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China‘s Real Estate Prices Rose by 7.8% in December

The recent official data and research released on Thursday revealed that Chinese property prices rose at their fastest annual rate in 18 months in December, which has made the country's authorities express concerns.

The real estate sector witnessed prices rise by 7.8% from a year ago - up from the 5.7% annual rise reported in November, renewing fears that an asset bubble is developing.

Among cities that saw the sharpest gains was Shenzhen, the centre of southern China's manufacturing industry. Prices in the city were up 18.9%.

The reason attributed is the $1.5 trillion (£932bn) in loans by the Chinese banks in order to boost economic growth, with a large proportion being used to invest in property.

Experts expressed concerns about an eventual deterioration in banks and flagged China's huge levels of investment, citing that "high investment spending, particularly in the real-estate sector, also carries the risk of asset price misalignments".

In such a scenario, the banks have been suggested to increase the amount of capital they hold in order to reduce lending, and Chinese city authorities have been asked to boost up property developments and construct more low-cost housing.

China's investment as a percentage of gross domestic product swelled to a record 47% in 2009, while credit expanded 30%, a level claimed as "very high" for a nation in which banking-system assets are in excess of 100% of GDP.