An investigation into real estate investment and economic growth in China: A Dynamic Panel Data Approach

Abstract

Using a dynamic panel data approach to analyze national-level and province-level data in China from 2000 to 2012, this paper studies how real estate investment affects Chinese economic growth. We find that real estate investment has significantly positive contemporaneous effects on economic growth on both national and regional levels. Surprisingly, we also find that real estate investment has negative lagged effects on economic growth. Such negative lagged effects differ among the three regions we investigated: the eastern region shows the most significant effects from real estate investment; while the middle region shows the least. Further examinations of the four types of real estate investment (i.e. housing investment, office building investment, investment for commercial and business purposes, and other investment) show that housing investment exhibits the most influence on the economy in China. Additionally, we find that the four types of real estate investment exhibit significantly negative lagged effects on Chinese economic growth and there are regional differences in the repressive effects of the four types of real estate investments on economic growth.