Industrial investments and housing prices in China

Explosive housing prices in major cities have created a great deal of new houses that are vacant, which is defined as oversupply. We use the matrix of the direct input coefficients of an input-output table to identify 13 of 36 Chinese industrial sectors as housing-related. We estimate Marginal q values by sector for 2001-2016; sectoral investment is explained by panel estimations based on Marginal q theory. The Marginal q investment elasticities of 13 housing-related in-dustries, the remaining 23 industries, and all industries were 0.2412, 0.8539, and 0.6956 respectively. The housing price Granger explains the producer price index (PPI), and the PPI Granger explains the Marginal q values of the 36 industrial sectors. Overcapacity via over -investment was evident in all 13 housing-related industrial sectors, including metal and cement, during the period of explosive housing prices.