AS housing bubbles go, China's looks relatively benign. Unlike in the United States, Chinese home buyers typically put down at least 40 percent of the purchase price. That means they don't have to worry about a modest decline wiping out all their equity, and banks have little reason to fear an influx of "jingle mail" from defaulting homeowners returning the keys.

Household debt amounts to less than 20 percent of China's gross domestic product, according to the International Monetary Fund, one fifth of the US ratio.

"In the United States, housing was a borrowing vehicle for households. In China, it's a savings vehicle," said Stephen Green, an economist with Standard Chartered in Hong Kong.

This is a vital distinction. It was leverage that turned the US housing slump into a global financial crisis. That suggests even if China's housing market suffers a similar slide, the economic consequences would be far less severe.

That doesn't mean it would be painless.

There are a couple of trouble spots. China's new home sales have fallen sharply in some cities, putting property developers in greater danger of default. Local governments counting on land sales to help repay US$1.5 trillion in loans may find the money flow slows, saddling banks with bad debts.

But the Chinese government appears to be ready, willing and able to limit the economic fallout. Over the past 18 months, China has clamped down on property speculators to try to cool prices.

If it stays on that course, China could become one of the few countries to successfully deflate a property bubble before it bursts. If there is a global recession, all bets are off.

Keep rising

Nationwide data suggests China's housing affordability is not that much different from Britain's and only marginally worse than that of the United States, where house prices have fallen precipitously over the past five years.

But in major cities such as Beijing and Shanghai, it is off the charts. IMF figures show that a 70-square-meter home in Beijing costs about 20 times the average annual household disposable income, quadruple the national ratio and almost seven times higher than in the United States. Beijing, Shanghai and Hangzhou look worse than even notoriously pricey Tokyo on the affordability scale.

A People's Bank of China survey in mid-September showed 76 percent of urban residents saw property prices as too high, and 38 percent expected them to keep rising this year. Both readings were higher than in the PBOC's mid-June poll.

Beijing was quick to try to stamp out speculation while other countries have left it up to market forces to squeeze out the excess - sometimes with catastrophic economic consequences, as the United States can attest.

In July, China extended the list of cities where it limits the number of homes a family can buy. There are now 40 cities with such restrictions in place, including Beijing and Shanghai.

In January, it raised the minimum down-payment for second homes to 60 percent from 50 percent.

Compare that with the US, where at the height of the housing boom speculators could buy with no money down. Some even obtained mortgages for more than the purchase price.

Now, 22.5 percent of US homeowners owe more on their mortgages than their homes were worth, according to data analysis company CoreLogic. These "underwater" borrowers are more likely to default than those with positive equity.

In China, it would take a house price drop in the 40 percent range before negative equity became a serious concern, said Barend Janssens, head of wealth management for emerging markets at Royal Bank of Canada. "There is a lot of fat, and people will lose some of that," Janssens said.

Rising wages also play in China's favor. The US housing bust coincided with a severe spike in unemployment, and wages stagnated. In China, double-digit annual wage increases are the norm, so income should rise faster than housing costs.