Looming signs of slowing economic growth have fuelled calls for an end to credit tightening, leading to doubts about the government's drive to cool the property market.

Yet, even as the economy heads towards a turning point after high-speed growth, policy-makers must keep a close eye on overheating growth in the property sector.

Any attempt to sidestep short-term trouble at the cost of a much-needed long-term solution will only complicate the situation.

As some initial half-year statistics indicate, the Chinese economy, the world's seventh largest, may be slowing down.

China's consumer price index (CPI), a key inflation measurement, recorded only a 1.8 per cent increase in April and May, a considerable drop from more than 5 per cent growth during the same period of last year.

The downward trend in CPI growth, along with other figures such as slowing growth in consumer loans, has quite reasonably persuaded some economists to scale down their forecasts for the national economy.

A recent report by the National Development and Reform Commission's Macroeconomic Institute predicted the country's economic growth will slide to 8.8 per cent this year from 9.5 per cent last year.

Under these circumstances, the country's ongoing efforts to prevent house prices, particularly in major cities, from rocketing further appear to be badly timed.

Given the huge boost the housing boom has given to domestic economic development, State banks' loan business growth and job creation in many industries, the price of those policies seems very dear.

The reason the government belatedly but decidedly rose to face the challenge of soaring house prices early this year was that inactivity will make things worse.

Excessive housing price hikes will not only deprive many people of the chance to buy an affordable house, but also lure more investors with bigger mortgages, increasing domestic banks' exposure to this sector.

Thanks to a series of tough measures to tighten credit supply and reverse self-fulfilling upward expectations, soaring house prices in many cities have begun to flatten rather than fall.

In fact, the economy will not be able to bear a sharp drop in house prices. The success of the government's efforts rests on a gradual withdrawal of incentives underpinning irrational price hikes.

The government's attempts so far have not been good. Though the country's average housing price was predicted to maintain an 8.3 per cent rise this year, still somewhat higher than a modest growth level, rapidly slowed growth of mortgages points to desirable prospects for the housing market.

Not that these policies aim to make house prices falter. Instead, they are supposed to change the structure of housing supply to better meet demand while reducing banks' exposure to housing-related loans.

These goals are crucial to both the country's people-first development and the health of the financial sector.

Projections of an economic slowdown have put these efforts to the test. A rush to take off the brakes may effectively rekindle the national economy's growth momentum for the moment.

But that should not be an option for policy-makers. Such short-sighted changes will seriously undermine the credibility of these policies. Worse, they may cost the country's opportunity to avoid a bust after the housing boom.

(China Daily July 18, 2005)