China Investment July 2016


China: Downward trend in investment persists in July

August 11, 2016

In the first seven months of the year, urban fixed-asset investment (FAI), excluding rural households, expanded 8.1% over the same period last year, which represented the weakest growth on record. The reading came in below the 9.0% increase registered in the January-June period and undershot the 8.8% rise the markets had expected. A month-on-month comparison shows that investment in urban fixed assets rose a seasonally-adjusted 0.31% in July, which was below the 0.40% increase tallied in June.

The slower pace of growth observed in July reflected a broad-based deceleration: all three sectors (the primary, secondary and tertiary) registered slower growth in the seven months up to July. The closely-watched real estate development indicator also decelerated and growth dropped to a five-month low in July, suggesting that the acceleration experienced by the property sector in the first months of the year has come to an end.

Analyzing July’s data from the ownership side, investment growth among state-owned and state-holding units remained virtually steady in July, while that of private companies slowed over the previous month. This signals that the public sector continues to be the main source of investment growth at the expense of the private sector, thereby casting doubts about the quality of China’s economic transition.

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 July 2016 0

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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