chapter  10
17 Pages

Equipment investment and openness in China

ByM. J . HERRERIAS AND VICENTE ORTS

Today, China has become one of the most important economies in the international markets. The economic policy reforms oriented towards stimulating investment and foreign trade that were initiated in the sixties have encouraged economic growth, productivity and income distribution. Investment, especially in equipment, probably boosted the capital/ labour ratio and favoured the increases in productivity, and it has become the most relevant source of growth for China from the pre-reform period (before 1978) until the present day. Over the period 1964-2004 on average, the annual growth rate of equipment investment was above 10 per cent, and gross domestic product (GDP) grew at a rate of 6.10 per cent during the pre-reform period and over 10 per cent in recent years in China. On the other hand, although exports represented a small percentage of the GDP during the pre-reform period, currently, they are considered to be one of the most important factors that enhance Chinese economic growth.