Housing Consumption and Economic Growth in China

Consumption is a very important part in social reproduction, and its driving effect on social economic growth always plays the leading role. Housing is the basic living material which is essential for people's life; housing consumption is the important material condition for the labor force reproduction. This study, based on China's statistical data from 1985 to 2007, by employing co-integration theory, Granger causality test and error correction model (ECM), respectively investigates the relationship between consumption, housing consumption and economic growth. The empirical result denotes that there exists bilateral Granger causality relationship between consumption and economic growth. For a long period, there exists long term stable equilibrium relationship between GDP, consumption, and housing consumption; consumption and housing consumption both promote the growth of GDP. Housing consumption's contribution to the growth of GDP is obviously higher than consumption. For a short period, consumption spurs the growth of GDP more than housing consumption.