The Impact of Real Estate Investment on Profits in the Real Economy

Abstract

In recent years, with the rapid development of the virtual economy, the real economy, which is the cornerstone of China's national economy, has seen the phenomenon of "turning from real to virtual". A large number of real enterprises deviate from their main business direction and invest funds in the high-risk, high-return real estate industry. Based on the panel data of 30 provinces, municipalities and autonomous regions in China from 2000 to 2020, this paper constructs a two-way fixed-effect model to discuss the relationship between real estate investment (Rei) and real economic profits (Profit). The study found that Rei has a significant negative effect on real economy profits, and this effect is regional heterogeneous: in the eastern and western regions, Rei significantly suppresses real economy profits, but in the central region, there is no obvious impact. This paper provides a new perspective for the research on Rei and the development of the real economy, reveals the impact of Rei on the profits of the real economy, and further provides policy suggestions for regulating the cross-industry investment of real enterprises and promoting the coordinated development of the two.