Study About Chinese Real Estate Cycle And The Mutual Effects With Macro Economy

China has stepped out deflation since the second half of year 2003. In the totalprice recovery process, real estate sector made a significant effect. Real estatedevelopment investment kept rising continuously, from 1991, only accounting for4.6% of total fixed asset investment, to 18.34% in 2003. Real estate has developedinto an underpinning industry in macro economic development. At the same time, realestate price and vacancy rate keep rising nationwide, and especially in big cities,which causes prevalent worrying about risks accumulated in the industry, theexistence of real estate bubble and the ensuing breakout of real estate crisis. Therefore,study about Chinese real estate cycle has become an urgent task facing scholars.At present, not many research upon Chinese real estate cycle can be found andamong them, most are qualitative, and stress in the inside of the industry, whilequantitative research about mutual effects between real estate cycle and macroeconomic cycle remains blank. As a part of macro economy, real estate sector hasstrong mutual effects with the macro economy. It can be a leading industry, developsin advance of the macro economy, while also needs to comply with the wholeeconomic structure, can not deviate or exceed the development level of otherindustries for long.Realized the problem, this paper introduces the concept of real estate cycle,summarizes worldwide research concerning real estate cycle and the mutual effectswith macro economy;on the basis of analyzing the past two worldwide real estatecrisis and the introduction of various theories explaining real estate cycle, summarizescharacteristics in the development of Chinese real estate market;sets up diffusionindex of Chinese real estate cycle with data and indices from inside the sector;finallyafter expatiating mutual effects between real estate industry and macro economy,analyses the relationship in Chinese economy, and long-term equilibrium relationshipbetween commercial house price and GDP using popular econometric method likeVAR(VEC).This paper supplies a gap in the research about the mutual effects betweenChinese real estate cycle and the macro economy, establishes foundation for futureresearches.