Under the inclination of economic integrating, international capital circulates at an ever-increasing velocity. As an investing tool, the movable and immoveable belongings, the boundary between which is besides going progressively blurred, and this is non merely for the demands of capital prosecuting net incomes, but the consequence of farther opening up and mature of the international investing market. As an investing tool, existent estate must be affected by the international capital flows.
By and large talking, international capital flows indicate the assorted signifiers of capital transmittal, input and end product among states for specific economic intents. International capital flows aid to set the capital excess and lack, doing the most efficiency of the capital. International capital flows play a vitally of import function in the universe economic promotion, particularly in the development states. The international capitals massively inflow into China through direct investing, stock investing and other investing in the recent old ages, due to the rapid development of Chinese economic system and anticipation of RMB ‘s grasp. There are five and six hundred billion dollars invested into China every twelvemonth, which serve to buying natural stuffs for production, and serve to buying land, works, office edifice and commercial lodging every bit good. Therefore, big sums of foreign investings will decidedly convey a big demand of domestic existent estate trade goods. Followed with the communicating equipments, computing machines and other electronic equipments fabricating industries, existent estate has become the 2nd largest industry that attracts foreign investings.
Real estate is the basic industry of the national economic system. It is the basic necessities of both production and life. Meanwhile, it is besides a sort of assets or wealth. The monetary value of existent estate relate to the production and populating jobs of general population, relate to a metropolis ‘s development potency and fight, besides relate to the state ‘s fiscal stableness and macro-economic policy. Since the lodging monetisation reform of China in 1999, existent estate industry has become a major driving force of the economic growing. While existent estate is developing quickly, existent estate monetary value is besides uninterrupted lifting. Real estate monetary value has already exceeded the range which common people could afford, particularly in the bigger metropoliss, such as Shanghai and Beijing, whose house monetary values rise quickly, draw great attending from all over the state. With the development of existent estate market and the accommodations of national existent estate finance policy, the existent estate industry of China continues to increase the demand for capital. However, domestic capital, particularly the capital influxs of commercial bank began to be restricted, and the funding costs of existent estate developers have increased, which offer more chances to international capital come ining the existent estate market of China.
International capital flows can do up for capital deficits and inadequate of the existent estate industry of China, cut down the domestic recognition hazard, expand supply and demand of the existent estate market, increase competition of the existent estate industry and advance the development and growing of the existent estate industry. In add-on, it is true that international capital influxs, particularly foreign investing influxs bring advanced engineering, equipment and direction theories to the existent estate industry of China, which is good to the development and betterment of existent estate market mechanisms. On the other manus, big sums of foreign capital influx into the existent estate industry has besides brought some negative effects: big sums of foreign capital influxs will escalate the instability of international income and payment and the force per unit area of RMB grasp, and weaken the independency and the effectivity of pecuniary policy of our state ; Foreign investing is chiefly used into the development of high class edifices in the existent estate market of China, which will worsen the instability of supply and demand of the existent estate market ; some short-run capital influxs into the existent estate market, will convey heightened guess, motivating the bubble of existent estate industry. Therefore, there is strong theoretical and practical significance to analyse the impact on international capital influxs to the existent estate market of China by qualitative and quantitative trial. In order to analyze the impact of foreign investing on Chinese existent estate monetary value, this paper will discourse the manner how international capital inflow influences Chinese existent estate monetary value and analyze the influence of international capital motion on the existent estate monetary value by using econometrical tools, taking the comparative information about international capital flows and existent estate market signifier one-fourth 3 in 1998 to one-fourth 4 in 2007.
2.Literature Reappraisal
Song Bo and Gao Bo ( 2007 ) took the rising prices into history and made usage of the seasonal informations about foreign investing and existent estate monetary value to put up an mistake rectification theoretical account ( ECM ) , so utilize Granger-causality trial to analyze the relationship between international capital flows and existent estate monetary value of China. They draw the decision that: in the short tally, the addition of lodging monetary values attracts the influx of foreign capitals ; in the long tally, foreign capital influxs help to better the rise of lodging monetary values. At the present phase, commanding the far excessively great flow of foreign capitals will lend to maintaining domestic lodging monetary values stable.
Meng Xiaohong and Li Chunji ( 2006 ) analyzed the impact of international capital influxs on existent estate market, concentrating on support. They summed up that two ways through which international capital flow to existent estate market: one is direct manner, international capital straight inflows to existent estate market to impact existent estate monetary values. The other is indirect manner, concentrate on that money supply determines the slack of existent estate. In peculiar, single lodging loans has greatly influenced on the demand for existent estate market, indirect manner has a great influence on the existent estate market. Then they analyzed the impact of international capital flows on domestic existent estate monetary values mechanism by agencies of trade figure analysis from international trade theory. They drew the decision that: in the long tally, the fluctuation of international capital flows will do the fluctuation of existent estate monetary values.
Qin Zihua ( 2006 ) researched on the relationships among existent estate monetary values of China, investing and money supply by co-integration trial and Granger trial to analyse the relationship between money market and existent estate market in China. Experimental consequences show that money supply could impact existent estate monetary values and investing, hence appropriate pecuniary policy could be established to macroeconomic control existent estate market. At the same clip, the impact of existent estate industry on pecuniary policy is turning fast. And existent estate industry is besides one of the aims for set uping pecuniary policy.
Wan Lunlai and Chen Xixi ( 2007 ) used FDI of Shanghai existent estate industry from 1980 to 2004 as the sample, analyzed the relationship between FDI and the growing of China existent estate industry. Co-integration trial indicated that there is a long term equilibrium relationship between them. Error rectification theoretical account show that in the short term, the impact of FDI on the growing of existent estate industry normally has a slowdown of 3 old ages. However, Granger causality trial indicated that FDI was non the direct cause ensuing in the growing of existent estate industry.
Gu Jianfa ( 2004 ) indicated that big sum of foreign capital influxs ???c¤?-e©¬?‹?eY?promoted Shanghai ‘s house monetary values, and to some extent the enlargement of the existent estate bubble. The negative consequence of foreign capital on Shanghai existent estate market is non optimistic. Obviously, foreign hot money pulled Shanghai house monetary values. ‘Hot money ‘ is for the intent of arbitrage, it is non valid capital. When addition the net income from Shanghai existent estate market, it will go forth the market. Whether the existent demand of existent estate market could seasonably make full the vacancy of the sudden backdown of ‘hot money ‘ , is deserving serious consideration.
Liu Hongyu ( 2005 ) insisted that foreign investing was difficult to put in strong regional existent estate development in the short term by analysing the international and domestic signifiers of international capital flows. He believes that existent estate plus direction houses and existent estate investing consulting houses have good chances, the companies merely runing on the existent estate development will hard to last.
There is wide infinite for foreign investings invest into existent estate fiscal services. Company listing is non the lone manner for existent estate development companies to equity funding.
Li Jing ( 2007 ) insisted that foreign investing was attracted by the great potency of China ‘s existent estate market to scatter the domestic investing hazard through analysing the grounds why foreign investings prefer China ‘s existent estate market in his maestro thesis. From the position of micro degree, the undertakings favored by foreign investors have found the quality of foreign investing demands and the expected return. He proposed that ordinances of existent estate industry should be farther strengthened. And meanwhile better market supervising system and beef up the transparence of the industry to pull foreign investing.
4. Analysis on existent estate monetary values of China
4.1 The overview of existent estate monetary values of China
It is can be seen from China Statistical Yearbook, the chief existent estate monetary value indexes of China are: Selling Price Indexs of Houses, Transactions Price Indexs of Land, Renting monetary value indices of Houses and Property Management Price indices. And Selling Price Indexs of Houses include residential belongings sale monetary value index, non-residential commercial house sale monetary value index and 2nd manus house sale monetary value index. The following we will chiefly analyse the present state of affairs of existent estate monetary values of China by utilizing the alteration of Selling Price Indexs of Houses of China. Harmonizing to China Statistical Yearbook, Selling Price Indexs of Houses is summarized as the table 4-1 and 4-2.
The alterations of Selling Price Indexs of Houses of China from 1998 to 2006 have been shown as the table 4-1, It is can be seen that Selling Price Indexs of Houses and Transactions Prices Indices of Land of China have been increasing from 1999 to 2004 by contrast. Year 2004 was the twelvemonth with greatest alteration of existent estate monetary values of China, Selling Price Indexs of Houses grew up to 109.7 while Minutess Price Indexs of Land reached 110.1. It is chiefly because that land market ordinance began from 2003 and house monetary values ordinance began from 2005 have a comparative suppression consequence on existent estate monetary values, particularly on land monetary values. After 2004, they have maintained a downward tendency, particularly the land monetary value index for 2006 is 101.4, there has been a important diminution.
From the alterations of existent estate monetary values of 35 large-scale and medium-scale metropoliss of China, since 2000 existent estate monetary values of east coastal metropoliss grow faster than those of Midwest. Harmonizing to some mentions, there were 5 metropoliss whose Selling Price Indexs of Houses were supra 105 from 2000 to 2003, and among which 4 are east coastal metropoliss ; there were 9 metropoliss whose Selling Price Indexs of Houses were supra 110 in 2004, and 8 of them are east coastal metropoliss. There were 5 metropoliss whose Selling Price Indexs of Houses were supra 108 from 2005 to 2006, 4 of which are east coastal metropoliss. However, Midwest metropoliss such as Yinchuan, Xining, Chongqing, Changsha were stable during the assorted periods.
From the ratio of house monetary value and land monetary value, the Numberss of east coastal metropoliss whose ratio below 1 have increased, which means the figure of metropoliss of eastern whose land monetary value grow faster than house monetary value has increased. The ratio above 1 means the house monetary value grows faster than the land monetary value while below 1means the land monetary value grows faster than the house monetary value. Although the ratios of China kept lifting from 2003, they are all below 1. It slight declined in 2005. Obviously, the addition of house sale monetary value was much slower than that of land dealing monetary value from 2002 to 2005, while it was in the antonym in 2006. Harmonizing to some mentions, the Numberss of metropoliss with the ratio of house monetary value and land monetary value below 1 were 14 among the entire 35 metropoliss from 2002 to 20003, 4 are east coastal metropoliss and 10 are other countries ; the figure was 12 in 2004, 6 are east coastal metropoliss and 6 are other countries ; the figures from 2005 to 2006 were the same as that of 2004.
4.2 The analysis on residential belongings sale monetary value
Since 1998, residential belongings investing has been accounted for more than 60 % of the entire existent estate investing. This shows that the residential lodging market is a major constituent of the existent estate market. Thus it is peculiarly of import to analyse the residential house monetary value. In the China Statistical Yearbook, residential belongings monetary value index includes general residential edifices monetary value index, economically low-cost house monetary value index and top-quality residential edifices monetary value index. Harmonizing to assorted types of residential house monetary value indices listed at Table 4-2, we can reason that the alterations of residential house monetary value of China chiefly have the undermentioned features.
First, the assorted types of residential belongings monetary value indices remained the same tendency. From 1998 to 2004, residential belongings monetary value index and commercial house monetary value index fundamentally maintained the same tendency ( Table 4-2 ) . After the residential belongings monetary value index reached to the highest point 109.4 in 2004, its addition border dropped down. Harmonizing to the informations, residential house sale monetary value and second-hand residential house sale monetary value rose 9.4 % and 11.5 % in 2004 severally. In 2005, monetary values of freshly built residential house and second-hand residential house were down to 8.4 % .
Changes in general residential edifices monetary value index O and residential house monetary value index fundamentally show the same alteration rate, 1998-2004 increased steadily, it began to fall after 2004, general residential edifices monetary value index in 2004 is 109.8 compared with 108.2 for 2005 and 105.9 for 2006. High-grade residential edifices monetary value index reached the highest point 110.0 in 2004, 5.8 % more than 2003. Then it dropped down to 109.5 for 2005 and 107.7 for 2006. Economically low-cost house monetary value index has maintained upward tendency since 2002, the figures are 103.7 and 103.7 in 2005 and 2006 severally. General speech production, the growing rate of residential belongings monetary value has continuously decreased rent old ages, while the one of economically low-cost house monetary value increased.
Second, the alteration of top-quality residential edifices monetary value promotes the alteration of residential belongings monetary value. The graph 4.2 shows that the fluctuation of top-quality residential edifices monetary value is stronger than that of residential belongings monetary value. To some extent, the alteration of top-quality residential edifices monetary value promotes the alteration of residential belongings monetary value. For illustration, top-quality residential edifices monetary value index reached the highest point 110.0 in 2004, 5.8 % more than 2003, while residential belongings monetary value index reached 109.4, 3.5 % more than 2003. Harmonizing to the informations provided in Table 4-3, we can utilize Eviews 6.0 to analyse the correlativity of alteration rates between residential belongings monetary value index and top-quality residential edifices monetary value index. And got the correlativity coefficient R=0.863099 ( P=0.005774 ) , there is a strong correlativity between them harmonizing to the Correlation coefficient R and chance P.
Third, the fluctuation of residential house monetary value index is in the same way with the fluctuation of realized foreign investing. The alteration rates of realized foreign investing of China and residential belongings monetary value index fundamentally remain the same direct every two old ages ( Table 4-4 ) . They both experienced a fluctuation during 1999 to 2005, their extremums and troughs coincided with each other, and they both reached the maximal alteration rate in 2004 during the recent old ages. Residential belongings monetary value index changed 3.5 % and realized foreign investing changed 14.13 % . Similarly, they fell back in 2005, and at that place was a certain correlativity between them. Harmonizing to the informations provided in Table 4-3, we can utilize Eviews 6.0 to analyse the correlativity of alteration rates between residential belongings monetary value index and realized foreign investing. And got the correlativity coefficient R=0.630671 ( P=0.025379 ) , there is a certain correlativity between them harmonizing to the Correlation coefficient R and chance P.
Fourth, the alterations of consumer monetary value index and residential belongings monetary value index are fundamentally in the same tendency. Harmonizing to the graph 4-5, there was a stiff lifting tendency of residential belongings monetary value from 1998 to 2005. Consumer monetary value index kept lifting with residential belongings monetary value during the period except 1999 and 2002. Harmonizing to the informations provided in Table 4-4, we can utilize Eviews 6.0 to analyse the correlativity between residential belongings monetary value index and consumer monetary value index. And got the correlativity coefficient R=0.867654 ( P=0.005235 ) , there is a strong correlativity between them harmonizing to the Correlation coefficient R and chance P. With the deepening of lodging reform, the demand for residential belongings will be the basic demands for future old ages, its monetary value driven by effectual demand will see a stiff upward tendency, while the alteration of consumer monetary value index will further impact the monetary value outlooks and alterations to advance residential belongings monetary value addition more significant in the upward interval of consumer monetary value index.
3. Overview of FDI in China
The construct of international capital flows has many different readings based on domestic and abroad. From this paper, the reading could accurately reflect the features of international capital flows is ‘International capital flows mean the capital move from a state or part to another state or part, and it has a direct relationship with a state ‘s balance of payments ‘ , which shows there is a closely relationship between international capital flows and a state ‘s balance of payments. For a specific state, international capital flows includes international capital influxs and international capital escapes. This paper will stress on international capital influxs to analyse the impact of it on existent estate monetary value and we will take foreign direct investing ( FDI ) as the chief factor of international capital influxs.
An of import portion of the economic reform procedure in China has been the publicity of foreign direct investing ( FDI ) influx. After more than thirty old ages of economic reform, China has become one of the most of import finishs for cross-border direct investing. In the undermentioned portion, we will follow the development procedure of FDI in China.
3.1 Major FDI types in China
While the comparative importance of different beginning states for FDI inflow alterations over the old ages, the composing of different types of FDI undertakings has besides experienced alterations throughout the old ages. There are five signifiers of FDI in China: ( I ) equity joint ventures ( EJVs ) , ( two ) co-op operation endeavors or contractual joint ventures ( CJVs ) , ( three ) entirely foreign-owned endeavors ( WFOs ) , ( four ) foreign sharing-holding endeavors ( SH ) and ( V ) articulation geographic expedition ( JE ) . The definition of each signifier is as below:
3.1.1 Equity Joint Venture ( EJV )
Equity joint ventures involve joint investing by Chinese and foreign spouses in limited liability corporations with sharing of profits/loses and hazards. EJVs used to rule the signifiers of FDI in China, China ‘s Joint Venture Law and its Amendment Provisions set the per centum of a joint venture ‘s capital contributed by a foreign investor between 25 % and 99 % .
3.1.2 Contractual Joint Venture ( CJV )
A contractual joint venture is a partnership between a foreign investor and a domestic endeavor. An illustration would be that the foreign spouse provides engineering
From the graph, by and large we can split the FDI development procedure into five stages:
