China Investment May 2016


Investment growth hits an all-time low in May

In the first five months of the year, urban fixed-asset investment (FAI), excluding rural households, expanded 9.6% over the same period last year, which represented the weakest growth on record. The reading came in below the 10.5% increase registered in the January-April period and undershot the 10.5% rise the markets had expected.

The slower pace of growth observed in May reflected a deceleration in all of the main sub-categories of the index. Growth in the secondary sector slowed to an all-time low, while that of the primary sector receded to nearly a five-year low. The moderation observed in the tertiary sector, however, was softer. The closely-watched real estate development indicator decelerated in the first five months of the year, following April’s 13-month high.

Analyzing May’s data from the ownership side, investment growth among state-owned and state-holding units remained robust in May, while that of private companies slowed to an all-time low. This situation casts doubts about the economic transition in China, as the public sector remains as the main source of investment growth at the expense of the private sector.

A month-on-month comparison shows that investment in urban fixed assets rose a seasonally-adjusted 0.49% in May, which was down from the 0.53% increase tallied in April.

FocusEconomics Consensus Forecast participants expect fixed-asset investment to grow 10.4% in 2016, which is unchanged from last month’s Consensus. In 2017, the panel sees fixed-asset investment growth at 9.5%.

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China Investment Chart

China Investment May 2016

Note: Month-on-month changes of seasonally adjusted urban fixed-asset investment index and annual growth rate (year-to-date) in %.
Source: National Bureau of Statistics of China (NBS).

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