01973cas a2200253 a 4500 AALejournalIMF009166 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451865257 1018-5941 BD-DhAAL BD-DhAAL Barnett, Steven. What's Driving Investment in China? / Steven Barnett, Ray Brooks. Washington, D.C. : International Monetary Fund, 2006. 1 online resource (39 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Investment has grown rapidly in China in recent years, reaching more than 40 percent of GDP. Despite good progress on bank and enterprise reforms, weaknesses remain that could contribute to inefficient investment decisions. Manufacturing, infrastructure, and real estate have been the drivers of fixed asset investment. Econometric analysis presented in the paper suggests that manufacturing investment is strongly correlated with firms' liquidity, largely retained earnings. Analysis of residential real estate investment shows that it is weakly correlated with real household income growth and real mortgage interest rates. A policy implication of these findings is that reducing liquidity in firms, for example by requiring state-owned enterprises to pay dividends to the government, and using monetary policy to reduce liquidity increase real interest rates, would slow investment in manufacturing and real estate. Mode of access: Internet Brooks, Ray. IMF Working Papers; Working Paper ; No. 2006/265 Full text available on IMF http://elibrary.imf.org/view/journals/001/2006/265/001.2006.issue-265-en.xml IMF e-Library