The Paper Dragon...

Getting closer and closer to open flames...

Kenneth Rogoff, ex-chief economist for the IMF, told Bloomberg Television in Hong Kong that the denouement could prove abrupt after such a torrid boom. "You're starting to see that collapse in property and it's going to hit the banking system," he said.

The government is trying to deflate the housing market gently, mostly using tools known as "financial repression" rather than Western style rate rises. Xu Shaoshi, land minister, said sales are already dropping. "In another quarter's time or so, the property market will probably come to a full correction and prices will fall. It's hard to say to what extent they will fall," he said.

At the same time, China is shifting its foreign reserve strategy, rotating out of Europe and into Japanese government bonds (JGBs). Japan's finance ministry said China bought $6bn (£3.9bn) of bonds from January to April, a record pace of accumulation.

Analysts say Beijing is hunting for fresh places to park its reserves after losing confidence in eurozone debt. It already holds around 70pc in dollars, a level deemed too high by many in Beijing. China's move helps explain the fall in yields on 10-year JGBs to just 1.06 pc last week, and why the yen has appreciated to ¥87 to the dollar -- nearing levels last seen in 1995.

China views soaring house prices as a threat to social stability, since workers are shut out of the market. The price-to-earnings ratio is 13 in Beijing and Shanghai, four times Western levels.

Charles Dumas from Lombard Street Research said China's boom had been driven by its fiscal stimulus of 13pc of GDP, the largest ever by major country in such a short period. The boost was concentrated in 2009, with credit growth running at 25pc of GDP.

"The Chinese had nowhere to put their savings since real interest rates were negative and capital controls stopped them investing abroad, so they bought apartments," he said.