Analysis of the impact of real estate market fluctuation on macro economy in China

[Abstract] All along， the real estate has played a very important role in China's national economy， especially in recent years， the real estate market fluctuated greatly with the sharp increase in the urban population which has caused widespread concern in various sectors.Fluctuations in the real estate market not only affect our national housing supply and demand， but also have a certain effect to the development of its related industries， and have a significant impact on China's macro economy. Therefore， the analysis of the impact of fluctuation of the real estate market on social macroeconomic is very important to China's economic development. This paper will analyze the impact of market volatility on China's macro economy in three aspects including the total social consumption， economic growth and inflation so as to regulate the local real estate market fluctuations and drive China’s macroeconomic development.

[Keywords] Chinese real estate；Market volatility； Macroeconomic； Influence； Analysis

According to the actual situation in our country， the real estate has been developing smoothly as it is an integral part of lifestyle products under the background of the gradual expansion of urbanization. Its development has reached a peak and has became an important part of our country’s market economy. However， the marketization of real estate is not regular enough during its rapid development. The real estate has certain economic operation risk and operational errors so that the market volatility have a great impact on China's macro-economy. Therefore， how to avoid the impact to macro-economy by controlling the market volatility of real estate is an urgent problem to be solved.

The macro regulation history of real estate in China

China's central government has publicly stressed： \"economic growth， price stability， full employment， balance of international payments\"， and it has become the primary target of China’s economic regulation of which economic growth ranked in the first place. Therefore， in China's economic development， real estate market fluctuations are required to adapt to macro-economic growth. The macro-economic control of real estate is of great significance to social and economic development. Since 1998， China's real estate market regulation can be divided into the following three stages：

The first stage is from 1998 to June in 2003， during this period， China's central government issued preferential policy such as tax relief and interest rate to encourage housing consumption， which had effectively promoted the development of China's real estate market， making it jump to another level in social and economic development. In 1997， the Asian financial crisis erupted which led to China’s economy depression for a period of time. In order to stimulate domestic demand， the Chinese government promulgated a series of policies and regulations to make corresponding regulation on macro-economy so as to promote the economic growth and enable the real estate industry to have a great further development[1].

From June 2003 to the first half of 2008， the development of China's real estate market had been in a rising trend during this period. China's central government made greater efforts in all aspects such as the rate of down payments， interest rates and tax revenue and had promulgated relevant specific policies in order to avoid the emergence of economic bubbles.

From the second half of 2008 up to now is third stage that the Chinese government has regulation of the real estate industry. During this period， the regulation efforts of the Chinese government become smaller gradually， and strongly encourage people to buy a house by promulgating relevant policies such as loan interest rates and tax. In the second half of 2008， the Chinese government regulated a series of policies encouraging people to purchase a house in order to avoid the adverse effects on China's real estate market from the sub-prime crisis in the United States . These policies greatly promoted the development of China's real estate market.

With the above regulation policy， the government's goal has always been making the real estate market development able to adapt to the development of the macro-economy so as to promote the stable and sustainable development of the economy. For example， when the fluctuations of the real estate market is rising too fast， the government will issue policies to restrain the fluctuation trend so to avoid spread； when the development of the real estate industry is in depression， the government will come up with relevant policies to encourage people to purchase so as to mobilize the development of real estate market economy.

The positive impact of the real estate market fluctuation on the macro-economy

Promote Employment

Real estate industry as a inseparable field of construction industry needs more labor. A large number of builders are especially needed in the early running process while most of the builders are migrant workers. Therefore， the large market demand in the prosperous period of the real estate industry solved part of the rural employment problems in a certain extent and greatly improved China's rural employment. Relevant survey shows that one of the largest projects of the SOHO project needs about 6000 migrant workers. The rising volatility of China's real estate market has mitigative effects on the problem of employment of peasants and promotes the development of the national economy.

（Two）Promote the development of real estate and related industries

When the fluctuations in the real estate market is stable， the market can promote the development of its related industries along with its own development. In this period， the rise in the value of the real estate market would attract more enterprises to increase investment so that the supply of real estate market is greatly increased， and finally the rapid development of the real estate market is promoted. At the same time， as the real estate industry has a strong correlation with other industries， its development also promotes the development of its related industries to a certain extent. According to relevant survey， if the demand for real estate increases 100 Yuan， the demand for other industry would increase to 215 yuan， its impact on China's macro economy is 315 yuan with a combination of the capital requirements of all industries. It shows that the real estate industry is extensively involved in many fields [2]. By analyzing the data， we realize that the moderate growth of the demand in real estate industry has a great promotion in China's overall economic development.

（Three） It is conducive to the recovery of bank accounts

When the fluctuation of the real estate market is on a stable rise， it also has certain guaranteeing effect to the loan security of the banking system， which is mainly reflected in two aspects. First， the bank can allay fears about \"bad debt\" because the value of collateral is increasing with a better cashability. On the other hand， real estate developers’s loan interest could promote the development of banks and drive the collection of receivable at the same time[3].

（Four） Promote domestic demand

When the real estate market is in recession， the price will drop moderately. In accordance with international practice of house price to income ratio， the proportion housing price accounts for in national consumer spending would reduce correspondingly， and national spending in other areas such as tourism， catering， car and household electrical appliances will increase in contrast. When these consumption expenditure increases， the profits of the manufacturers will increase too which will promote workers’s consumption by improving their salary and wage. As demand would driven development， when these industries get high profits， they would increase the investment in technological innovation to improve the industrial development， optimize the industrial operation structure so as to promote the sustainable development in China's market.

Reference：

[1]Tang Zhijun， Xu Huijun， Ba Shusong， Research on the impact of China's real estate market fluctuation on macroeconomic fluctuations[J]. Statistical Research，2010，（02）：15-22.

[2]Lu Xinhai， Liu Jianwen.Research on the impact of the real estate market fluctuation on the macro economy[J].China real estate，2013，（16）：21-33.

[3]Chen Xiumei， Han Helin， Zhao Yuanbing. An analysis of the impact of real estate price fluctuation on economy -- Research on Real Estate Macro-controlof China[J].Price Theory and Practice，2009，（08）：54-55.

[4]Wu Si.An analysis of the impact of China's real estate market fluctuation on macro economy[J].Commerical Culture，2015，（18）：32-33.