A Study of the Impacts of Governmental Investment on Non-governmental Investment in China’s Industrialization Process
|School||Dongbei University of Finance|
|Keywords||Industrialization Process Layered Industrialization Governmental Investment Non-governmental Investment VAR Model|
China is in the process of development of industrialization and urbanization at present. We are at the stage of the second half if the medium division of the process of the industrialization, according to the division of the stage of industrial development made by economists such as Chenery, etc. From the international comparison of the investment rates we can know that it plays an important role to maintain a high investment rate for the rapid economic development at this stage. This is why we implement the strategy of expanding investment. Since the global financial crisis in 2008, in response to the crisis, majority of the countries in the world have taken unprecedented measures to stimulate investment. China’s huge foreign exchange reserves will not only stimulate our country’s domestic economic development but also become the main driving force of the world to promote economic recovery.The importance of the policy of expansion investment in the macroeconomic policies suddenly increases in this background. In order to "expand domestic demand, adjust structure, promote growth and benefit people’s livelihood", the State Council issued the "4 trillion economic stimulus package". But how can we expand investment? Is it possible to expand investment? How much can it expand? Will investment demand be expanded and promotes economic growth? And can the governmental investment stimulate non-governmental investment? All these issues are in the priority for macroeconomic policy makers to decide.Investment which consists of governmental investment and non-governmental investment is an important driving force for national economic development. The relationship between the governmental investment and non-governmental investment has always been the focus point in the academic field. It has also been controversial on the impact of the governmental investment on non-governmental investment. One point of view is that the governmental investment will incur the non-governmental investment; the other point of view is that governmental investment will generate a "crowding-out effect" on non-governmental investment. However, previous study is based on the general situation of the whole country or from a provincial perspective. And it did not take the process of layered industrialization in China and different levels of industrialization in different provinces into consideration to make further distinction and comparative analysis.The process of China’s industrialization is divided into three levels commencing from the top down level by level, rather than simultaneously: national economy level, city economies level, and intra-county economies level. The special structure of China’s industrialization process determines the imbalance of the regional economic development and the uneven process of industrialization. Hence, in the implementation of governmental investment to stimulate the policy, we must decide the strength and the direction of the governmental investment according to different stages of industrialization of different provinces. This paper, according to the level of industrialization and the process index, make a cluster analysis on China’s 31 provinces (municipalities, autonomous regions) and divide them into four areas. Then the article makes an empirical analysis on the variable of the governmental investment and non-governmental investment by constructing VAR model in these areas. It analyzes objectively the effecting of the governmental investment on non-governmental investment in these areas, and these effects are positive or negative. Thus it can provide a testimony for policy makers.This paper, according to the contents, can be divided into five parts:general discussion, literature review, theoretical study, empirical analysis, and conclusions with policy recommendations.Part I:Overview. This part analysis the background the problem comes out in and the significance of the problem in theory and practice from the overall. The thesis illustrates the basic idea of the problem, including the specific train of thought, research structure, logical system and the main study methods. Finally, the paper summarizes the main ideas, innovation and the need for further consideration.PartⅡ:The review. In this part, the article reviews and discusses the connotation and extension of related concepts such as industrialization, governmental investment, non-governmental investment; reviews the theory of industrialization at home and abroad and theoretical research about the impact of governmental investment on non-governmental investment in recent years. In accordance with the study of industrialization and the logic of the system of the theory of governmental investment on non-governmental investment at home and abroad, this part describes the authoritative research findings and carries on a more comprehensive summary on the inadequacies of these research.PartⅢ:Theoretical study on the impacts of governmental investment on non-governmental investment in China’s industrialization process. Firstly, this part conduct a deeply studies on the industrialization of China, the overall process of industrialization as well as the regional process of industrialization; in accordance with level of the industrialization and the index of process of industrialization, using the method of cluster analysis, divides and compares various regions in China. Then, using the theory of the dynamic optimization of the economic, the paper analyzes the impact of the governmental investment on non-governmental investment.PartⅣ:The empirical analysis about the impact of governmental investment on non-governmental investment in China’s industrialization process. According to the second and third part’s theory, the paper, selecting statistical data of four different industrialized areas, tests and analyzes the data by using VAR model, which prove the key points about the effect of governmental investment on non-governmental investment in the process of industrialization.PartⅤ:Conclusions and policy recommendations. The paper transforms the theoretical and empirical analysis about the impacts of governmental investment on non-governmental investment in the industrialization process into conclusions, and puts forward corresponding policy countermeasures and suggestions in follow-up policy of governmental investment.