Negative Investment in China: Financing Constraints and Restructuring versus Growth

Sai Ding, Alessandra Guariglia, John Knight and Junhong Yang

Economic Development and Cultural Change, 2021, vol. 69, issue 4, 1411 - 1449

Abstract: This paper addresses an interesting phenomenon in China’s investment pattern: despite high aggregate investment and remarkable economic growth, negative investment is commonly found at the microeconomic level. Using a large firm-level data set mainly made up of unlisted companies, we show that private firms undertake negative investment in order to raise capital. We also find that, owing to overinvestment and misinvestment in the past, state-owned firms have had to restructure by getting rid of obsolete capital in the face of increasing competition and hardening budget constraints. Finally, rapid economic growth counterweighs both effects for all types of firms, with a larger impact in the private and foreign sectors. Thus, the needs to redeploy resources and to overcome capital market imperfections help to explain the negative investment of many Chinese firms.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1086/706825 (application/pdf)
http://dx.doi.org/10.1086/706825 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Negative investment in China: financing constraints and restructuring versus growth (2012)
Working Paper: Negative investment in China: financing constraints and restructuring versus growth (2010)
Working Paper: Negative investment in China: financing constraints and restructuring versus growth (2010)
Working Paper: Negative investment in China: financing constraints and restructuring versus growth (2010)
Working Paper: Negative investment in China: financing constraints and restructuring versus growth (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:ecdecc:doi:10.1086/706825

Access Statistics for this article

More articles in Economic Development and Cultural Change from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().