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How Much Does Investment Drive Economic Growth in China?

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Author Info

  • Duo Qin

    (Queen Mary, University of London)

  • Marie Anne Cagas

    (Asian Development Bank)

  • Pilipinas Quising

    (Asian Development Bank)

  • Xin-Hua He

    (Chinese Academy of Social Sciences)

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Abstract

Investment-driven growth has long been regarded as a key development strategy in China. This paper investigates empirically the validity of this view. Post-1990 data analyses and macroeconometric model simulations show that market demand has become a regular force in driving investment since reforms, that non-demand-driven investment growth contributes to increasing capital-output ratio far more than output growth, that government investment exerts a pivotal role in amplifying investment cycles, albeit effective in promoting employment, and that delayed and rising consumption from current investment surge can help sustain the impact of growth even with constant-returns-to-scale in the long-run GDP.

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Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 545.

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Date of creation: Aug 2005
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Handle: RePEc:qmw:qmwecw:wp545

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Keywords: Investment; Growth; Impulse response function; Cointegration; Granger non-causality;

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References

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Citations

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Cited by:
  1. Tomohara, Akinori & Takii, Sadayuki, 2011. "Does globalization benefit developing countries? Effects of FDI on local wages," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 511-521, May.
  2. Harb, Nasri, 2008. "Oil Exports, Non Oil GDP and Investment in the GCC Countries," MPRA Paper 15576, University Library of Munich, Germany.
  3. Mah, Jai S., 2010. "Foreign direct investment inflows and economic growth of China," Journal of Policy Modeling, Elsevier, vol. 32(1), pages 155-158, January.
  4. Abdul Karim, Zulkefly & Abdul Karim, Bakri & Ahmad, Riayati, 2010. "Fixed investment, household consumption, and economic growth : a structural vector error correction model (SVECM) study of Malaysia," MPRA Paper 27146, University Library of Munich, Germany.
  5. Yilmaz Akyuz, 2006. "From Liberalization To Investment and Jobs: Lost in Translation," Working Papers 2006/3, Turkish Economic Association.
  6. Duo Qin & Haiyan Song, 2007. "Sources of Investment Inefficiency: The Case of Fixed-Asset Investment in China," Working Papers 584, Queen Mary, University of London, School of Economics and Finance.
  7. Qin, Duo & Cagas, Marie Anne & Ducanes, Geoffrey & He, Xinhua & Liu, Rui & Liu, Shiguo & Magtibay-Ramos, Nedelyn & Quising, Pilipinas, 2007. "A macroeconometric model of the Chinese economy," Economic Modelling, Elsevier, vol. 24(5), pages 814-822, September.
  8. Qin, Duo & Cagas, Marie Anne & Ducanes, Geoffrey & He, Xinhua & Liu, Rui & Liu, Shiguo, 2009. "Effects of income inequality on China's economic growth," Journal of Policy Modeling, Elsevier, vol. 31(1), pages 69-86.

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