Research on the Influence of Real Estate Development on Private Investment: A Case Study of China

Abstract

Private investment in China, as a developing country, is an important source of financing for Chinese SMEs (Small and Medium-Size Enterprises) and has played a major role in the development of the real economy. However, in 2016, the growth rate of private investment in China dropped from 10.18% to 3.17%, which had a significant impact on the real economy. At the same time, China’s real estate market has developed rapidly, attracting a large number of capital inflows. The relationship between real estate development and private investment in China is worth considering. This study first, theoretically analyzes the influence mechanism of real estate industry on private investment, pointing out that within a modest development range, the development of real estate industry can promote private investment through the industrial linkage, urbanization, and balance sheet effects, but when real estate is overdeveloped, it has an inhibitory effect on private investment through vampire effect, raising costs and reducing demand effect. In other words, real estate has different effects on private investment in different developmental periods. Therefore, there is a non-linear relationship between the two variables. Second, the relevant provincial panel data of 31 provinces in mainland China from 2003 to 2015 were selected. Using the dynamic panel system Generalized Method of Moments (GMM), this study estimated the correlation between real estate development and private investment. The empirical results showed that the development of the real estate industry has a significant impact on the level of private investment; the two showing an “inverted U-shaped” relationship. At present, in some provinces in China, the real estate industry has exceeded the inverted U-shaped threshold. To boost the vitality of private investment in promoting real economic growth, the development of the real estate industry should be restricted, and house prices should be properly regulated.

The Coupling Coordination Evaluation of Sustainable Development between Urbanization, Housing Prices, and Affordable Housing in China

“…In this research, the economic development level indicator has the highest weight value in the evaluation indicator system, which means that the economic development level is an important indicator in the urbanization process. Li et al and Liu et al , respectively, focus on the impact of individual investment and population flow on housing prices in the urbanization process, demonstrating the close relationship between urbanization and housing prices [73,74]. In this study, the urbanization process and housing prices show high coupling in the system, which indicates that there is a close coupling coordination relationship between them.…”

The Nonlinear Interaction of Real Estates and Economic Growth in China

“…[7] examines the influencing factors to economic in Sichuan province in China using Basso, and find that real estate growth rate on economic growth in Sichuan is not significant. [8] examines whether real estates market affects the private investments, and find that the growth of the real estates market has an important impact on the private investment's growth. [9] examines how real estates fluctuations affects China's economic fluctuations using OLS and Granger causality test, and find that real estate industry is the most powerful pull of China's economic growth momentum.…”

Nonlinear Influence of Chinese Real Estate Development on Environmental Pollution: New Evidence from Spatial Econometric Model

“…Gerdesmeier et al (2010) found that investment has a profound impact on the development of the real estate industry, and the scale of investment changes can be used to predict the rise and fall of real estate [ 18 , 19 ]. Therefore, this article uses real estate investment to measure the degree of real estate development.…”