The International Monetary Fund (IMF) said China’s reliance on a high level of investment to drive economic growth could lead to instability if the government continues to maintain expansion at current rates, Reuters reported. China may have over-invested between 2007 and 2011 by between 12% to 20% of GDP to relieve the effects of financial downturn, according to a research paper released by the organization. The report said that over-investment over a long period could lead to higher levels of investment that produce the same level of growth. It also predicted that investment could reach 60-70% of GDP, compared to 50% now. “Under such a strategy, vulnerabilities will likely grow in the form of hidden deadweight that will have to be paid in the future in one form or another. The cost of financing such an elevated level of investment could undermine overall economic stability,” the report said.
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