**Abstract**
Recently, Lin Yifu, the honorary president of the National Development Research Institute at Peking University, sparked a heated debate by suggesting that “abandoning the investment-driven growth model is due to the waste of resources.†This statement has triggered discussions in both academic circles and the media about who should take the lead in driving economic growth—investment or consumption. Experts have emphasized that while investment still plays a crucial role in China’s current economic development, it should not be treated as a universal solution for all problems. Instead, there is an urgent need to address the systemic issues behind excessive investment and move toward more rational and efficient investment practices that can sustain long-term growth.
**1. Investment Has Become a Hot Potato**
As China's economic growth slows down and the pressure on the economy continues to mount, the traditional investment-driven model has come under increasing scrutiny. There is now a growing call for greater reliance on consumption as the main driver of economic growth. In this context, Lin Yifu took a different stance, arguing that investment—not consumption—is the real engine of sustained economic growth. His comments immediately drew sharp criticism from various sectors of society.
"‘Investment’ has become a bad word," Lin said, noting that many critics blame it for a wide range of economic problems, such as declining income shares, over-leveraging, lack of innovation, pollution, and corruption. Some argue that China should shift away from its investment-heavy model and focus more on boosting consumption. However, Lin sees this as a case of throwing out the baby with the bathwater. He believes that without proper investment, there can be no technological advancement, industrial upgrading, or infrastructure improvement, which are all essential for long-term growth.
Wu Jinglian, another prominent economist, pointed out that when the macroeconomy faces challenges, governments often resort to the so-called "China model"—a strategy of strong state intervention and massive resource mobilization. While this may offer short-term relief, it often leads to deeper structural problems, such as excessive credit expansion, rising debt, and eventual economic slowdowns.
**2. Investment Still Plays a Key Role**
The debate around the investment-driven growth model goes beyond just numbers—it touches on the core of China’s economic reform. Liu Shengjun, a well-known columnist, noted that the discussion centers on whether the country should continue maintaining a high investment rate or gradually shift toward higher consumption. The government’s role in infrastructure and other key sectors remains a critical issue.
Lin Yifu argues that consumption alone cannot sustain economic growth. It depends on income growth, which in turn relies on improvements in labor productivity. And that requires investment in technology, industry upgrades, and infrastructure. Without these, consumption becomes a passive force, driven only by borrowing, which eventually leads to debt crises.
While the investment model has its flaws, it still holds an irreplaceable position in China’s current economic structure. Xu Hongcai, director of the Information Department at the China International Economic Exchange Center, pointed out that China’s industrialization, urbanization, and modernization are far from complete. A certain level of investment is still necessary. Increasing consumption depends on rising incomes, which in turn depend on investment. Therefore, it is important not to overcorrect and shift too quickly from investment to consumption.
**3. Reforming Investment Methods to Improve Efficiency**
Investment should not be seen as a catch-all solution to every problem. Wang Wei, a commentator, suggested that Lin Yifu’s emphasis on investment is partly due to the fact that many issues are currently being blamed on it. The real challenge lies in addressing the root causes of excessive investment and finding a more sustainable path.
Xu Hongcai stressed that what is needed is a reasonable and moderate approach to investment. The key is to reform how investments are made, improve their quality, and increase efficiency. This includes breaking up government monopolies, simplifying administrative procedures, and allowing private capital to play a bigger role. By making the investment process more diversified, market-oriented, and transparent, the government can guide and regulate it effectively.
Experts also emphasize that the real issue is not whether investment or consumption drives growth, but rather the underlying structural imbalances. Zhang Monan, deputy director of the World Economic Research Office at the National Information Forecasting Department, pointed out that China must focus on adjusting its supply and factor structures, shifting from external demand to internal supply. Re-defining the relationship between the government and the market, and enhancing productivity, will be key to unlocking long-term growth and overcoming supply-side constraints.
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