Can ‘new’ infrastructure become an engine of growth for the Chinese economy?

Abstract

ABSTRACT This paper explores the effect of new infrastructure on economic growth from the aspects of tangible and intangible assets. According to empirical analysis, we conclude that traditional infrastructure directly contributes to the Chinese economic growth via fixed asset formation, while new infrastructure has overall insignificant direct effect on growth, i.e. it is unrealistic for new infrastructure to become an engine of growth for the Chinese economy in the short run. But it is also worth noting that new infrastructure does have the potential to promote the upgrade of industry structure and therefore boost economy in the long run. Based on the modelling results as well as the nature of new infrastructure, it is suggested that new infrastructure investment is not suitable to act as a short-term stimulation especially under Covid-19 pandemic despite its great potential in the long term.