Real Estate Bubbles in China, Causes and Future Expectations/Solutions

China is still experiencing rapid economic growth (with GDP annual growth rate 6.7% in Q3 2016). While China is becoming more urbanized and modernized after the reform period, one can witness from the other side, the asset market boom (especially real estate boom) which triggers anxiety to economists and financial experts. What is the real estate bubble or boom? What are the causes of real estate exuberance? Is there a trend in the real estate prices? If the bubble burst then what are the glimpse consequences on china’s economy? How can we prevent the asset bubbles from growing or in other words, what are the precautions and proactive ways central bank of China should take concerning the monetary policy to condone the bubble’s growth? This paper will shed-light on the causes of this real estate bubble and how to solve it using autoregressive (AR) and autoregressive distributed lag (ADL) models.