Munich Personal RePEc Archive

China's Investment Rate: Implications and Data Reliability

Holz, Carsten A. (2015): China's Investment Rate: Implications and Data Reliability.

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For the past nearly forty years, China has experienced average annual real GDP growth of close to ten percent, much of it driven by investment and capital accumulation. By 2014, gross capital formation had reached 46 percent of aggregate expenditures. This paper documents the role of investment in driving economic growth in China, questions how much longer China can sustain a relatively high investment rate, and examines the arguments that have been offered for an impending drastic reduction in investment. The quality of the investment statistics and of the gross fixed capital formation statistics (the latter as part of the national income and product accounts) is assessed; these data are potentially problematic with no easy way for researchers to improve the data. The paper finally makes the point that investment in China remains broad-based across all economic sectors, with little specialization in sight; the size of the Chinese economy would appear to allow comprehensive development across all economic sectors. At the same time, the relative size of foreign investment in China has become negligible and the China growth story thus has become a domestic one.

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