Foreign direct investment in China's real estate market

This paper analyzes the recent trend of foreign direct investment in China's real estate market (FDIRE). It develops a panel regression model to examine the determinants of FDIRE in China. It incorporates a new explanatory variable to test the difference between FDIRE in coastal areas of China and in other areas. Such variable was never incorporated in models of previous studies. The result reveals that GDP per capita and the number of foreign real estate enterprises are the most significant factors affecting foreign investment in China's real estate market. This reflects that China's economic growth and its increasingly open market have a significant contribution to the rising trend in foreign investment in its real estate market. The newly incorporated regional factor COASTAL in the panel regression model shows that FDIRE in China still concentrates in coastal areas. However, there is more investment in those fast growing areas in recent years. It is suspected that FDIRE may overheat China's real estate market. Thus the Chinese government should monitor the real estate market carefully to stabilize the house price.