In a new book of lectures by Ben Bernanke, the former Federal Reserve Chairman contends that the US property bubble was not the result of low interest rates, but regulatory flaws and defects in the financial system. Bernanke suggests that the low interest rate policies adopted by the Fed were intended to stabilize the overall economy, of which the housing market was only one part.

China should heed this line of reasoning. The root of its own housing market discomfort lies first and foremost in its problematic fiscal income structure. It has been fairly well established by this point that the excessively high home prices seen across many parts of China are largely the outcome of local government maneuvers to inflate land prices. Land transfer fees constitute one of the top sources of revenue for regional authorities.

China's relatively tight monetary policy has raised the value of the renminbi, but have nationwide housing prices shown any sign of falling? If authorities turn off the liquidity tap in an attempt to deflate the housing market, they will not only miss this goal but also spark a renewed wave of capital flight.

The author is Niu Wenxin, a commentator.