ABSTRACT
China’s economic growth in 1998 has been, to a large extent, dependent on the pulling force of public investment. When discussing China’s high economic growth, we need to have a thorough understanding of the potential growth curve. From the perspective of demand, China’s economy is transforming from one constrained by resources to one constrained by the market, that is from a “seller’s market” to a “buyer’s market.” The pulling effect on economic growth generated by public investment is closely related to an investment multiplier. For an investment multiplier to function at its best, there should be no excess production capacity. When China uses public investment to pull up economic growth, some foreign economists think that we are copying Japan, and they conclude that the results will not be good.
