This is a progress report of a larger study on fixed capital investment in post 1951 Mainland China. It first presents the results of regression analysis on the factors affecting fixed capital investment and its components during 1952-1982. Regression analysis is also used to measure the effects of various kinds of capital investment on aggregate output. The report then makes a systematic analysis of related control mechanisms, the characteristics of capital investment, and the problems encountered in 1978-1983. Although there are many publications on Mainland China’s capital investment by scholars outside the Chinese mainland, this report is the first of its kind to attack the foregoing problems.
We find that conventional macro and policy variables contributed to the widely-fluctuating cyclical pattern of capital expansion experienced during 19521982 in Mainland China. On top of this, some special features of the capital investment system during 1978-1983 (as well as in 1958-1960), such as the disorganized delegation of authority to evaluate and to approve investment plans and to finance capital projects, the abuse of delegated power at lower levels, and the lack of unified leadership within the construction industry and coordination among the suppliers and users of construction materials, were particularly responsible for the overexpansion of capital investment, the mismatching of the supply and demand for capital goods and construction materials, the low economic efficiency of capital investments, and other economic problems experienced at the same time. It is also our finding that during 1952-1982, the relative effects on the gross output value of industry and agriculture, national income, and gross social output of investment variables were, generally, in the following order of importance: capital replacement and renovation investment, capital construction investment, and fixed capital stock. However, the rates of aggregate output growth generated by a one-percent increase in these investment variables(i,e., investment elasticities of production) were smaller than those generated by a one-percent increase in the output of food grains and primary energy.
In the course of our analysis, we also delimit various components of fixed capital investment, discuss important concepts, point out the weaknesses of available statistical data, and comment upon the viewpoints expressed by economic researchers in Mainland China on some economic issues.
