Analysis On The Impact Of Industrial Structure, Local Government Investment On Economic Growth

Since the reform and opening up, China’s economy has made considerabledevelopment. As an emerging market country, China has successively catch up withGermany and Japan to become the world’s second largest economy just after the UnitedStates, while long maintained two digit economic growth rate, is known by the world as“China’s growth miracle”. With economic growth, our living standards is improved, andthe country’s position on the world stage is more stable, but behind those beautiful data,there are some deep-rooted contradictions-not reasonable industrial structure andgrowth mode extensive, redundant construction serious. Especially after China’saccession to the WTO, with the world more closely due to the lack of power of our owngrowth, institutional and structural is not strong enough, our economy is morevulnerable to external factors, and the outbreak of the financial crisis in2008led toChina’s economic growth rate down obviously, is a good illustration. It also exposed theproblem which has long existed in China, over-reliance on exports and investment tospur economic growth, continued weakness in consumer and high-tech, highvalue-added products inadequate to show that the current mode of economic growth hasbeen unable to adapt to the reality of economic development needed. The urgent is toachieve a breakthrough and an innovation. The transformation of economic growthmode has become the primary task in front of us, and upgrading the industrial structureis an important foundation for the transformation of economic growth mode. After thefiscal decentralization, the local government played an increasingly important role inChina’s economic growth, especially in the post-crisis era. Local governments’investment in order to prevent the rapid decline in economic growth has played a goodrole. At the same time, blind investment has led to a series of questions, including someindustries’ serious excess capacity, high risks of local government debts. In theupgrading of the industrial structure, we should get more rational use of the guiding roleof the local government investment to promote economic growth mode transformationand sustain economic growth. This paper attempts to join the local governments’investment this variable in the study of the upgrading of industrial structure andeconomic growth and hope that it can help us better study the relationships among thosethree, and find a reasonable explanation and evidence of the miracle of China’s economic growth, and make a good direction for local governments’ investment.With the method of combining standardizing and empirical analysis, based onpanel data from2000to2010, of China’s31provinces, municipalities and autonomousregions, we analyzed the influence of local government investment, the upgrading of theindustrial structure on economic growth and then made a conclusion: local governmentinvestment and upgrading of industrial structure are playing a significant role inpromoting economic growth, and the economic growth is sustainable, that means thecurrent period of economic output is valuable to promote the role of the next issue.Which also shows that local government investment and upgrading of the industrialstructure has a more long-term influence on economic growth. As for the upgrading ofthe industrial structure, the tertiary industry accounted for the negative impact to theeconomy, implying that China is still in the secondary industry dominated stage. Whilethe growth of tertiary industry employment structure is conducive to economic growth,indicating that China should increase the ability of tertiary industry to absorbemployment, vigorously develop the tertiary industry, not just to pursue the output valueof the moment. In addition to the direct positive effect to economic growth, the studyalso found that, local government investment has the ability to promote the developmentof the tertiary industry even the upgrading of the industrial structure. So the localgovernment investment also has a positive impact on economic growth within theframework of the industrial structure.