The Formation And Risk of Government Investment Dependence under Financial Restriction in China

摘要

At present, in China's financial market, there exists very strong financial restriction in both indirect financing and direct financing. Financing channels for private sectors are so narrow that the efficiency of capital allocation is low. Financial restriction leads to the situation that China's economic growth mainly relies on government investment. Moreover, with the enlargement of market size, the dependence degree of economic growth on government investment deepens. This phenomenon will cause an important aftermath: Local governments have strong motivations to implement government investment in order to achieve various economic goals, which propels the accumulation of financial risk and supply surplus risk that finally causes a new-round economic stagnation. This would be the logic implied in several obvious economic cycles in China.