Advanced Search
MyIDEAS: Login

Why Does China Invest So Much?

Contents:

Author Info

  • John Knight

    (China Growth Centre, St. Edmund Hall University of Oxford, OX1 4AR, United Kingdom.)

  • Sai Ding

    (Department of Economics, University of Glasgow, Adam Smith Building, Glasgow, G12 8RT, United Kingdom.)

Abstract

China has had a remarkably high ratio of investment to output ever since economic reform began in 1978, surpassing almost all other economies. This is an important proximate determinant of China's high growth rate. This paper gathers together the available evidence to explain why investment is so high: factors both on the demand and on the supply side, and in the latter case the availability of both resources and funds. It analyzes the rate of return on capital and its evolution, and the factors that have kept it up. It draws on the literature to explain the high saving rate, and considers why the imperfect capital market and institutional deficiencies have not constrained investment. The state-owned and private sectors are treated separately because of their different objectives, behavior, and funding. (c) 2010 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.mitpressjournals.org/doi/pdfplus/10.1162/ASEP_a_00030
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by MIT Press in its journal Asian Economic Papers.

Volume (Year): 9 (2010)
Issue (Month): 3 (October)
Pages: 87-117

as in new window
Handle: RePEc:tpr:asiaec:v:9:y:2010:i:3:p:87-117

Contact details of provider:
Web page: http://mitpress.mit.edu/journals/

Order Information:
Web: http://www.mitpressjournals.org/loi/asep

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  2. Shang-Jin Wei & Xiaobo Zhang, 2009. "The Competitive Saving Motive: Evidence from Rising Sex Ratios and Savings Rates in China," NBER Working Papers 15093, National Bureau of Economic Research, Inc.
  3. Cull, Robert & Xu, Lixin Colin & Zhu, Tian, 2009. "Formal finance and trade credit during China's transition," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 173-192, April.
  4. Knight, John & Song, Lina, 1999. "The Rural-Urban Divide: Economic Disparities and Interactions in China," OUP Catalogue, Oxford University Press, number 9780198293309.
  5. Sean Dougherty & Richard Herd, 2005. "Fast-Falling Barriers and Growing Concentration: The Emergence of a Private Economy in China," OECD Economics Department Working Papers 471, OECD Publishing.
  6. Sai Ding & John Knight, 2011. "Why has China Grown So Fast? The Role of Physical and Human Capital Formation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(2), pages 141-174, 04.
  7. Alessandra Guariglia & Xiaoxuan Liu & Lina Song, . "Internal Finance and Growth: Microeconometric Evidence on Chinese Firms," Discussion Papers 09/11, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  8. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
  9. Loren Brandt & Xiaodong Zhu, 2000. "Redistribution in a Decentralized Economy: Growth and Inflation in China under Reform," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 422-451, April.
  10. Ding, Sai & Knight, John, 2009. "Can the augmented Solow model explain China's remarkable economic growth? A cross-country panel data analysis," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 432-452, September.
  11. Hay, Donald & Morris, Derek & Liu, Guy & Yao, Shujie, 1994. "Economic Reform and State-Owned Enterprises in China 1979-87," OUP Catalogue, Oxford University Press, number 9780198288459.
  12. Knight, John, 1995. "Price Scissors and Intersectoral Resource Transfers: Who Paid for Industrialization in China?," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 117-35, January.
  13. Zou, Heng-fu, 1991. "Socialist economic growth and political investment cycles," European Journal of Political Economy, Elsevier, vol. 7(2), pages 141-157, July.
  14. Guariglia, Alessandra & Poncet, Sandra, 2008. "Could financial distortions be no impediment to economic growth after all? Evidence from China," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 633-657, December.
  15. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  16. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, number 9780521898010, October.
  17. Cull, Robert & Xu, Lixin Colin, 2005. "Institutions, ownership, and finance: the determinants of profit reinvestment among Chinese firms," Journal of Financial Economics, Elsevier, vol. 77(1), pages 117-146, July.
  18. Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006. "The Return to Capital in China," NBER Working Papers 12755, National Bureau of Economic Research, Inc.
  19. Jeffrey Wurgler, 1999. "Financial Markets And The Allocation Of Capital," Yale School of Management Working Papers ysm123, Yale School of Management, revised 01 Mar 2001.
  20. Ding, Sai & Knight, John, 2009. "Why has China Grown so Fast? The Role of Structural Change," Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 7, Verein für Socialpolitik, Research Committee Development Economics.
  21. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, number 9780521725200, October.
  22. Paul De Grauwe, 2008. "Animal Spirits and Monetary Policy," CESifo Working Paper Series 2418, CESifo Group Munich.
  23. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Sai Ding & Alessandra Guariglia & John Knight, 2010. "Does China overinvest? Evidence from a panel of Chinese firms," Working Papers 2010_32, Business School - Economics, University of Glasgow.
  2. Knight, John & Wang, Wei, 2011. "China’s Macroeconomic Imbalances: Causes and Consequences," BOFIT Discussion Papers 15/2011, Bank of Finland, Institute for Economies in Transition.
  3. Sai Ding & Alessandra Guariglia & John Knight, 2010. "Negative investment in China: financing constraints and restructuring versus growth," Working Papers 2010_04, Durham University Business School.
  4. Guonan Ma & Robert McCauley & Lillie Lam, 2013. "The Roles of Saving, Investment and the Renminbi in Rebalancing the Chinese Economy," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 72-84, 02.
  5. Ding Lu, 2011. "Transition of China’s growth pattern," Frontiers of Economics in China, Springer, vol. 6(4), pages 535-555, December.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:tpr:asiaec:v:9:y:2010:i:3:p:87-117. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.