Strict realty rules can curb speculation

The Chinese economy has stepped into a new normal, as a result its GDP growth declined to 6.5 percent in 2016. But contrary to popular belief, the main driver of China's economic growth over the past few years has been the real estate sector, not the high-technology or manufacturing industry.

Although the real estate sector contributed about 10 percent to China's GDP in 2016, it created some problems, such as bubbles and financial risks, for the national economy. If the major part of a country's resources is concentrated in the real estate or stock market, its real economy could face an economic downturn. For example, some listed companies have sold the properties they owned in first-tier cities and earned far more money than they made from their main businesses.

And this is how soaring housing prices distort China's real economy, and capital flows rapidly into the asset market, further inflating the real estate price bubble.