NEW YORK (TheStreet) -- When it comes to global investing, one of the biggest and most closely watched stories over the past few years has been China's handling of its red hot housing industry.

This week, it appears as though a new chapter has begun to take shape. While interesting to watch, this is a story that conservative ETF investors would likely be best off following from the sidelines.

Fearing a bubble, government officials have taken a myriad of steps to reign in the breakneck growth of the real estate market. In the past, these proposed policies, which have included higher down payments, bans on third-home purchases, and placing limits on bank lending, had little impact on cooling expansion.

However, the story began to show signs of shifting in late 2011. At the start of the new year,

The Wall Street Journal

reported that 70 Chinese cities saw property prices head lower in December from the previous month, marking the third consecutive month of declines. This trend continued into January.

Tumbling home prices help to ease some bubble-related pressure. However, this downturn has also brought with it some new challenges, the most pressing of which is the fear that slumping home prices combined with macroeconomic tensions in regions like Europe would result in a devastating Chinese economic "hard landing."

Now, as European fears are taking a back seat, China's policy makers are beginning to ease their grip on the housing market.

Bloomberg reported in mid-week that China's central bank was once again taking active steps to influence the nation's housing market. This time, however, the moves made appear to be an effort to reignite demand and buoy the industry. First-time home buyers will be the main focus for these policies. The report notes that, in addition to getting loan priority, the government will take steps to promote increased construction of affordable housing.

The central bank's turnaround to promote and provide added support to the Chinese housing market is encouraging and as a result shares of Chinese-focused ETFs have enjoyed a welcomed spurt of strength.

However, for conservative investors, this move is not in and of itself a reason to pile into a concentrated fund like the

Guggenheim China Real Estate ETF

(TAO) - Get Report

. The threat of an all-out collapse of the nation's real estate industry has been noticeably reduced. The potential for a continued slowdown, though, is still present. The global marketplace has watched in recent weeks as China's growth trajectory has begun to wane. As the nation works to regain its footing, continued choppiness could ensue.

Ultimately, those confident in China's ability to skirt a "hard landing" should have their sights set on products that offer an element of diversification. Funds like the

iShares China 25 Index Fund

(FXI) - Get Report


Guggenheim China Small Cap Index ETF

(HAO) - Get Report

are better bets here.

When venturing into China, be sure to keep any exposure small and closely monitored. We have seen in the past how heavily global market sentiment can influence developing nations. In the event that fears resurface, overexposure to a fund like FXI or HAO can result in gut-wrenching fluctuations.

Written by Don Dion in Williamstown, Mass.


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At the time of publication, Dion Money Management did not own any equities mentioned.