China Investment February 2020


China: Investment posts largest drop on record in January-February

March 16, 2020

Nominal urban fixed asset investment plunged 24.5% in the first two months of the year compared to the same period in 2019, the first drop since the series began in 1996. The print contrasted the 5.4% growth year-to-date in December and was much sharper than the 2.0% drop expected by market analysts.

All sub-categories posted double-digit declines, with the secondary sector leading the pack.

On a month-on-month basis, investment in urban fixed assets fell a seasonally-adjusted 27.4% in February, sharply down from the 0.1% decrease in January.

The effects of the Covid-19 should reverberate through the coming months. Ting Lu, Lisheng Wang and Jing Wang, economists at Nomura, warn that:

“The actual shock could be much bigger than those deeply negative January-February numbers suggest, because the lockdowns started only from 23 January. […] Given the relatively slow resumption rate (around 70% at the moment), we expect negative growth for all activity data in March too, though these will likely be less negative. […] As COVID-19 has quickly grown to a global pandemic, hopes for a short-term V-shaped recovery have become increasingly dim. In addition to the tremendous shock on the supply side, China will be faced with slumping external demand in coming weeks.”

Analysts are still factoring in recent developments. That said, FocusEconomics Consensus Forecast participants expect nominal fixed-asset investment to grow 5.0% in 2020, which is down 0.2 percentage points from last month’s Consensus. In 2021, the panel also sees nominal fixed-asset investment growth at 5.0%..


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China Investment Chart

China Investment February 20 20 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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