The Role of the Real Estate Sector in the Structural Dynamics of the Chinese Economy: An Input-Output Analysis

Market-oriented housing reforms and the rapid urbanization process have led to spectacular growth in the Chinese real estate sector (RES). However, the changes in the role played by this sector in the structural dynamics of the Chinese economy have not been examined sufficiently. Accordingly, we analyze the intersectoral structural changes to the Chinese RES, its linkages with the rest of the economy, and its growth sources, using four Chinese input-output tables from 2002 to 2017. We depart from existing work on the RES by using the causative matrix approach and structural decomposition analysis, and obtain three main results. First, the RES, which received little non-RES feedback during the 2002-2007 period, has subsequently received much more substantial feedback. Second, the impact of the RES on China's economic growth stems mainly from its forward linkages. Third, the growth in the RES has been driven mainly by domestic demand expansion. Our results highlight that the Chinese RES, which plays a key role in value chains, is highly dependent on its own final demand and a fall in its demand would impede economic development. An important implication of these results is that developing the national economy by stimulating the RES would not be as effective as developing the RES through stimulating the national economy.