China’s Dual Economic Transformation And The Rate Of Investment

In recent years China’s high rate of investment has attracted attention from scholars at home and abroad. As dual-structure of economy is the most prominent one big characteristic of China’s economy and is the internal cause which restricting a long-term development of China’s economic, we couldn’t separated it from any China’s economy research. SO a study on the relationship between dual-structure of economy and the investment rate can help us understanding China’s high investment rate on theoretical and practical significance.This paper will research on two aspects:theoretical and empirical. In the aspect of theory, we construct two departments in a small country model, and we describe dual economic structure transformation as labor migration——labor transferred from the agricultural sector to the non-agricultural sectors. After solving the equilibrium in the situation of labor couldn’t transfer and of labor shift. We discovered a positive relationship between the labor migration and capital, the labor migration will stimulate investment and per-capita income, that is, dual economic structure transformation often accompanied by a high rate of investment.In the empirical aspects, first we construct fixed-effect model based on the data of30provinces of China from year1994to2010. The results show that, dual economic structure transformation has a positive effect on the investment rate when we add three variables on first-lagged inGDP, relative price and real interest rate. The first two variables also have a positive effect on the investment rate,but real interest rate has little influence on the investment rate. Then we divide30provinces into four parts, construct long panel model for four parts separately, the conclusion is similar to the result of fixed-effect model. The northeast region’s investment rate is the most sensitive to Dual economic structure transformation in these four region, and its increase of investment rate is the biggest, either. Western region is just on the opposite if not consider the eastern region.At last, we insist that China’s high rate of investment is the result of economic and social development, especially of Dual economic structure transformation, so we should treat China’s high rate of investment with rationality. We should pay much more attention on Promoting the effect of household saving transform into investment and the effect of investment by the financial reform, in order to make full use of investment in national economy.