One of China's leading economists has said that the country is facing the possibility of a dangerous real-estate bubble and rising inflation which could put growth at risk.

Yu Yongding, senior fellow at the Chinese Academy of Social Sciences (CASS) and former member of the monetary policy committee of the People's Bank of China, said that the demand for new property was so high that prices were in danger of soaring out of control.
Speaking at the World Economic Forum in Davos, Mr. Yongding said that China's authorities would have to act to calm the market and that the rate of growth would have to be lowered: ""Definitely inflation is the biggest concern so far. At the same time we are concerned about a real estate bubble.
""The demand for houses is still tremendous. So there is a tug of war between the central bank and the real estate developers. If the bank loosens the property policy there may be a re-emergence of a real estate bubble.""
CASS is affiliated to the State Council, one of the major government bodies in China.
Yongding's warning comes after a series of signals that markets are becoming concerned that the rapid rate of growth in China is not sustainable.
Three weeks ago The Sunday Telegraph revealed that a number of hedge funds had begun taking short positions against China.
The following week, Goldman Sachs warned of some short term dangers for the Chinese economy and last week a report from the consultants, McKinsey, said that high property and commodity prices were a threat.
Yongding made it clear that he did not believe that there were ""short-run"" risks to China, but he did say that a fundamental restructuring of the economy was necessary to stop long term problems: ""I am not too worried about the short run prospects of the Chinese economy. Why am I so confident? Because China's fiscal position is extremely good.""
China's gross debt is just 20 percent of GDP. ""There is tremendous room for the central bank to use very expansionary fiscal policy to stimulate the economy,"" he said.
""We are now formulating the next five-year map of the monetary plan and according to our intention in the next five years Chinese growth will be lower. It will be lower than 8 percent.""
China's most recent growth rate has been above 10 percent but high food and other commodity prices are putting pressure on consumers. The Chinese authorities appear to be well aware of the problems of inflation and over-heated house prices.
Last week the country introduced its first property tax in an attempt to curb spiraling prices. The tax will apply to anyone buying a second home in Shanghai and Chongqing and will be set between 0.4 percent and 1.2 percent of the purchase price depending on the value of the home compared to the rest of the market.
The property tax would have ""a big psychological effect on potential home buyers,"" said Ge Haifeng, head of research at China Real Estate Index System in Beijing. ""China's housing market may get really quiet in coming months,"" he said.
The move is also likely to stop Chinese home buyers' hoarding houses as it will no longer be cost free. It could also curtail people who buy houses simply as an asset class rather than as a home.
(Source: Telegraph.co.uk