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Determinants of Corporate Investment in China; Evidence From Cross-Country Firm Level Data

  • Nan Geng
  • Papa N'Diaye
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    This paper analyzes the evolution of investment in China, its main features, and its key determinants. In recent years, manufacturing, real estate, and infrastructure have been the main drivers of investment. Investment remains largely concentrated in coastal areas, but there has been a shift to greater investments inland in recent years. The empirical analysis of the determinants of investment indicates that financial variables, such as interest rates, the exchange rate, and the depth of the domestic capital market are important determinants of corporate investment. The results suggest in particular that financial sector reform, including that which deregulates and raises real interest rates as well as appreciates the real effective exchange rate, would lower investment and help rebalance growth away from exports and investment toward private consumption.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=25787
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/80.

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    Length: 19
    Date of creation: 01 Mar 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/80
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    1. Caselli, Francesco & Feyrer, James, 2005. "The Marginal Product of Capital," CEPR Discussion Papers 5203, C.E.P.R. Discussion Papers.
    2. Michael Leahy & Sebastian Schich & Gert Wehinger & Florian Pelgrin & Thorsteinn Thorgeirsson, 2001. "Contributions of Financial Systems to Growth in OECD Countries," OECD Economics Department Working Papers 280, OECD Publishing.
    3. 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.
    4. Yiping Huang, 2010. "China's Great Ascendancy and structural risks: consequences of asymmetric market liberalisation," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 24(1), pages 65-85, 05.
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