Why does China invest so much?

Journal article

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.

Authors: Knight, J; Ding, S

• Publisher: MIT Press
• Journal: Asian Economic Papers
• Volume: 9
• Issue: 3
• Pages: 87 - 117
• Publication date: 2010-09-01
• DOI: 10.1162/ASEP_a_00030
• ISSN: 1535-3516
• Language: English