This paper uses the standard one-sector neoclassical growth model to investigate why China''s consumption has been low and investment high. It finds that the low cost of capital has been quantitatively an important factor. Theory predicts that the price of capital may have been significantly...

The Chinese government has recently focused on the need to increase consumption to rebalance the economy. A widely held view is that despite China''s remarkably high growth, the share of consumption in total expenditure has been low and declining due to high and rising saving rate of Chinese...

This paper uses the standard one-sector neoclassical growth model to investigate why China’s consumption has been low and investment high. It finds that the low cost of capital has been quantitatively an important factor. Theory predicts that the price of capital may have been significantly...

Intro -- Contents -- I. INTRODUCTION -- II. CONSUMPTION, INVESTMENT, AND SAVINGS IN CHINA -- III. THE CHINESE ECONOMY AS A NEOCLASSICAL GROWTH MODEL -- IV. CALIBRATING THE GROWTH MODEL -- V. SIMULATING THE MODEL: THE FIRST CUT -- VI. INTRODUCING INVESTMENT WEDGE -- VII. FINANCIAL FRICTIONS AS...

The Chinese government has recently focused on the need to increase consumption to rebalance the economy. A widely held view is that despite China's remarkably high growth, the share of consumption in total expenditure has been low and declining due to high and rising saving rate of Chinese...