The Impact of housing reform on consumption, investment, and industrial growth: a tale of three Chinese cities

Housing reform has been a key component in China's economic revitalization program initiated by the late paramount leader Deng Xiaoping since 1978. By reforming the welfare housing system, the Chinese government aims at the removal of a burden (i.e., welfare housing) from state finance. At the same time, housing reform will stimulate changes in consumption, investment, and related industrial sectors, and thus facilitate economic growth. This paper examines the impact of housing reform on consumption, investment, and industrial growth in three Chinese cities. Data are collected from field reconnaissance, government policy documents and census materials, covering the period 1985-1998. Descriptive statistics and correlation analysis are used for analyzing the data. Research findings revealed that housing reform resulted in drastic changes in housing investment and growth of related industries. Self-raised capital became the main source of housing investment, while state investment declined considerably. Significant correlations were clearly discernible between housing investment and related industries. Nevertheless, the power of resident's consumption, as measured by the percentage expenditure on real property, household articles and services, was a constraint against housing commercialization. Further reforms to raise the level of effective demand for housing, and to introduce various schemes in housing finance are critical for developing the housing industry into an engine of economic growth.