Estimation Of China Provincial Public Capital Deposit And Economic Benefit Studies

Public investment plays an important role in China’s economic society, but few research has been done on provincial public capital deposit. Upon defining the scope of public investment, this thesis applies perpetual inventory method to establish four core metrics of capital deposit, attempting to estimate the public capital deposit of the whole nation during1978-2012and of31provinces and cities during1993-2012.In terms of provincial public deposit, the average growth rates of public investment in most provinces are higher than that of fixed investment; the provincial public deposit is growing gradually every year and most provinces present a stable increase. By calculating the public capital output ratio of the nation as a whole and of each province, conclusion can be drawn that the public deposit and investment efficiency in different areas vary differently; and economically advanced provinces with higher degree of marketization are likely to have higher investment efficiency of public capital. In contrast, the efficiency in the less developed western provinces are lower.By analyzing the public capital output ratio of the nation and each province, it’s found that with the progress of China’s society and economic development as well as growth of GDP, the public capital output ratio of the whole nation and almost all the provinces are increasing gradually. This is an indication that the output efficiency and its utilization level of public capital are going down. Seen from rom east to west, the output ratio of eastern provinces are lower that of middle and western provinces; and that of middle provinces lower than that of western provinces.This shows that there exist big difference between regional public deposit and regional economic development. Therefore, preferential policies, such as China Western Development, the Rise of Central China, shall be adopted to narrow the gap of public deposit of different regions in a few years, but this will not definitely narrow the economic difference between regions. As a consequence, when the government is driving regional economic growth by increasing public capital investment, it’s important to focus on its output efficiency.By examining the cointegration of public deposit to total output value in eastern, middle and western China, it’s concluded that the three sequence variables, i.e. the growth rates of total domestic output, public and private capital deposit, enjoy a long-term stable relation. The output elasticity of public capital in eastern China is notably0.3452; that in the middle is0.0193and that in the west is-0.1583. The output efficiencies of private capital deposit are0.5633、0.5174and0.5908respectively, which are similar and notable. Hence it’s found that with regard to average effect of public and private capital, the estimation of data of different regions varies differently. Private capital contributes more to economic growth than public capital. The difference of economic development in different region and provinces is not entirely attributable to the difference of public capital investment. More importantly, it’s geographic location, market condition, human resources and investment environment that lead to the difference of private capital deposit and capital utilization efficiency, resulting in the notable difference of economic development in each region and province.In conclusion, with the slowing down of industrialization and especially the economic growth in recent years, it’s vital to leverage government public investment to boost rapid and sustained economic growth. The difference of public deposit can be narrowed through planned policy intervention by government at all level, hence better supporting local economic development. Though more investment is still needed in the long run, emphasis should be how to improve public investment efficiency rather that its growth rate in the short term, because nowadays the investment-driven economic model does not work well in China. Therefore, policy makers should give priorities to how to reasonably improve public investment efficiency in each province, esp. in western China.