Abstract
Private investment in China, as a developing country, is an important source of financing for Chinese SMEs (Small and Medium-Size Enterprises) and has played a major role in the development of the real economy. However, in 2016, the growth rate of private investment in China dropped from 10.18% to 3.17%, which had a significant impact on the real economy. At the same time, China’s real estate market has developed rapidly, attracting a large number of capital inflows. The relationship between real estate development and private investment in China is worth considering. This study first, theoretically analyzes the influence mechanism of real estate industry on private investment, pointing out that within a modest development range, the development of real estate industry can promote private investment through the industrial linkage, urbanization, and balance sheet effects, but when real estate is overdeveloped, it has an inhibitory effect on private investment through vampire effect, raising costs and reducing demand effect. In other words, real estate has different effects on private investment in different developmental periods. Therefore, there is a non-linear relationship between the two variables. Second, the relevant provincial panel data of 31 provinces in mainland China from 2003 to 2015 were selected. Using the dynamic panel system Generalized Method of Moments (GMM), this study estimated the correlation between real estate development and private investment. The empirical results showed that the development of the real estate industry has a significant impact on the level of private investment; the two showing an “inverted U-shaped” relationship. At present, in some provinces in China, the real estate industry has exceeded the inverted U-shaped threshold. To boost the vitality of private investment in promoting real economic growth, the development of the real estate industry should be restricted, and house prices should be properly regulated.
Highlights
Since the reform and opening up, China’s Non-Public Economy has been gradually applauded
Based on the provincial panel data of 31 provinces in mainland China from 2003 to 2015, this paper conducts an in-depth study of the relationship between real estate development and private investment
The paper analyzed the mechanism of real estate investment affecting private investment in theory, pointing out that the development of real estate industry promotes private investment through the industrial linkage, urbanization, and balance sheet effects and has an inhibitory effect on private investment through the vampire effect, raising costs and reducing demand effect
Summary
Since the reform and opening up, China’s Non-Public Economy has been gradually applauded. TThhee aammoouunntt ooff pprriivvaattee iinnvveessttmmeenntt iinn CChhiinnaa aanndd iittss yyeeaarr--oonn--yyeeaarr ((YYooYY)) ggrroowwtthh. Makuyana’s (2016) [12] research showed that both public investment and private investment can promote economic growth, but the empirical results indicated that private investment plays a more significant role. With respect to stimulating private investment, Luo and Wang (2013) [29] believed that the real estate investment should be controlled and private investment in high-tech industries should be encouraged It can be concluded from the above literature that the impact of public investment on private investment and their roles in economic growth are hot topics in the study of private investment. PMosoitdiveeraEtfefleyctsdeveloped real estate has a positive impact on private investment through the indusMtroiadlelrinatkealgyed, uevrbealonpizeadtiorenaal nedstbaatelahnaces sahepeotseitfifveectsim, wphaoctseosnpepcriifvicatme eicnhvaensitsmmenist atshfrolulogwh st.he industrial linkage, urbanization and balance sheet effects, whose specific mechanism is as follows. The speciffiic mechanism of action can be represented in Figuree 33
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