Does government investment crowd out private investment in China?

This paper asks whether government investment “crowds out” or “crowds in” private investment in China. We divide government capital expenditures into two types: (1) investment that serves to provide public goods and infrastructure, and (2) investment in private industry and commerce. The results of structured vector auto-regressive analysis suggest that government investment in public goods in China “crowds in” private investment significantly, while government investment in private goods, industry and commerce, mainly through state-owned enterprises, “crowds out” private investment significantly.