The Return to Capital in China

40 Pages Posted: 15 Dec 2006  

Chong-En Bai

The University of Hong Kong - School of Economics and Finance; University of Michigan - William Davidson Institute

Chang-Tai Hsieh

University of Chicago - Booth School of Business; University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Yingyi Qian

Tsinghua University - School of Economics & Management; Centre for Economic Policy Research (CEPR)

Date Written: December 2006

Abstract

China's investment rate is one of the highest in the world, which naturally leads one to suspect that the return to capital in China must be quite low. Using the data from China's national accounts, we estimate the rate of return to capital in China. We find that the aggregate rate of return to capital averaged 25% during 1978-1993, fell during 1993-1998, and has become flat at roughly 20% since 1998. This evidence suggests that the aggregate return to capital in China does not appear to be significantly lower than the return to capital in the rest of the world. We also find that the standard deviation of the rate of return to capital across Chinese provinces has fallen since 1978.

Suggested Citation

Bai, Chong-En and Hsieh, Chang-Tai and Qian, Yingyi, The Return to Capital in China (December 2006). NBER Working Paper No. w12755. Available at SSRN: https://ssrn.com/abstract=949764

Chong-En Bai

University of Michigan - William Davidson Institute ( email )

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
(852) 2859-1036 (Phone)
(852) 2548-1152 (Fax)

Chang-Tai Hsieh (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yingyi Qian

Tsinghua University - School of Economics & Management

Beijing, 100084
China

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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