China Center Chart of the Week: China’s intangible investment – high in absolute amount, small relative to conventional capex
Xiaohui (Janet) Hao, Ph.D.
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In this second of three China Center "Charts of the Week," Conference Board economist Janet Hao expands her examination of China's intangible investment patterns.
Intangible investment is positively correlated to output per person and more developed countries tend to invest more on intangible assets both in absolute terms and in relation to tangible investment.
China, however, is a significant outlier as regards intangible investment. China has spent a much larger amount on intangible investment, as a percentage of GDP, than other countries at similar, or higher, levels of development.
This chart shows that China invested more than most European countries (as a percent of GDP) on intangible assets. China also spent much more than India, but still far less than some of the wealthiest countries. However, the chart also shows that despite its large absolute investment in intangibles, China’s overall spending pattern still looks like that of a developing country. Here, China is relatively in line with comparables, suggesting that while its overall intangible investment may be high for its level of development, China still relies mostly on conventional fixed asset investment.
Monitoring the growth and nature of China’s intangible investment provides a unique gauge of the country’s progress in shifting toward a higher value-added, more knowledge intensive economy.