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China property prices accelerate

14 January 10 07:37 GMT

Chinese property prices rose at their fastest annual rate in 18 months in December, official figures show.

Real estate prices rose by 7.8% from a year ago - up from the 5.7% annual rise seen in November and renewing fears that an asset bubble is developing.

Chinese authorities have expressed concerns that property prices are rising too fast.

On Tuesday, China's central bank announced measures to curb lending in order to reduce real estate investment.

Lending boom

Last year, Chinese banks issued $1.5 trillion (£932bn) in loans in order to boost economic growth - with a large proportion being used to invest in property.

One of the leading rating agencies, Fitch Ratings, has been among those expressing concern over the trend, arguing that too much lending could harm the banking sector as well as the property sector.

"Fitch is concerned about an eventual deterioration in banks' asset quality, amid the loan growth acceleration in 2009," the ratings agency said.

"High investment spending, particularly in the real-estate sector, also carries the risk of asset price misalignments."

Banks have been told to increase the amount of capital they hold in order to curb lending, and Chinese city authorities have been told to speed up property developments and build more low-cost housing.

The government also this month brought back a sales tax on property sold within five years of its purchase to discourage speculators looking to make quick profits.

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