Determinants of Corporate Investment in China: Evidence from Cross-Country Firm Level Data

 
Author/Editor: Geng, Nan ; N'Diaye, Papa
 
Publication Date: March 01, 2012
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper analyzes the evolution of investment in China, its main features, and its key determinants. In recent years, manufacturing, real estate, and infrastructure have been the main drivers of investment. Investment remains largely concentrated in coastal areas, but there has been a shift to greater investments inland in recent years. The empirical analysis of the determinants of investment indicates that financial variables, such as interest rates, the exchange rate, and the depth of the domestic capital market are important determinants of corporate investment. The results suggest in particular that financial sector reform, including that which deregulates and raises real interest rates as well as appreciates the real effective exchange rate, would lower investment and help rebalance growth away from exports and investment toward private consumption.
 
Series: Working Paper No. 12/80
Subject(s): Capital markets | Corporate sector | Exchange rate appreciation | Investment | Real effective exchange rates | China, People's Republic of

Author's Keyword(s): China | investment | cost of capital | financial sector reform
 
English
Publication Date: March 01, 2012
Format: Paper
Stock No: WPIEA2012080 Pages: 18
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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