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How Much Does Investment Drive Economic Growth in China?

  • 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)

Registered author(s):

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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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
Date of revision:
Handle: RePEc:qmw:qmwecw:wp545
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