Re-Recognized The Pillar Role Of Real Estate Industry For China’s Economy

China’s economic reform and development, which began in the late1970s orearly1980s, necessarily led to the rapid development of real estate with the reform of thecommercialization of urban residential. In2003, China’s State Council Document No.18(the "State Council on the promotion of sustainable and healthy development of real estatenotice") gave the high degree of recognition to the development of real estate, andconsidered it as a pillar industry of national economy (-that document states:"real estatewhich is associated with many industries, and promoted them to develope, has alreadybecome a pillar industry of national economy").The issued Official documents caused theacademic’s debate, but most scholars have no doubts except a few who expressed theopposite opinion. For a while, real estate which may replaced the automobile industry(Note: After the reform and opening-up and before the WTO accession, auto industry alsohad been hoped to be China’s pillar industry of national economy), became a new pillarindustry. However, things are unpredictable, Chinese real estate faced a "turning point"after a short time of population, and the accumulated bubble of real estate began to burst,--the facts had given the best answer to the debate of the real estate which is a pillarindustry of China’s national economy or not. But, it is necessary to reflect from the theoryand practice angle, in order to avoiding the same mistakes.As mentioned above, under the influence of public opinion and official documents,scholars had many different voices. But their views, which are often the sake of discussionand lack of systematic analysis and theoretical support,are not convincing enough. In thispaper,we do research on the developed market economies from the economic developmentand structural changes theory, and found that the thesis of"real estate is a pillar industry ofnational economy", is neither in line with economic development and the rule of structuralchanges, nor in according with general experience of economic development, moreseriously,may mislead a large developing country’s economic reform and developmentpolicies and national consciousness.Based on this, in order to respect the scientific spirit of economic theory and thepractical economic development, I do theoretical analysis on the function and role of real estate from economic development and structural changes theories and the practicalexperiences of mature market economies.And then, I do empirical research with"associated effects analysis"of leading industry or pillar industry on the development andfunction of China’s real estate to clarify its role in the national economy,especially in thedeveloping country.In addition, I analyse the negative effects about the stability ofeconomical development by the burst cases of domestic and foreign real estate bubble, andthe distorted development of real estate, in the short term, can cause the negative effects,such as, innovation shoaling, distorted society values of wealth,in the long term canaccelerate conversion of the farmland, resulting in an overall reduction in supply ofagricultural products, so that to produce the rise of the basic necessities, causing sustainedirreversible inflation.