China’s Asset Bubble: Truth or Imagination

This paper investigates whether there is an asset bubble in China. This paper compares asset bubbles in the US and Japan with asset bubble in China using a historical data. We expect that Chinese government has an ability, in some measure, to control the spread of bubble in asset market. And, Chinese government has an ability to control inflation that may occur with asset bubble. On the other hand, Chinese government elastically and loosely cut liquidity, retrench, and pump-priming to secure domestic growth. After reviewing all the analysis regarding Chinese asset market and ‘domestic and foreign’ environment, we conclude that there is a low possibility in fluctuating asset prices in the short-run in China. However, there are some other risk factors that may affect to the other countries and these risk factors are different from the previous periods in China.