An Analysis On The Correlation Between The Development Of Real Estate And Economic Growth Of China

As an important sector in the national economy, the industry of real estate plays a significant role in prompting the growth of other sectors in the national economy due to its large scale. But if the national economy relies on the real estate too much, as a result, there will be bubbles and the unsustainable development of the economy, Because of its role in driving economic development of China, there is an initiative relationship between the real estate and economic development. In the year of 2007, the growth rate of China's economy reaches 11.4%, far beyond the 2% growth rate of America and Japan. But, at the same time of the high growth rate, the component of GDP also changed greatly, the percentage of consumption declined yearly, from 53% in 2004 to 36.2% in 2007. Comparatively, the percentage of fixed assets rose from 44.2% in 2004 to 52.46% in 2007. The real estate kept a percentage of more or less 20% in the fixed asset, but its share in the GDP rose quickly, reached 10.25% in 2007. To some extent, the economic growth of China already relied on the real estate industry excessively, which can be seen much more clearly in some local provinces. There are no other countries whose economic growth relied on the real estate industry so much. This article tries to find out the reasons of this excessive relies on the real estate of the Chinese economy and give some suggestions.There are also many problems when China's economy is growing fast. Firstly, so many risks exit in China's economic growth, including the imbalance ratio between consumption and savings, the increases of surplus in foreign trade, excess liquidity and so on. Secondly, there are the problems of"comparative disadvantage", which means it may be difficult to grow sustainable for China's economy in the next years. But, the state opportunism, which could make the promise to the fair rule of society become unbelievable, may be more serious, as well, it also means it is difficult to achieve the goal of wealth possession among the people, which is the most important factor in the economic growth.This paper analyses the relationship between the investment of real estate and China's economic growth by means of econometrics tools, including co-integration and ECM models and the analysis of Granger causality.For the reason that China's economic growth is so dependent on the investment of real estate, this paper thinks that, firstly, it is inevitable as the state opportunism has become institutionalization in China's gradual reforms. Secondly, because China's industrial structure, which lies in the low-end in the world's industrial chain, has problems. Thirdly, the chief executive of a region could receive promotion by means of helping the development of real estate industry. Fourthly, China's real estate company pay more attention on the land reserves and financial credit to the bank , which are both controlled by governments in some degree in China.In order to enhance the competitiveness of real estate industry in our country, step up the healthy development of real estate market, promote the sustainable and steady progression of national economy , this article believe that four aspects continually should be stressed: Firstly, it is necessary to change industrial structure, at the same time; our nation should develop service industry. Service industry basically is dependent on the privately operated economy, which could lead to the wealth flow to the populace hand and promote the consumption increase; Secondly, it is essential to change our country's present examining and assessment official system, which based on the economical achievement. Only in this way, government officials will not pursue"the achievements"by doing large-scale"the image project"through the real estate industry, however, actually neglecting the economic development quality. Thirdly, it is require to perfect Local authorities' financial revenue system. Fourthly, it is indispensable to perfect transfer payment system which Central authorities support Local authorities'.