chapter  2
Capital formation and growth
Pages 8

China’s continuingly high growth over the past two decades has attracted a lot of

attention. In particular, a vast literature has focused on the understanding of that

growth.1 While working on China’s economic statistics, researchers have

confronted a major problem, i.e., Chinese statistical system does not report data

on capital stock. As a result, researchers have often used gross investment figures

as a proxy of capital formation in China. This is obviously problematic. Some

researchers have also attempted to derive their own data. The methods involved

vary considerably. So do the results. The objective of this study is to improve

over previous work. Specifically, this chapter employs the recently released

official accounting figures to derive capital stock series for China and its thirty

regions. A review of the literature is presented in Section 2.1. This is followed by

discussion of the methodology in Section 2.2 and new estimates in Section 2.3.

The relationship between capital formation and growth in the Chinese economy

is examined in Section 2.4. Finally, summary comments are reported in the

conclusions.