CAPITAL-INVESTMENT, INTERNATIONAL-TRADE AND ECONOMIC-GROWTH IN CHINA - EVIDENCE IN THE 1980-90S

This paper demonstrates that fixed-capital investment and merchandise exports are two important determinants of China's economic growth in t he 1980-90s. Changes in fixed-capital investment unidirectionally caus ed growth in industrial output and its sub-categories. Similar one-way causal relations existed between exports and industrial output and it s sub-categories. However, no such causal relation was found between i mports and output. These findings suggest that China follows an invest ment driven expansion path; China's export-oriented trade strategy enh ances economic growth; and the import-permitting regime has no contrib ution to economic performance. JEL Classification Numbers: F14, F43, a nd O53.