Can it be done without harming the wider economy?

October 6th 1979 was a beautiful Saturday in Washington. It was not the kind of day that augured wrenching change in economic policy. But on that date Paul Volcker, then chairman of America’s central bank, announced a radical plan to quash persistent inflation. Before the battle was won, America’s interest rates reached 20% and unemployment surpassed 10%. Car dealers sent him the keys to vehicles they could not sell, in coffins.

China is now facing its own “Volcker moment”, according to Ting Lu of Nomura, a bank. The government’s aim is not to curb an inflationary spiral (China’s consumer prices are rising only modestly) but to break a vicious circle of property speculation and credit expansion. Regulators are making it harder for developers to raise money and for households to buy homes. The new rules have already pushed several property firms, including the country’s biggest homebuilder, Evergrande, to the brink and contributed to a decline in home sales. But are China’s rulers willing to endure anything like the economic discomfort that Volcker inflicted to achieve their goals? The world may be about to find out...

The Economist: China’s bid to stabilise its property market is causing jitters