Unlocking the potential of Chinese cities

Residential property prices in China's first-tier cities - Beijing, Shanghai, Guangzhou and Shenzhen - are up again. A home in these cities now runs buyers half as much as a home in the world's most expensive cities: New York City, London, and Hong Kong. Letting some of the air out of this housing bubble, before too much pressure builds up, will require improved management of China's rapid urbanization - and not just in the four first-tier cities.

Of course, the housing situation is most urgent in the first-tier cities. And their governments have moved quickly to cool the market.

But this is just a temporary fix. A longer-term solution will require the authorities to address the fact that demand for a limited supply of residential property is high and rising, owing to the rapid flow of often young Chinese talent to cities that offer access to economic opportunities, not to mention better public infrastructure. Policymakers must determine the proper balance between State control and market forces in guiding urbanization throughout the country.