Abstract This thesis investigates the impacts of foreign capital inflows and monetary policy on the real estate price in China’s first-tier cities including Shanghai, Beijing, Shenzhen, and Guangzhou based upon the monthly time series data spanning from January 2006 to December 2014. The Johansen’s Cointegrating test is applied to explore the long-run equilibrium relationships and influencing directions among foreign capital inflows, monetary policy, and the real estate price in China’s first-tier cities. Error Correction Model (ECM) is constructed to measure their short-run relationships. Empirical results show that there exists a multidirectional link among key variables of foreign capital inflows, monetary policy, and the real estate price in China’s first-tier cities. In the long run, both foreign capital inflow and monetary policy have great impacts on the real estate price in China’s first-tier cities. Specifically, foreign direct investment in real estate (FDIRE) has a small impact with respect to the foreign exchange reserve (FER) from the perspective of foreign capital inflows. This may be due to the fact stringent restrictions are implemented on the foreign direct investment in real estate (FDIRE) by Chinese government when they invest the real estate market in China’s first-tier cities. Narrow money supply (M1) has the greatest positive impact on the real estate price in China’s first-tier cities among these selected indicators. On the whole, attempting to cool down the real estate market in China’s first-tier cities through controlling the liquidity of the foreign exchange reserve (FER) and narrow money supply (M1) would be very effective in the long run. However, interest rate adjustments may not be very effective in the long run. In the short run, the real estate price in China’s first-tier cities is mainly affected by itself. Foreign capital inflows and monetary policy have little immediate effects on the real estate price in China’s first-tier cities. But we can still find these little immediate effects from foreign capital inflows are stronger than monetary policy. Moreover, a positive correlation is existed between the error correction item and the real estate price in China’s first-tier cities in the error correction model (ECM). This indicates the real estate price in first-tier cities does not adjust to the equilibrium price’s direction when the deviation appeared in the short run. The regulatory function of the market-oriented economy called ‘invisible hand’ does not work in real estate market in China’s first-tier cities. This seemingly irrational situation could be explained by various economic and social reasons in China, including the imperfect system of the market, the lack of investment channels in the financial market, and the influence of Chinese cultural traditions. Keywords: foreign capital inflows; monetary policy; real estate price; first-tier cities; Error Correction Model (ECM)