China's real estate market

According to recent report and analysis, housing price is dropping, in some areas as fast as in the U.S., in China's big cities. After the government adopted a number of fiscal and financial policies to curb the rising CPI and housing price, people seem to be waiting for the market to correct itself. The mid-term trend is still uncertain due to huge Chinese demand for real asset, but in the short term, if home price drops, same effects such as shrinking consumer spending, inflating renting price, and higher mortgage rate, as in the U.S. will ensue. Another ongoing trend is the appreciation of commercial real estates. When home investment margin goes south, hot money is likely to transfer into this market and push up the price. Meanwhile, overheating economy also sustains the growth of the CRE.
The intention of the government regulation is by no means limited to the price concern. Such policy combination is targeting small and inefficient developers. The ones who can endure such price drop and maintain profitability will be large and accountable developers trusted by the government and the banks. These polices also convey the message of the "harmonious society" concept, in which the government is trying to make the housing more affordable and accessible.
Rising food, energy, and housing price has become the number one threat to the political stability in China and current administration's political legacy is totally depending upon its ability to manage this threat. (so by the end of the year, we will see exchange rate goes to 6.5, interest rate 1%up, reserve ratio up to 18%, and a new Shibor!)
I think the United States and China should coordinate and cooperate closely on these economic policy issues to avoid mutually destructive proposals that only intent to save their own back. They can also learn from each other's policy initiatives to improve economic outlook as well as people's living standard (education, health care, housing, etc.). Though two economies are heading toward different directions now, proper U.S.-China "alliance against economic deviation" might help the Americans to get a financial boost and the Chinese a soft landing.