China is really worried at the speculative rise in the real estate prices across the nation in the last one year. The prices are over 50% higher in most of the cities due to availability of cheap bank financing since the beginning of this year.

Also China spend over 500 billion US dollars towards infrastructure in the last one and a half year, which increased the domestic demand levels. The Chinese banks raised up the new loan issuance by over 52% in the year 2009 which may turn into an uncontrollable asset bubble in the coming months / years. So the Chinese government has got into the act and cut down on further loan growth. We can only expect China to keep raising interest rates in the coming months also, if loan growth do not subside to respectable levels.

China has been helping out Japan, South Korea and even US in the last few quarters by importing more from those countries. And any drop in Chinese demand could well pull down the exports of their ailing countries, which they would not wish anyway.

In fact the economic recovery in Japan in the last quarter of 2009 has been due to surge in exports to China which may now come under pressure. US also might see a cut on their export oriented sector if China consciously cuts down imports in the coming months.