The official Chinese national accounts do not contain any estimate for the capital stock for the whole economy. Yet such a figure is necessary in order to determine past performance of the economy and its likely future path. This is the more so in China where the level of investment is particularly high (Figure 1). Concerns have been raised that there has been over-investment so reducing rates of return and the growth of productivity. Changes in the structure of the capital stock over time can change the average rate of return and the productivity of capital, so obscuring the underlying changes in productivity. This is particularly the case in China where the national accounts measure of the rate of sectoral return is assumed to be zero for most of the housing, infrastructure and government sectors. Thus, the question of whether there has been over-investment requires evidence both on the overall capital stock and its distribution across different sectors of the economy.

**Figure 1 Investment rate**

<!-- Start of picture text --> Current prices, % GDP<br>50<br>45<br>40<br>35<br>30<br>25<br>20<br>1981 1986 1991 1996 2001 2006 2011 2016<br>Source: NBS and author estimates<br><!-- End of picture text --> There have been many attempts to estimate the total capital stock of the economy, given the absence of official estimates. They have all been faced with similar problems. Even though investment data are available since 1952 on an internationally agreed basis, there is uncertainty about the initial value of the capital stock at that date, following a long period when the economy had been impacted by war and revolution. Moreover, in contrast to the aggregate data, the most detailed figures on investment continued to be gathered under the principles set out in the early 1950s rather than using the internationally agreed System of National Accounts (SNA). In addition, the gathering of economic data during the 1960s was sparse and sometimes was interrupted completely. Despite these problems, the Chinese authorities have made considerable efforts to produce standardized economic accounts back to 1950. However, for investment, the official macroeconomic data lack the granularity that is found in the accounts of many countries, forcing analysts to use a variety of supplementary data.

The absence of granularity for investment data is of particular concern given the high and rising level of investment. It is well-known that this rise has been driven by infrastructure and housing. Some also maintain that it has been driven by investment by state-owned enterprises, giving rise to excess capacity. This note attempts to improve the granularity of data for gross fixed capital formation in China by focusing on four sectors: housing, infrastructure, government and the business sector. By providing corresponding estimates of capital stock, a judgement can be made on the extent of overinvestment and the movement in the productivity of capital in the business sector of the economy Until recently, capital stock estimates for China have oscillated between providing estimates for the whole economy and for the non-residential sector. While earlier studies used the non-residential sector data (Chow, 1993), with the publication of aggregate official data for gross fixed capital formation, attention switched to estimates for the whole economy. Recently attention has switched back to disaggregated data. Bailliu et al. (2016) considered the non-residential capital stock. Others 2