IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Why Does China Invest So Much?

  • 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.)

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.

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.

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

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. Guariglia, Alessandra & Liu, Xiaoxuan & Song, Lina, 2011. "Internal finance and growth: Microeconometric evidence on Chinese firms," Journal of Development Economics, Elsevier, vol. 96(1), pages 79-94, September.
  2. 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.
  3. 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.
  4. Marcos Chamon & Eswar Prasad, 2008. "Why Are Saving Rates of Urban Households in China Rising?," IMF Working Papers 08/145, International Monetary Fund.
  5. repec:cup:cbooks:9780521725200 is not listed on IDEAS
  6. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  7. 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.
  8. Paul De Grauwe, 2008. "Animal Spirits and Monetary Policy," CESifo Working Paper Series 2418, CESifo Group Munich.
  9. 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.
  10. 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.
  11. 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.
  12. 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, March.
  13. King, Robert G. & Levine, Ross, 1993. "Finance and growth : Schumpeter might be right," Policy Research Working Paper Series 1083, The World Bank.
  14. repec:cup:cbooks:9780521898010 is not listed on IDEAS
  15. Paul R. Masson, 2008. "Monetary Policy," Chapters, in: International Handbook of Development Economics, Volumes 1 & 2, chapter 54 Edward Elgar.
  16. John Knight & Sai Ding, 2008. "Why has China Grown so Fast? The Role of Structural Change," Economics Series Working Papers 415, University of Oxford, Department of Economics.
  17. Cull, Robert & Lixin Colin Xu & Tian Zhu, 2007. "Formal finance and trade credit during China's transition," Policy Research Working Paper Series 4204, The World Bank.
  18. 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.
  19. Chong-En Bai & Chang-Tai Hsieh & Yingyi Qian, 2006. "The Return to Capital in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(2), pages 61-102.
  20. 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.
  21. 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.
  22. Zou, Heng-fu, 1991. "Socialist economic growth and political investment cycles," European Journal of Political Economy, Elsevier, vol. 7(2), pages 141-157, July.
  23. Knight, John & Song, Lina, 1999. "The Rural-Urban Divide: Economic Disparities and Interactions in China," OUP Catalogue, Oxford University Press, number 9780198293309, March.
  24. 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.
Full references (including those not matched with items on IDEAS)

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

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: (Anna Pollock-Nelson)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.