An Analysis Of The Optimum Scale Of Public Investment In China

The international financial crisis in 2008 has set back the entire economy of the world. In order to stimulate the growth of economy, all nations in the world have increased investment strength in public investment. China has also brought forward a 4,000 billion project of public investment to expand domestic demand, adjust the structure, improve the living standard of people and as a result to promote economic development in a steady and fast way. However, focusing on the foreign and domestic research, it demonstrates that the scale of public investment has two sides toward economy. Expanding the scale of public investment can promote economic growth, while as the scale enlarges, it will lead to output inefficiency, private investment disincentives and so on. Therefore, judging the optimal scale of public investment is extremely important.Firstly, this paper theoretically and comprehensively analyzes public investment, the optimal scale of public investment and the part public investment plays in economic development. Then the present state of China's public investment and the economic effect of government's balance-of-payment scale are analyzed. The model of optimized scale of public investment is built through Barro Model and the optimal scale value of public investment is then obtained. This result shows that the scale of public investment does not reach the request of economic growth and further expanding in public investment is thus needed. Finally, through analyzing the problems related to public investments in both foreign underdeveloped countries and China, the author suggests the following measures: 1) Set dynamic limitations on public investment and ensure the capital flow be guided reasonably to boost economy growth; 2) Optimize the management model of public investment and deploy a comprehensive monitoring system to maintain a good economic operation; 3) Identify the goals of public investment and enhance the capability of independent innovation to ensure a long-term development; 4) Restructure the public investment system and accelerate the transformation of growth pattern to improve the quality of economy.