China Investment June 2016


China: Downward trend in investment growth remains intact in June

July 15, 2016

In the first six months of the year, urban fixed-asset investment (FAI), excluding rural households, expanded 9.0% over the same period last year, which represented the weakest growth on record. The reading came in below the 9.6% increase registered in the January-June period and undershot the 9.4% rise the markets had expected.

The slower pace of growth observed in June reflected a slowdown in the secondary and the tertiary sectors. Conversely, growth in the primary sector accelerated slightly in the same period. The closely-watched real estate development indicator decelerated to a four-month low in June, suggesting that the acceleration in the property sector experienced in the first months of the year has likely come to an end.

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

A month-on-month comparison shows that investment in urban fixed assets rose a seasonally-adjusted 0.45% in June, which was slightly below the 0.49% increase tallied in May.

FocusEconomics Consensus Forecast participants expect fixed-asset investment to grow 9.8% in 2016, which is down 0.2 percentage points from last month’s Consensus. In 2017, the panel sees fixed-asset investment growth at 9.4%.

Author: Ricard Torné, Lead Economist

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China Investment Chart

China Investment June 2016 1

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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