During the first half of 2003, rapid growth in China led many to proclaim the emergence of an economic "bubble." Extremely rapid growth of money and credit was accompanied by rapid growth in investment, especially in the housing market. Chinese policymakers have taken steps to restrain the bubble, and these measures are now having an impact. During this first phase, the emergence of the bubble and the way that it was handled seem to have strengthened the positions of both Premier Wen Jiabao and Central Bank Governor Zhou Xiaochuan. However, the rapid emergence of the bubble economy reveals some unsettling realities about the Chinese economy. Moreover, the bubble portends important shifts in the economic payoffs and challenges that lie ahead for the political leadership.