China’s Two House Policy

In an effort to cool the red-hot Chinese housing market, The China Banking Regulatory Commission (CBRC) has directed banks to cease offering mortgages to people buying their third homes in four of its major cities. Property prices in Beijing, Shanghai, Shenzhen and Hangzhou have sky rocketed during the past few years, with condos going for millions of dollars. Beijing fears that these sky-high prices are making it impossible for ordinary people to afford housing. The CBRC has also ordered a mini “stress test” on its banks to a theoretical 50 percent fall in the price of homes. The Claymore/AlphaShares China Real Estate

has had an impressive run after the credit crisis ended. However, as China is intent on fighting speculation and deflating record high property prices, the ETF could fall. Investors may want to avoid the fund for now, until it reaches lower prices.