| The real estate industry is the foundation of the national economy and guiding sector, but also pillar industry. In China, the proportion of added value of real estate to GDP has increased year by year, the proportion of the investment in real estate to the total fixed asset investment, the proportion of the instrument of real estate and consumer credit to the total financial credit, as well as the contribution of its development to the growth of the national economy, has been outstanding. From 1987 to 2006, China's investment in real estate grows from 15 billion Yuan to 1.9382 trillion Yuan, an increase of 128 times, with an average annual growth rate of 32.1%. over the same period the investment in fixed assets only increased by 34.8 times, with an average annual growth rate of 20.4%, and GDP grew only 19.4 times, with an average annual growth rate of 11.8%. The average growth rate of China's investment in real estate is far higher than fixed assets investment and GDP. Due to real estate industry's important position, its running state will has an important impact on the development of national economy.The real estate industry is closely related to the national economy, which is the "barometer" of the national economy. The real estate market is also closely related to financial stability. A financial risk caused by fluctuations in the real estate industry mainly refers to Price fluctuations in the banking system. The interaction among the volatility of house's price, macroeconomic and financial industry has caused monetary authorities and financial supervision departments'concern. The late 1980s, Many countries and regions have painful experiences in the burst of real estate bubble which go after the rapid expansion of bank credit. For example, in 1990 the Japanese real estate bubbles, the 1997 Southeast Asian financial crisis in Thailand, Malaysia, Hong Kong, etc.From 1993 to 1994, in China's North Sea, Hainan, real estate bubble in the real estate market also bring about serious impact to the developing banking system and real estate market.China's real estate industry came out of recession in the end of 1996 and entered a recovery phase in 1997 when the real estate market entered a new round of development cycle. In 1998, driven by the national housing reform and commercial banks'mortgage business, real estate investment growth began to pick up and the real estate industry was a greater development of the indicators increased considerably, and the subsequent start of the economy rose steadily. In 2001, China's real estate prices continued rising momentum in 2003 and in 2004 the indicators accelerated rise in 2006. In 2007 the real estate market has shown overall overheating signs. Prices in large and medium cities rose greatly and in some of the key cities and regions, prices rose several times. The real estate bubble began to show itself. It's like the real estate bubble burst a few years ago as we can see from the extent and speed of the price rising. This has drawn much attention both in academic areas and government offices."Real estate bubble" has been a hit in recent discussion and research. This paper is based on this background .We study the impact of the real estate market fluctuations on national economy and financial institutions and China's current judgment of the real estate market bubble in order to draw specific policy recommendations. Therefore, the study of the impact of the real estate market fluctuations on a country's economic system has an important impact on the relevance and theoretical significance.This paper is mainly based on the economic cycle theory, and studies the real estate cycle observed in the Chinese housing markets. It empirically explores the impact of the real estate industry on the national economy in the mean time it analyses the harmfulness of the real estate bubble. Then through the judgment of China's real estate bubble, this paper has raised some specific policy recommendations. This paper's studying path is: First it emphasizes on the regulation of the development of China's real estate industry as well as the relationship between the real estate and macroeconomic cycle by the research on the cycle fluctuates of China's housing market. Second it makes a further empirical analysis of the relationship between the real estate industry and all aspects of the national economy. The third, this paper summarizes the experience and the lessons from the theoretical analysis and case studies from the classic cases in the history about the real estate bubble which we have studied. Then this paper makes an empirical study on China's real estate bubble. The last, going beyond the previous studies this paper puts forwards some suggestions on the coordinated development of the real estate markets and economy.This paper is structured as follows:Chapter one is the introduction. This chapter makes a brief introduction on the background, significance, the content and the major innovation of this paper.Chapter two is the study of the basic theory of the real estate. This chapter major defines the related conception of the real estate; explores the characteristics of the real estate industry, further more it analyses the status and role of the real estate in the national economy.Chapter three is the study on the real estate cycle. This chapter firstly reviewed the economic cycle theory, and then it summed up the economic cycle theory, finally it makes an empirical study on Chinese real estate cycle. Chapter four is emphasize on the relationship between the real estate and the national economy. Through the relationship between the investment of the real estate and the economy growth, the price of the real estate and household consumption and the price of the real estate and the other capital, this chapter make an empirical study on the relationship between the real estate and the national economy.Chapter five is the research on the domestic and foreign typical case of the real estate bubble. This chapter reviews the case about the financial crisis caused by the real estate bubble in Japan, Thailand, Malaysia, Hong Kong and China's Hainan Island, and Beihai and makes a comparative analysis, concludes the experience and lessons. After that it makes a research on the formation mechanism of financial risks caused by the real estate bubble.Chapter six is an empirical study of China's real estate bubble. This empirical study will be monitoring china's current situation of the real estate development and judge the state of the bubble, through establish a monitoring indicator of the real estate bubble. After that this chapter will discuss the reasons for the real estate bubble and the harm caused by the real estate bubble.Chapter seven is the policy recommendations. In order to promote the healthy development of real estate, do a good job and coordinate the development of the national economy, suppression the real estate bubble, this paper from the State, local governments, developers and the banking system and so on, makes the specific policy recommendations.This paper uses a method in combination of theory and practice, historical research and the reality analysis, logic and empirical studies, qualitative analysis and quantitative research. The main innovations are:1. Synthesize China's real estate cycle index in order to depict Chinese real estate cycle fluctuations, by selecting several indicator systems and then using principal component analysis. We find that there are two cycles in China's real estate market since 1987: the 1987 to 1996 cycle and the 1997 to date cycle. These two cycles have shown different characteristics, in the former cycle, the real estate market experienced the two phases of overheating and adjustment; and in the latter one, the real estate market has a relatively stable development firstly and then grow rapidly.2. Compare the real estate cycle and the national economy cycle and discuss the interaction between the two. By the comparison of the real estate cycle and the economic cycle, we find that China's real estate cycle and trend of the national economy cycle are basically the same. The recovery and prosperity of China's real estate cycle are earlier than the national economy cycle, and its recession is later than the national economy cycle. Moreover, the fluctuation of the real estate cycle is far greater than the fluctuation of the economic cycle. This shows that there is some interrelated relationship between the real estate market and the national economy and that there is interaction in the development of the two. The article also explained the causes of fluctuations in China's real estate cycle from the perspective of the investment, consumption and national policy.3. Establish econometric models, and study empirically the extensive links between the real estate industry and all dimensions of the national economy. Research the relation between the real estate industry and the national economy from three aspects, they are the relationship between real estate investment and economic growth, the relationship between real estate prices and household consumption and the relationship between real estate prices and the prices of other assets of the economy. The research shows that there is a casual relationship between the real estate investment and GDP, and the real estate investment promotes growth of the national economy largely. The real estate market has a greater and significant wealth effect on consumer spending, and the wealth effect of China's stock market is weaker. The inflation index has accelerated the increase of housing prices, and the land price rise is not the direct cause of rising housing prices. Residential prices and the prices of non-residential real estate have a fairly great impact on the overall sales prices of real estate, and the residential price increases have a greater effect than non-residential price rises.4. Sum up the experience lessons of the real estate bubble through case studies. We carried out an inspection of the 1990 Japanese real estate bubble, the 1997 Southeast Asian financial crisis in Thailand, Malaysia and other countries, and Hong Kong, China, Hainan and Beihai real estate bubble in this article, and analyzed the experience and the lessons learned. Explore the real estate bubble hazards to the national economy and financial system. By studying the bubble of real estate at home and abroad, we find that the bubble formations shared an identical character----excessive expansion of the finance results in the real estate bubble, the bubble will also trigger financial risks.5. This article makes a comprehensive judgment of China's real estate market bubble circumstances by selecting all 10 indicators from supply category and demand category respectively, and discusses the current level of China's real estate bubble. Overall, to a certain extent, the real estate bubble has appeared in China's real estate market since 2000, and it has an increasing trend over the past two years. And we make specific policy recommendations.
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