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House prices in the main cities of China have been rising to historically high levels. Unsustainable growth of housing prices might cause financial crises and damage the whole economy. This research aims to detect whether bubbles dominate China’s real estate market. It begins by systematically analysing the features of China’s real estate sector, followed by proposing a theoretical framework to identify the fundamentals of house prices and decompose house prices into cyclical and bubble components. It then applies the vector error correction model and other econometric techniques to testify the theoretical framework with data of seven Chinese cities from 2008M01 to 2017M12. The main findings of this research include the following four parts. Firstly, the residential housing market of Shanghai was exposed to the irrational bubble issue, but the rest six cities examined were at safe positions. Secondly, both long-run and short-run relationships between economic fundamentals and house prices have been verified. Thirdly, economic regulations also have significant effects on house prices. Finally, this research suggests that the root cause of the high housing prices in major cities in China is due to the excessive capital injection into the residential property market. Key words: China, House prices, Housing bubbles, Political adjustment, Real estate market, Macroeconomics.JEL: G15, G21, R11, R21, R31. Postoje li neracionalni mehuri pod visokim cenama stambenog smestaja u vecim gradovima Kine? Cene kuca u glavnim gradovima Kine popele su se na istorijski visoke nivoe. Neodrživi rast cena stanova mogao bi izazvati finansijske krize i naneti stetu ekonomiji kao celini. Ovo istraživanje ima za cilj da utvrdi da li mehuri dominiraju kineskim tržistem nekretnina. Pocinjemo sistematskom analizom karakteristika kineskog sektora nekretnina, nakon cega predlažemo teorijski okvir za identifikaciju osnova cena kuca i dekompoziciju cena kuca na ciklicne komponente i mehure. Zatim primenjujemo model vektorske korekcije gresaka i druge ekonometrijske tehnike za proveru teorijskog okvira sa podacima o sedam kineskih gradova od 2008M01 do 2017M12. Glavni rezultati ovog istraživanja ukljucuju sledeca cetiri dela. Prvo, tržiste stambenih stanova u Sangaju bilo je izloženo problemu iracionalnih mehura, ali ostalih sest pregledanih gradova bilo je na sigurnim pozicijama. Drugo, provereni su i dugorocni i kratkorocni odnosi između ekonomskih osnova i cena kuca. Trece, ekonomski propisi takođe imaju znacajan uticaj na cene kuca. Konacno, ovo istraživanje sugerise da je glavni uzrok visokih cena stanova u vecim gradovima Kine rezultat prevelikog ulaganja kapitala na tržistu nekretnina. Kljucne reci: Kina, cene kuca, mehuri na tržistu nekretnina, politicko prilagođavanje, tržiste nekretnina, makroekonomija.

Are there irrational bubbles under the high residential housing prices in China’s major cities?