Advanced Search
MyIDEAS: Login

What's Driving Investment in China?

Contents:

Author Info

  • Steven Barnett
  • Ray Brooks
Registered author(s):

    Abstract

    Investment has grown rapidly in China in recent years, reaching more than 40 percent of GDP. Despite good progress on bank and enterprise reforms, weaknesses remain that could contribute to inefficient investment decisions. Manufacturing, infrastructure, and real estate have been the drivers of fixed asset investment. Econometric analysis presented in the paper suggests that manufacturing investment is strongly correlated with firms'' liquidity, largely retained earnings. Analysis of residential real estate investment shows that it is weakly correlated with real household income growth and real mortgage interest rates. A policy implication of these findings is that reducing liquidity in firms, for example by requiring state-owned enterprises to pay dividends to the government, and using monetary policy to reduce liquidity increase real interest rates, would slow investment in manufacturing and real estate.

    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.imf.org/external/pubs/cat/longres.aspx?sk=20067
    Download Restriction: no

    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/265.

    as in new window
    Length: 39
    Date of creation: 01 Nov 2006
    Date of revision:
    Handle: RePEc:imf:imfwpa:06/265

    Contact details of provider:
    Postal: International Monetary Fund, Washington, DC USA
    Phone: (202) 623-7000
    Fax: (202) 623-4661
    Email:
    Web page: http://www.imf.org/external/pubind.htm
    More information through EDIRC

    Order Information:
    Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

    Related research

    Keywords: Absorptive capacity; Resource allocation; real estate; real estate investment; residential real estate; land sales; house prices; real estate development; urban housing; urban population; residential buildings; real estate developers; real estate lending; real estate prices; housing prices; real estate review; subsidized housing; housing reforms; housing affordability; commercial property;

    This paper has been announced in the following NEP Reports:

    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. 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.
    2. Eswar Prasad & Shang-Jin Wei, 2007. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 421-480 National Bureau of Economic Research, Inc.
    3. Liu Hongyu & Yun W. Park & Zheng Siqi, 2002. "The Interaction between Housing Investment and Economic Growth in China," International Real Estate Review, Asian Real Estate Society, vol. 5(1), pages 40-60.
    4. Shang-Jin Wei & Genevieve Boyreau-Debray, 2004. "Can China Grow Faster? a Diagnosison the Fragmentation of the Domestic Capital Market," IMF Working Papers 04/76, International Monetary Fund.
    5. Shang-Jin Wei & Eswar Prasad, 2005. "The Chinese Approach to Capital Inflows," IMF Working Papers 05/79, International Monetary Fund.
    6. Kuijs, Louis, 2005. "Investment and saving in China," Policy Research Working Paper Series 3633, The World Bank.
    7. Wensheng Peng & Matthew Yiu & Dickson Tam, 2005. "The Property Market and the Macroeconomy of the Mainland: A Cross Region Study," Working Papers 0512, Hong Kong Monetary Authority.
    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. He, Dong & Zhang, Wenlang, 2010. "How dependent is the Chinese economy on exports and in what sense has its growth been export-led?," Journal of Asian Economics, Elsevier, vol. 21(1), pages 87-104, February.
    2. Leslie Lipschitz & Geneviève Verdier & Céline Rochon, 2008. "A Real Model of Transitional Growth and Competitiveness in China," IMF Working Papers 08/99, International Monetary Fund.
    3. Jahangir Aziz, 2008. "Real and Financial Sector Linkages in China and India," IMF Working Papers 08/95, International Monetary Fund.
    4. Lipschitz, Leslie & Rochon, Céline & Verdier, Geneviève, 2011. "A real model of transitional growth and competitiveness in China," Journal of Asian Economics, Elsevier, vol. 22(4), pages 267-283, August.
    5. Jahangir Aziz, 2006. "Rebalancing China's Economy," IMF Working Papers 06/291, International Monetary Fund.
    6. Jahangir Aziz, 2008. "Deconstructing China’s and India’s Growth: The Role of Financial Policies," Working Papers id:1714, eSocialSciences.
    7. C Niranjan Rao, 2008. "The Role of Intellectual Property Rights in Information and Communication Technologies," Working Papers id:1742, eSocialSciences.
    8. Arslan Razmi, 2008. "Is the Chinese Investment- and Export-Led Growth Model Sustainable? Some Rising Concerns," UMASS Amherst Economics Working Papers 2008-09, University of Massachusetts Amherst, Department of Economics.
    9. Roberts, Ivan & Rush, Anthony, 2012. "Understanding China's demand for resource imports," China Economic Review, Elsevier, vol. 23(3), pages 566-579.

    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:imf:imfwpa:06/265. 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: (Jim Beardow) or (Hassan Zaidi).

    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.