As a result of the policy of state stimulation of economy and the construction boom, the volume of inefficient investments in China totaled $6.8 billion since 2009. A significant part of these funds has been embezzled by the party officials in charge of economic development of the country.
Only in 2009 and 2013 almost half of annual investments into the Chinese economy have been spent inefficiently, The Financial Times quoted reported the reports of the National Commission for Development and Reforms and the Academy of Macro-Economic Studies.
According to the evaluation by Jonathan Anderson, founder of Emerging Advisors Group consulting firm, during the past five years China has lost almost $1 trillion as a result of a poor supervision of investments. He believes that this constitutes about 5% of annual GDP of the country.
Anderson believes when in 2009 the government has lifted credit limitations, the local officials were tempted to spend funds at their discretion, manipulate the accounts and conclude contracts with the well-known businessmen.
The reports read that majority of inefficient investments fell to the steel industry and automobile manufacture, which have been supported by the government after the world financial crisis in 2009. The authors of the research believe that excessively free monetary policy and poorly designed system of stimulation of the officials in charge of investments is to blame for the losses.
In the past years a significant part of funds has been invested into the projects related to immovable property. But this year price of houses started going down, which could cause damage to this market, writes FT. Majority of the fields tied up to the immovable property sector, such as manufacture of steel, glass and cement, have excessive production capacities and the decline has already affected them.
