Wu Qing, DRC

2016-11-21

China’s economy might have reached a ‘L-shaped’ turning point, and the change of investment transformation mode is underway, but has not yet taken shape. It shows that government can play a big role in promoting the development of private investment. The total amount of China’s fixed assets investment over the past three quarters accounts for 80% of its GDP and infrastructure investment takes up nearly one quarter of the amount of total fixed assets investment. In light of fixed asset investment, the growth rate of private investment is only slightly more than 2%, while that of infrastructure investment is up to 18.6% and the increment accounts for more than 50% of that of fixed assets investment. Infrastructure investment is mainly conducted by the government, and nearly half of the increment of investment is due to the effort made by the government. Massive infrastructure investment is bound to impose an impact on government financial capacity and its capacity in tackling various issues, and its debt-to-GDP ratio may rise relatively quickly. Investment is the key variable in economic growth in the coming months. The Central Government can play a big role in many fields including easing the threshold for market access of private investment, reducing administrative examination and approval procedures, launching transnational bilateral or multilateral negotiations, and the management improvement of negative lists, which will all encourage further private investment. In the future, China’s economy still has to rely on investment, while there will be transformation mode changes in investment. One of the standards is to see whether private investment can increase, and whether there will be changes in investment fields. Each of these transformation mode changes will be reflected in economic development through a V-shaped curve. Thus, if economic growth continues to fall, it may not necessarily mean a bad news. With the established total amount of elements, the birth of newly-emerged industries will definitely be based on the closed down of backward production facilities.

For more detailed information, please refer to here.