The shift of China's monetary policy stance from "moderately loose" to "prudent" next year indicates curbing inflation and asset bubbles have become the Central Government's top priority. But is China's bubble problem short-term or long-term? Is it only monetary or related to economic structure? Is it the cause of China's economic imbalance or the result? And what kind of deep-rooted problems in the macro economy does it reflect? All these questions call for deep thought, said Zhang Monan, a researcher with the State Information Center, in a recent article for The Beijing News. Edited excerpt follows:

The fast economic growth China has experienced in the past three decades is mainly attributed to dividends of production elements (including labor force and resources), market-oriented reform and globalization. Today, the contribution of the three major dividends is weakening and the growth model built on low-cost advantages can no longer be sustained. Next year marks the beginning of China's 12th Five-Year Plan (2011-15) and now the Chinese economy is at a turning point about which way to go.

So far, the decaying dividends have not slowed the economic growth rate. They have, on the other hand, triggered property bubbles as a result of industrial capital flowing into the property market and virtual economy. It explains why property bubbles failed to be held back despite crackdowns by the government.

The truth is that the economic growth propelled by these dividends has put the Chinese economy in a tight spot. Corporate profits are shrinking quickly as a result of soaring production costs and plummeting marketing prices. What follows the corporate profit decrease will be overwhelming economic bubbles, because enterprises are forced to put money into property and stock markets in order to survive and keep their profits high, or at least stable.

Currently, property market bubbles and capital chasing after investment commodities are the pitfalls facing the economy. Private enterprises have chosen and will continue to choose to withdraw from the real economy and turn to the real estate sector. What's worse is that even state-owned enterprises (SOEs) are participating in this trend. In recent years, so many SOEs have engaged in the real estate that the government had to force 78 central SOEs to exit the sector.

To some extent, the real estate industry has become China's pillar industry. The real estate industry could contribute 3 percentage points to China's annual GDP growth, if investment in the industry maintains an annual growth rate of 15 percent. What's more, the real estate sector drives more than 20 related industries, including cement, iron and steel. In this sense, a real estate bubble burst could be a pop heard around the whole macro economy.

Above all else, the most important task for the future is to prevent a bubbling economy. Whatever course the economic transformation takes, developing the real economy will be fundamental to China's continued economic success. We should keep in mind that the real economy is essential to all economies, as nations like the Netherlands, United Kingdom, Japan and United States illustrated in the past. The decline of the Netherlands, United Kingdom and Japan was due to their once prosperous financial and property industries but decadent real industrial sectors. This also happens to be the root cause of the global financial crisis.