Industrialisation of the Chinese economy began in the early 1950’s, just after the
foundation of the People’s Republic of China in 1949, by Mao Zedong. Besides, physical
capital accumulation speeded up in the reform period due to the high level of both investment
and domestic savings. Investment in Chinese industry indicates a significantly changing
pattern between 1952 and 2005. Under the centrally planned economy, investment was fully
funded by government and particularly concentrated in heavy industries. In contrast, since the
introduction of reform policies, a growing part of investment has been financed by household
savings and oriented towards labour-intensive manufacturing industries. It is obvious from
Figure 1 that the capital per worker ratio exhibited an increasing trend in the course of the
reform period. Moreover, Figure 1 also highlights that the capital intensity shifted strikingly
starting from the early 1990’s.