FOR all the central government's tough talk on curbing wayward real estate prices, monumental risks still lurk in the market - so formidable that on a recent visit to the northern city of Tianjin, Premier Wen Jiabao had to vow - yet again - to cool the red-hot housing sector.

That the hidden risks in the property market are so hard to defuse has, in my view, laid bare a rift in the policy making circles.

Messages from the top brass too often get lost in a cacophony of disingenuous proposals floated by some officials and pundits on how to depress property prices.

Take one such proposal, which argues that by increasing the supply of affordable housing and low-rent apartments, steep home prices will gradually go flat.

Whoever spun this theory must have conflated the two attributes of commercial housing, which, albeit being loosely correlated, are essentially of very distinct natures. To understand the futility of increasing land or housing supply to keep exorbitant home prices in check, it should be noted that housing as a commodity has a dual role. It serves as both a dwelling place and an investment tool.

If the government does release extra land and cheap housing resources into the market, this might ease the burden on people without a roof of their own. But it's unlikely to dampen the enthusiasm of those who buy properties in anticipation of their potential rise in value.

The ongoing property boom is primarily driven by this thirst for swift accumulation of wealth.

Amid fears that raging inflation -exacerbated by flush liquidity in the capital market -will erode their hard-earned savings, most people tend to see property investment as the only secure and consistently lucrative destination for their money.

The perceived lack of serious government regulation of the property market only encourages this tendency and swells the ranks of home buyers.

This rush to buy is seen by some as the "rigid demand °?- behind ever higher property prices. Meanwhile, concepts like urbanization and a homogenizing Western lifestyle have been conveniently cited to underpin the notion that home prices will continue their upward spiral in China.

In a country where per capita income has yet to reach US$3,000, and where people have to fend for themselves instead of hoping to rely on a porous social security net, the hankering to amass wealth as fast as possible is palpable among the Chinese populace.

Under these circumstances, it's not hard to see why local governments found to be hoarding land and developers caught cutting corners in construction were often subjected to public opprobrium, for their activities were resented not so much for being illicit as for being blatantly speculative and predatory.

But even if the government moves to raise land supply or mete out punishment to land-hoarding developers in a bid to lower home prices, these measures will hardly dent popular perception of properties as the sole objects worth investing in.

By the same token, any salary increase can do little if anything to foster frugality on the part of its beneficiaries.

Whether they receive a pay raise or not, people's savings will continue to flow to the housing market as long as they expect to make money from it.

Gluttony

Some experts have fretted about the fact that property sales generate a disproportionate percentage of China's fiscal revenues.

They opine that without the current housing boom China's economy would fall on hard times.

Their worries seem well founded, given the possibility that the real estate gluttony may not only suck in funds that should go to vital sectors of the economy, but it may also impose a financial yoke on a growing number of ordinary home buyers, local governments, mainstay industries and major banks.

Either way, China's economic dynamism would be at stake.

The reluctance to face up to this scenario has given rise to a policy of accommodation with the status quo.

Now that a significant share of China's economic resources is concentrated in the property sector and its related industries, why bother making vain efforts to change the situation and risk an economic hard landing?

That's why sky-high home prices have only flattened, not plummeted. The government's moderate approach in cooling off the persistent housing fever has failed to tamp down market greed.

The government came up with watered-down overhauling plans in hopes of concessions from the market.

Nevertheless, property speculators have not "replied in kind" - namely they haven't settled for existing returns on their investments. They hold firm in their belief that property speculation alone is the easiest way to build a personal fortune.

Although a raft of government regulations do raise the bar on profiteering in the real estate sector, some people are still trying to find their way in, by hook or by crook.

No other country's property market perhaps is more distorted than China's, which reaps outrageous benefits at almost no cost.

The trade-off between profits and risks is currently nonexistent but it won't be missing forever.

Conventional wisdom has it that in the long run high returns and high risks always go hand in hand in a given market.

If current trends develop in China, the property boom will inevitably turn to bust.

Such a housing fiasco threatens to take down with it some of China's local governments, businesses and banks, which are either overly reliant on high home prices or simply cannot withstand the impact of a massive shake up of the industry.

Thus, China cannot fully withdraw its stimulus efforts. And local officialdom and speculators will keep propping up housing bubbles for the sake of their own interests. This bodes ill for China's economic future.

(The author is professor of finance and executive vice dean of the School of Economics at Fudan University. Shanghai Daily staff writer Ni Tao translated and edited his article originally written in Chinese.)