Introduction

Abstract

China has maintained fairly high capital accumulation levels and aggregate investment ratios,¹ which contribute to its impressive economic growth. At the same time, state-sector fixed investment, which constitutes the main share of gross fixed investment,² has shown conspicuous cyclical patterns in its annual growth rate since 1953, when a consistent and reliable accounting system for the state sector came into operation. The relevant amplitudes are impressive in comparison with those of other socialist countries, such as the former Soviet Union and Eastern Europe.³ An interesting question arises: which mechanisms produce such persistent high investment ratios and what forces shape the remarkable cyclical patterns of these investment growth rates? The basic purpose of this study is to reveal the nature of these fundamental mechanisms and determinant forces and the way together they generate chronic investment hunger and shape the pronounced investment cycles.

Keywords

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