EconPapers    
Economics at your fingertips  
 

What’s Driving Investment in China?

Steven Barnett and R. Brooks

No 2006/265, IMF Working Papers from International Monetary Fund

Abstract: Investment has grown rapidly in China in recent years, reaching more than 40 percent of GDP. Despite good progress on bank and enterprise reforms, weaknesses remain that could contribute to inefficient investment decisions. Manufacturing, infrastructure, and real estate have been the drivers of fixed asset investment. Econometric analysis presented in the paper suggests that manufacturing investment is strongly correlated with firms' liquidity, largely retained earnings. Analysis of residential real estate investment shows that it is weakly correlated with real household income growth and real mortgage interest rates. A policy implication of these findings is that reducing liquidity in firms, for example by requiring state-owned enterprises to pay dividends to the government, and using monetary policy to reduce liquidity increase real interest rates, would slow investment in manufacturing and real estate.

Keywords: WP; investment; investment growth; real estate investment (search for similar items in EconPapers)
Pages: 39
Date: 2006-11-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=20067 (application/pdf)

Related works:
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:imf:imfwpa:2006/265

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().

 
Page updated 2024-06-12
Handle: RePEc:imf:imfwpa:2006/265