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China’s Real Capital Crisis

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Published/Copyright: June 17, 2014
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Global Economy Journal
From the journal Global Economy Journal Volume 14 Issue 2

Abstract

Investment in fixed assets – roads, buildings, machinery and other infrastructures – has powered China’s economy for the last two decades. It has driven success in manufacturing export markets and has transformed the physical face of China. At the same time, many commentators worry that China’s growth model relies too heavily on increasingly inefficient investments and that, as a result, its economy has become unbalanced. To sustain growth rates of 8% or higher, they argue, China must shift its economy toward consumption-led growth. While seemingly compelling, the conventional overinvestment story is misleading in certain respects. Our research shows that on some measures China may need more capital, not less. However, the key issue facing China is the distribution of capital and how it is used. In fact, investments in the right areas can stimulate household consumption and provide an entirely new source of balanced growth.

Keywords: China; capital investment; capital distribution

Acknowledgments

The authors would like to thank Charlene Tsang, Mickey Xu and Jing Yu for their contributions to this article.

References

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Published Online: 2014-6-17
Published in Print: 2014-6-1

©2014 by Walter de Gruyter Berlin / Boston

Articles in the same Issue

  1. Frontmatter
  2. Articles
  3. Foreign Investment, Institutional Quality, Public Expenditure, and Activity of Venture Capital Funds in Emerging Market Countries
  4. At the Core of the International Financial System
  5. The Role of Internet Use on International Trade: Evidence from Asian and Sub-Saharan African Enterprises
  6. What’s News
  7. What Motivates China to Invest So Heavily in U.S. Treasury Securities?
  8. China’s Real Capital Crisis
  9. Common Trends and Common Cycles in Oil Price and Real Exchange Rate
  10. Targeted Trade-Related Policies and Manufacturing Firm Productivity in Eastern Europe and Central Asia: Effect of Corruption
https://doi.org/10.1515/gej-2014-0013
Keywords for this article
China; capital investment; capital distribution

Articles in the same Issue

  1. Frontmatter
  2. Articles
  3. Foreign Investment, Institutional Quality, Public Expenditure, and Activity of Venture Capital Funds in Emerging Market Countries
  4. At the Core of the International Financial System
  5. The Role of Internet Use on International Trade: Evidence from Asian and Sub-Saharan African Enterprises
  6. What’s News
  7. What Motivates China to Invest So Heavily in U.S. Treasury Securities?
  8. China’s Real Capital Crisis
  9. Common Trends and Common Cycles in Oil Price and Real Exchange Rate
  10. Targeted Trade-Related Policies and Manufacturing Firm Productivity in Eastern Europe and Central Asia: Effect of Corruption
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