BEIJING (MNI) - China's property bubble is set to burst, causing greater damage to the domestic economy than the U.S. suffered after its housing market collapsed in 2008, a government economist warned in comments published Friday.

Yi Xianrong, a researcher at the Chinese Academy of Social Sciences with a reputation for speaking out against the government's housing policy, said the U.S. housing bubble was smaller than China's and still burst, despite the country's superior legal and credit systems.

In an interview with China News, Yi warned that burst property bubbles bring systemic risk " and the (Chinese) bubble is set to burst, no one can save it, and it might be even worse than the United States."

Yi did not indicate what he expects to trigger the bubble bursting.

Market News International calculations show prices nationwide rose an average 3.7% y/y in August. But transaction levels have been falling amid a standoff between potential buyers and developers and some analysts are expecting prices to start falling as government tightening bites.

Yi said prices remain high despite the government's efforts at taming the market. Falling transaction volumes are the result of credit restrictions rather curbs on purchases, Yi said, arguing that taxes should be raised and credit tightened further.

" If the government introduced tighter tax policies, property prices would adjust. The current problem with property is to crack down on speculation," he said.

He added that developers won't face any liquidity problems because of abundant funding in the private lending market.

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