The Effect of Foreign Investment on the Real Estate Industry in China

Dianchun Jiang, Jean Jinghan Chen and David Isaac
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Dianchun Jiang: Institute of International Economics, Nankai University, Tanjin, P.R. China
Jean Jinghan Chen: School of Land and Construction Management, University of Greenwich, Oakfield Lane, Dartford, DA1 2SZ, UK, j.chen@gre.ac.uk
David Isaac: Real Estate Management and Head of Property and Land Management, University of Greenwich, Oakfield Lane, Dartford, DA1 2SZ, UK, d.isaac@gre.ac.uk.

Urban Studies, 1998, vol. 35, issue 11, 2101-2110

Abstract: This paper discusses the development of real estate industry in China in recent years. It argues that Hayek's theory of economic fluctuations can help to explain the contraction of the real estate market in 1994 in China as a whole. However, as a theory of the closed economy, Hayek's theory is found to be no longer robust when applied to cities where there is heavy foreign direct investment, such as Shanghai. We believe that it is the foreign direct investment that is making the real estate industry in Shanghai perform well, despite the government's tight monetary policy and the contraction of the industry in other parts of the country over the same period. The paper also argues that, while most foreign investment in real estate is classified as direct investment, it is very different from 'typical' foreign direct investment except in form and in fact shares most of the characteristics of portfolio investment. Foreign direct investment in real estate reflects the imperfections of China's capital markets.

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:sae:urbstu:v:35:y:1998:i:11:p:2101-2110

DOI: 10.1080/0042098984024

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