Abstract:
Empirical research has generally supported the role of infrastructure investment in economic development. Research on China's experience has found that infrastructure investment can boost overall productivity, output, private investment and employment. However, more investment is not necessarily better, as excessive investment may crowd out private investment. With China's economic development entering a new stage, the targets of infrastructure investment are also changing. Water conservancy, environment and public facilities are the most rapidly increasing fields, amounting to nearly half of total infrastructure investment. China's nominal infrastructure growth is now higher than GDP growth, but it is hard to judge whether infrastructure investment is excessive. Cities with huge infrastructure potential and controllable debt risks are mostly first- and second-tier cities, while those with little infrastructure potential and unsustainable debts are mostly third-tier and fourth-tier and smaller cities.
Keywords: infrastructure investment, local government debt
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