Robust building of physical capital for innovation

Physical capital is the most abundant of all the types of capital thanks to decades of investment-driven growth. While the misallocation of capital over the past decades is manifest in excess capacity in a number of manufacturing sectors, the channelling of investment towards high-tech and new industries is apparent in recent years (Figure 1).

Figure 1. High-technology investment is expanding rapidly

Share of investment in high-tech industries in total fixed asset investment

High-tech industries includes pharmaceutical manufacturing, aviation, spacecraft equipment manufacturing, electronic and communication equipment manufacturing, computers and office equipment manufacturing, medical equipment and instrument manufacturing in the Chinese industrial classification system. [Photo/Source from China Statistics Yearbook on High Technology Industry 2015 and National Bureau of Statistics.]