The 2009 surge in bank lending in China was accompanied by allegations that substantial funds had been funneled into the nation's stock and property markets. Using data from 1999 to 2011, possible linkages between lending activity, real estate prices, stock prices, and inflation are examined. We find empirical support for the claim that housing prices responded to increases in liquidity and lending rates, along with evidence of codetermination of stock prices and housing prices. House price inflation also appears to consistently affect the overall inflation rate in China, based on both causality testing and VAR estimation.
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Burdekin et al. (2014) studied this question.
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