Determinants of Corporate Investment in China: Evidence From Cross-Country Firm Level Data
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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. 2012/080
Subject:
Capital markets Corporate investment Exchange rates Financial markets Financial services Foreign exchange National accounts Real effective exchange rates Real interest rates
Frequency:
Biannually
English
Publication Date:
March 1, 2012
ISBN/ISSN:
9781475502329/1018-5941
Stock No:
WPIEA2012080
Pages:
19
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