China's Investment Rate: Implications and Data Reliability

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

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: investment rate, capital-output ratio, ICOR, national investment strategy, economic growth
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East

References

BEA website. Dtabase at www.bea.gov.

Investment Yearbook. Zhongguo guding zichan touzi tongji nianjian (China Investment in Fixed Assets Statistical Yearbook). Beijing: Zhongguo tongji chubanshe, various years.

NBS website: Dabase at http://www.stats.gov.cn (posted values may change slightly over time due to revisions).

NBS. Zhongguo zhuyao tongji zhibiao quanshi (Glossary on China’s Major Statistical Indices). Second edition. Beijing: Zhongguo tongji chubanshe, 2013.

PWT 8.1. Penn World Tables 8.1, available at http://www.rug.nl/research/ggdc/data/pwt/pwt-8.1.

Sixty Years. Xin zhongguo liushi nian tongji ziliao huibian (Comprehensive Statistical Materials on 60 Years of the New China [1949-2008]). Beijing: Zhongguo tongji chubanshe, 2010.

Statistical Yearbook. Zhonggtuo tongji nianjian. Beijing: Zhongguo tongji chubanshe, various years.

ZHANG Jun, and ZHU Tian. “Debunking the Myth About China’s Low Consumption.” China Economic Journal 6, no. 2-3 (2013): 103-112.

ZHANG Jun, and ZHU Tian. “Re-Estimating China’s Underestimated Consumption. Undated working paper (2014a).

ZHANG Jun, and ZHU Tian. “Zhongguo touzi lü gaozhan zhi mi” (The Puzzle of China’s High Investment Rate). Financial Times (Chinese edition), 6 August 2014(b), http://www.ftchinese.com/story/001057593, accessed 11 November 2014.

ZHU Tian, ZHANG Jun, and LIU Fang. “Zhongguo zhichufa GDP goucheng bili you duo kekao?” (How Reliable Is the Composition of China’s Expenditure Approach GDP?) Mimeo, November 2014.