It was reported that several banks in Shanghai were having difficulty lending money to people taking out a mortgage, even if they were borrowing for their first apartment. This occurred late last month after the authorities took a series of measures to tighten the money supply.

In the money market, the 7-day repo rate for inter-bank loans surged to 15 percent in the last week of October, marking a historical high since the inter-bank money market was established in the mid- 1990s. Such a high rate could only have been propelled by the capital shortage.

The administration and others have for months been concerned about excessive liquidity in the Chinese economy and its possible harm. A capital shortage against such a backdrop is noteworthy.

Excessive liquidity does exist in our economy, which calls for a prudent monetary policy. Because of the overall tightening of the money supply, the capital shortage surged in a specific area and during a specific period, like what happened to people wanting to buy an apartment in Shanghai. This byproduct is able to hinder economic growth.

The subprime crisis in the United States was, in fact, a consequence of the overall tightening of the monetary policy.

The US Federal Reserve raised its benchmark interest rate 17 times from June 2004 to June 2006 to curb inflation in the country. Although the rate was only lifted by 25 basis points each time, its influence on the economy triggered a crisis in the subprime market.

Therefore, it is necessary for the decision-makers to review their monetary policy tools when it casts a shadow on micro economic activities, even though the policy to a certain extent is good. An adjustment to the policy is probably needed to ensure its goal is achieved without negative side-effects.

In our property market, the most important target for the State is to maintain prices at a reasonable level and to ensure most people are properly sheltered. The authorities never intended to prevent people from buying homes.

However, these people do face heavy taxes, fees, and other financial burdens when they want to purchase an apartment.

The People's Bank of China, the central bank, and the China Banking Regulatory Commission jointly issued a new rule in September that required mortgage holders who apply for another home loan to put a down payment of at least 40 percent and pay a 10 percent premium on their interest rate.

Following this, estate speculation became more costly and the market got sluggish. A mood of "wait and see", took hold as people were reluctant to buy, waiting for a market direction.

This is a key time. A wrong signal could change the subtleness in the market by pushing it too high or too low.

If the authorities choose the right policy, it could curtail property prices. If not, we could see prices rising to new highs.

There was a similar situation in late 2006. Property prices in several regions dropped as a result of macro control policies and consumer hesitation. However, the authorities did not introduce further policies to contain property prices and consolidate the market, so the market was soon activated by the suspended demand which once again pushed prices up. This strong upward momentum was carried into 2007 and has becomes a major issue to be tackled.

The authorities should try to come up with the correct policy to steer market in the right direction.

The Ministry of Land and Resources requires local governments to impose stricter supervision of property developers to stop them from hoarding land to push property prices higher.

Such a measure would help balance demand and supply. But it is extremely important to make the measure more feasible, so that it can be fully adopted in commercial practice.

The moves in the property market are usually at the center of the public's attention because they are related closely with the social stability and economic soundness. Now that the market shows early signs of being tamed under comprehensive tightening of the money supply, we must ensure its stabilization.