Abstract: The paper tests the impact of the evolution of China‘ s investment and sourcing mechanism on its economic growth with a structural model in which aggregate output and investment are treated as endogenous variables. Our estimates using the methods of indirect least squares show a strong correlation between output and investment supporting the hypothesis that China‘s growth are almost fully attributable to its capital investment. However, the results also indicate that it is the institutional reforms regarding investment ownership diversification, market orientation and local government participation that supported China‘s lasting growth in the past two decades. Our empirical tests also produce a negative supported correlation between China‘s output growth and its level implicating that growth convergence is applicable to China.