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The new Chinese government kicked off its tenure with a severe tax policy to curb real estate speculation, sending the Shanghai Composite skittering lower Monday and dealing another blow to the outlook for Canadian resource producers.

Chinese president Xi Jinping takes office officially this week and one of his primary initiatives – crushing speculation in the residential housing market – is already apparent. The government announced new measures late Friday mandating stricter implementation of a 20 per cent capital gains tax on home sales and increasing mortgage rates on purchases of second homes. The result was an almost 10 per cent swoon in property-related stocks traded in Shanghai.

The decades-long Chinese economic miracle that has boosted domestic resource stocks has been in large part a construction boom – not only roads, bridges, railways, airports and factories but also residences. The problem of overbuilding has reached epic proportions – government sources estimate that there are nearly four million vacant apartment units in Beijing alone .

Market reaction indicates that local investors believe the government is serious about curbing residential housing activity. That's likely to have significant negative effects on demand for iron ore, copper and other commodities provided by Canadian companies. Three month copper futures on the London Metal Exchange are trading 1.4 per cent lower Monday morning.

Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Scott on Twitter at @SBarlow_ROB.