BEIJING, Nov. 1 (Xinhua) -- In a popular residential district near Beijing's South Fourth Ring Road, a real estate agent, Zhao, strolled out of his office and exchanged jokes with his colleagues.

Things weren't so relaxed a little over a month ago in the Chinese capital, one of the hottest markets in the country's property boom. Zhao said he still needs time to adjust to the change.

"Each of us used to usher four to five groups of buyers to apartments. Now we can stand here chatting all day. Few even come to ask for a quote," he said.

"All the indicators (on home sales) point downwards. The panic buying appears to have eased," Zhao added.

Beijing is not the only city where the property market has cooled since late September. At least 20 Chinese cities announced measures to rein in loans and limit home sales to prevent the bubble from bursting.

The health of the overheated property sector has attracted the attention of the country's highest-ranking officials.

At a meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee last Friday, the leaders warned that monetary policy priorities should be directed at curbing an asset bubble and guarding against financial risk, while ensuring adequate liquidity.

It was the second time in three months that China's leadership mentioned the need to curb asset bubbles.

A booming property market aided by ample credit has played a key role in stabilizing China's growth. The economy expanded 6.7 percent year on year for three consecutive quarters amid sluggish global economic growth.

Overall, the world's developing nations are forecast to expand 4.2 percent this year, according to a recent report by the IMF, saying that compared to lackluster developed economies, emerging markets will make up more than three-quarters of projected world growth.

SQUEEZING THE BUBBLE

The downside of an economy that relies too much on housing seems obvious.

According to official statistics, China's banks doubled their loans to individual home buyers in the first three quarters from a year earlier to 3.63 trillion yuan (542 billion U.S. dollars), siphoning off capital that could have been invested in businesses.

Housing pricesin 64 out of 70 cities polled by the National Bureau of Statistics soared during the month of September from a year earlier. Some cities, such as Beijing, Shanghai, and Xiamen, saw an increase of over 40 percent.

China's banking watchdog has warned of financial risks related to the property sector, calling for efforts to ban illegal inflows of loans and wealth management funds to the sector.

Liu Xiaoguang, a researcher with the National Academy of Development and Strategy of Renmin University, said the asset bubble and debt risks have become the most likely factors to trigger a liquidity crisis and economic turbulence.

"If the bubble is not controlled, society's entrepreneurial spirit will be hurt as no one will be interested in the real economy anymore," said Wu Bin, who sold his house three years ago to start an agricultural business in central Hubei Province.

Wu said he is anxious as his former colleagues who have speculated on property have become rich, while he continues to struggle with a lack of investment.

Dong Ximiao, executive president of Hengfeng Bank Institute, predicted a monetary policy shift that helps prevent financial risk.

In first-tier cities, banks have been ordered to tighten the control of new loans to home buyers, while real estate developers are under close scrutiny for unscrupulous sales methods.

"Deceptive advertising, pricing fraud, and the 'hoarding' of homes persist in China's real estate market," said Chen Sheng, deputy director of the China Index Academy. "These contribute to the bubble."

In Guangzhou, developers tore down fliers advertising high-priced properties, and agents have stopped offering short-term loans for people who can't afford a full downpayment.

As a policy innovation, district governments in Beijing have even put a ceiling on apartment prices for land it sells to real estate developers.

FUNDING INNOVATION

Observers said they hope that after the government takes the steam off the property sector, capital will flow into the real economy to fund manufacturers, especially those in the high tech sector.

Promisense Electronic Technology Co., Ltd is a tech company that produces industrial gas sensors. The Suzhou-based company recorded nearly 1 million yuan (149,253 U.S. dollars) in turnover for the first nine months this year, much better than last year.

Yu Xiao, a partner in the company, was upbeat about the future.

"The market for environmentally friendly products is growing quite fast," he said. "We signed more contracts in the third quarter than in the first half of the year, and we expect this trend to continue in the fourth quarter."

Zhang Liqun, a researcher with the Development Research Center of the State Council, said signs have shown that the Chinese economy has stabilized, but to achieve steady and faster growth, more efforts should be placed on structural reforms.

In recent decades, China's breakneck development has relied on massive infrastructure development, heavy industry and large-scale manufacturing of middling and low-end merchandise for export.

The economy is now widely expected to follow an L-shaped path, which means the dip in growth will stop, but it may not return to the double digits anytime soon.

Li Daokui, an economics professor at Tsinghua University, said for middle-income economies to become high-income countries, it is normal to see growth drop and major industries transformed.

The government has been making efforts to slash overcapacity in loss-making heavy industries, such as steel and coal, to prevent inefficient use of bank loans and other resources.

Dong of Hengfeng Bank Institute said to help restructure the Chinese economy, monetary policy should direct funds away from asset bubbles and enter the real economy.