Study On Infrastructure Investment And Economic Growth In China

Since its reform and opening up in 1978, China has been among the countries in the world that witnessed the fastest economic growth. During this course, besides the incentive from a market-oriented economy system transition, the relation between infrastructure investment and economic growth has always been an eye-catching issue. Taking the issues reflected in the implementation of the infrastructure investment policy as the background, this article attaches great importance to the research in the effect of infrastructure investment on economic growth.1. This paper conducts an analysis on the effect of infrastructure investment flow as a demand factor on economic growth. With the help of input-output model, this article studies the aggregate output multiplier generating from input change as well as the pulling effect of different sector investment on relevant industry output. On this basis, this paper makes an analysis by demonstrating the achievements gained since China adopted a pro-active fiscal policy in 1998 and emphasizes that the anti-cycle nature of pulling up economic growth by taking investment as a demand factor is a short-term reform measure under particular conditions.2. This paper also examines the effect of infrastructure capital stock on the economic growth. By means of establishing an economic growth mode which contains a somehow congested stock made of both endogenous and exogenous investment, this part concentrates on the following aspects, namely, the effect of stock and its congestion degree on enterprise marginal output and its long-term growth rate, the effect on long-term economic growth by means of levying taxes to invest in infrastructure. This analysis also goes to the first-best fiscal policy adopted under the situation that infrastructure with a different degree of congestion. This paper also makes analysis on the contribution made to economic growth by increasing infrastructure capital since China implemented pro-active fiscal policy in 1998. Both theoretic and practical analysis indicates that infrastructure capital stock exerts a positive impact on economic growth and it will increase long-term economic growth rate. 3. This paper also deals with the effect of infrastructure capital stock on regional economic growth. To this end, this article establishes a growth model on the stock that is made up of both endogenous and exogenous investment and is sharedby two regions. The theoretic model serves the analysis of the effect of the stock on the two regions' economic growth and that of the fiscal policy that in support of the development of less developed regions. This analysis indicates that this stock shared by the two regions can promote their long-term growth rate simultaneously. Within a country where economy is of relevant the same nature, the less developed region can acquire more comparative benefit and levying more tax from developed region to invest in shared infrastructure is conducive to less developed region to catch up with the developed one. Experience is also listed in the part of theoretic analysis. Based on the theoretic study, this paper also makes analysis to further strengthen the investment in infrastructure, improve the maintenance of the capital stock and deepen the reform of government investing and financing management system.