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How China Grows- Investment, Finance, and Reform

Investment not changes in technology is the driver of China's big economic growth. The book states however that investment cannot be relied on to sustain growth for the future because of diminishing returns to capital. If China was technologically based than it could be depend on that for the future growth.

The largest source of investment finance comes from self financing, because it was the only form allowed for private companies before the 1990s. Self financing was the only access to bank loans they had at the time. When legal status improved China set out for a law based market economy which allowed private companies to get loans and also allowed foreign investing. This helped China reach the global market as it is a great contributor to all parts of the world currently.

Household income and savings is important for any type of investment one might want to take part in. The book points out that the population shift is a reason why savings is low in China. The population shifted to urban areas which had a negative impact on savings overall, because it had been thought that rural households saved on average three times more than urban areas. Rural areas seemed to rely more on own savings and support from families. The support from families comes from the Confucian tradition to govern one's family and live on your life in younger generations.

The book concludes that: "If there were an Olympic event for long-term economic growth, China's performance over the past 25 years would make it a gold medal winner". This quote sums up many of the major points on China's economy. It had a great boom of success, but it must continue to make changes to its financial plan in order to do so. I have seen some of the great industrial changes taking place such as demonstrated on the TEDA tour.

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This page contains a single entry by ture0036 published on June 12, 2011 9:39 AM.

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