Abstract: This paper makes an empirical analysis how credit expansion and R&D investment contribute to China economic growth from quantity and quality dimensions by using GMM for dynamic panel data method based on the inter-provincial panel data from 1998 to 2012. The result shows that: nationwide, both of credit expansion and R&D investment contribute to economic aggregate growth positively, while the effect of R&D investment is stronger than that of credit expansion. R&D investment promotes the improvement of economic quality, but credit expansion is opposite. Besides, the effects of credit expansion and R&D investment have regional disparity; it is the strongest in the east while it is inferior in the central and western regions. Promote China economy development under “new normal” background, not only need the capital factor produced by credit expansion, even need the innovative inspiration created by R&D investment more.

Key words: credit expansion, R&D investment, economic growth, system GMM estimation