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

March 1, 2012

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Format: Chicago

Nan Geng, and Papa M N'Diaye. Determinants of Corporate Investment in China: Evidence From Cross-Country Firm Level Data, (USA: International Monetary Fund, 2012) accessed December 21, 2024

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.

Subject: Capital markets, Corporate investment, Exchange rates, Financial markets, Financial services, Foreign exchange, National accounts, Real effective exchange rates, Real interest rates

Keywords: Capital markets, China, Corporate investment, Cost of capital, Data regression, Exchange rates, Financial sector reform, Firm, Firms from Hong Kong SAR, GDP, Global, Investment, Listed firm, Real effective exchange rates, Real interest rates, Shareholding company, Stateowned enterprise, Stimulus package, WP

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/080
Stock No:

WPIEA2012080
ISBN:

9781475502329
ISSN:

1018-5941

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