China's Investment Rate: Implications and Prospects
38 Pages Posted: 20 Jun 2017
Date Written: May 30, 2017
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. It also notes that investment in China remains broad-based across all economic sectors, with little specialization; the size of the Chinese economy may allow continued 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.
Keywords: Investment Rate, Capital-Output Ratio, ICOR, National Investment Strategy, Economic Growth
JEL Classification: E010, E220, E600, O110, O530
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