Empirical Analysis Of Savings And Investment And Economic Growth In China

With the process of high-speed development of China’s economy, it shows that economic improvements have been related to capital investment from savings and basic investment, specifically, economic development, savings and investments are positive-related. However, during this procedure, it is unknown that which factor is the main cause and which is the result, and making an economic policy relies on the confirmation of those factors mentioned above. Therefore, it helps to make sure if the policies are conformed to economic facts through determining the relationship among those factors, thus promoting the economic growth and the implement of "exploring western China" strategy.This paper depends on the related data from1996to2012and studies the dynamic correlation between China’s saving rate, investment and economic growth, using a vector auto-regression model. On this basis, this paper applied pulse response function and Granger causality test to analyze the interaction mechanism, and figured out that it has significant differences on causal relationship among three factors mentioned above in different economic environment:the efficiency of investment in eastern region is high, central and western part is low; the investment scale and growth rate in east is better; regional difference on consumption also exists that the east has larger ratio on service consumption while the central part has a balanced ratio on semi-manufactured goods and service, and the consumption in west is just to maintain the basic life; the national savings for investment is concentrated in the east which results in the affluent condition in east and lacking in west. These investment has achieved a better conversion of investment, economy and savings in east, which has not been realized in central and western part; when developing the economy in west, it would not affect the economy in east, which is the main pillar of fine economy in our country.In summary, the key to the development of stable economy is to invest properly. The east needs to make good use of its capital to improve science, technology and the return on investment; the central and western part needs to establish a market-led investment and financing mechanism, to achieve high return and high saving conversion rate; the government can take advantage of its capital and policy, increasing to support funding central and western part, therefore promoting the balance of regional economic development.