The Chinese authorities have succeeded in making good on their promise to lower property prices, but this bid to make housing affordable for the greater half of the Chinese population mightprove particularly costly for the Chinese economy as a whole. The residential sector is a major contributor of short-term economic growth in China, and accounted for an estimated 6.1% of its total GDP in 2010. Falling prices have already dragged down investment in the country’s real-estate market, and are expected make a similar dent in its demand for steel. Given the already dismal global economic outlook, a sluggish Chinese economy could then setoff more alarms than fireworks.

The fourth quarter of 2007 saw the end of Beijing and Shanghai’s housing boom. As transaction volumes plummeted by as much as 25 and 40 percent from July to August 2008 and by 67 and 70 percent year on year in Beijing and Shanghai respectively, developers’ are having to offer buyers’ massive discounts to boost sales of new units. According to CCTV, last month’s (August), average daily turnover in Beijing was 


