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Ding, Sai, Guariglia, Alessandra, Knight, John and Yang, Junhong (2021) 'Negative Investment in China: Financing Constraints and Restructuring versus Growth.' Economic Development and Cultural Change, 69 (4). pp. 1411-1449.

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This paper addresses an interesting phenomenon in China’s investment pattern: despite high aggregate investment and remarkable economic growth, negative investment is commonly found at the microeconomic level. Using a large firm-level dataset, mainly made up of unlisted companies, we show that private firms undertake negative investment in order to raise capital. We also find that, owing to over-investment and mis-investment in the past, state-owned firms have had to restructure by getting rid of obsolete capital in the face of increasing competition and hardening budget constraints. Finally, rapid economic growth counterweighs both effects for all types of firms, with a larger impact in the private and foreign sectors. Thus, the needs to redeploy resources and to overcome capital market imperfections help to explain the negative investment of many Chinese firms.

Item Type: Journal Article
SOAS Departments & Centres: Departments and Subunits > School of Finance & Management
ISSN: 00130079
Copyright Statement: © 2021 by The University of Chicago. All rights reserved. This is the version of the article/chapter accepted for publication in Economic Development and Cultural Change, 69 (4). pp. 1411-1449, published by University of Chicago Press. Re-use is subject to the publisher’s terms and conditions
DOI (Digital Object Identifier):
Date Deposited: 20 Apr 2020 07:49
Funders: Economic and Social Research Council

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