware that housing prices are becoming a political issue, as sensitive as CPI. Most debates about house prices are carried out at the economic level, but Chinese society simply cannot accept a fully market-based house price.
No matter whether right or wrong, Chinese society is now urging the government to solve all its economic and livelihood issues. Many people think that this is socialism.
Since the Communist Party of China holds the power, it must weather this pressure. Some requirements about housing are unreasonable. To endure them is the price of being a powerful and big government.
The housing market chaos tells us that, for a complex economy entity with 1.3 billion people, it is difficult to balance market leverages and government regulations. It can be expected that, without government regulation, house price may also drop down to a reasonable level but Chinese society does not have the patience to undergo this process. Therefore, let us leave that aside.
The regulation of house prices has become a test of the capability and credibility of the government.
The government has promised to control the prices for a long time now, but no significant effect has been seen. Doubts about local governments' profits from rising house prices have seriously hurt the credibility of the administration at all levels. This situation must be reversed.
A 10 percent or high price increase will exacerbate public doubt about local governments' willingness to control house prices. It would be irresponsible to let this doubt spread.
The governments at all levels must tell the truth. If the house prices are uncontrollable, no matter how difficult it may be, they must bravely shoulder the responsibility of their regulatory actions.
House prices concern millions of households. It is questionable whether some local governments carefully estimated the social reaction before announcing regulation goals. House pricing regulation must be accepted by the public.
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