More evidence that the initial stages of dialing back on easy money fueling asset bubbles only causes those  bubbles to get bigger in the short-term comes from China as, despite government efforts to cool a red-hot housing market, buyers keep bidding prices higher.

Bloomberg reports that measures taken so far by the Chinese government have been inadequate to stop property prices from rising sharply, efforts that stand in stark contrast to those of the U.S. government’s no money down programs, $8,000 tax credits, and freakishly low interest rates intended to revive the housing bubble here.

China’s cabinet raised minimum mortgage rates and down payment ratios for some home purchases, saying “more forceful” steps are needed to cool speculation after property prices rose at a record pace in March.

Down payments for second homes must be at least 50 percent, up from 40 percent, and interest rates can’t be lower than 110 percent of benchmark rates, the State Council said in a statement, citing decisions made during a meeting yesterday. Banks should also raise down payment ratios and rates for third homes “by a broad margin.”
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Residential and commercial real-estate prices in 70 cities climbed 11.7 percent last month from a year earlier, the National Bureau of Statistics said yesterday. Haikou, the capital city on the southern island of Hainan, had the biggest gain, with a 53.9 percent jump in overall property prices.

Housing isn’t the only thing in China that is on an upward trajectory as economic growth was sizzling hot in the first quarter, real GDP expanding at an annualized rate of 11 percent.

Clearly, the Chinese are now getting much too much of a good thing – eight percent GDP growth and rising home prices are one thing, but 11 or 12 percent economic growth and a housing bubble are quite another and, at this rate, we’ll soon see a repeat of early-2008 when consumer prices began to rise sharply spurring protests and general unrest.