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China Investment August 2022

China: Nominal fixed investment growth gains momentum in August

Nominal urban fixed asset investment increased 5.8% in year-to-date terms in August (July: +5.7% yoy), above market expectations. The reading was largely driven by faster growth in the tertiary sector. Secondary sector growth was unchanged, while primary sector growth dipped slightly.

Overall the investment landscape remained dominated by public investment in infrastructure and high-end manufacturing, as the government looks to offset the impact of frequent Covid-19 restrictions and develop greater autonomy in key technological domains such as semiconductors. In contrast, private investment growth was tepid at 2.3% in the year to August. On a monthly basis, nominal urban fixed asset investment grew 0.4% in seasonally-adjusted terms in August, which was above Julys 0.2% expansion.

On the reading, analysts at Nomura cautioned:

“We are concerned about the data quality of infrastructure FAI [fixed asset investment], as local government officials may be strongly incentivised to report high numbers to showcase their efforts in maintaining stable growth while fighting Covid. Manufacturing investment growth also improved to 10.6% y-o-y in August from 7.5% in July, but the quality of these data might suffer from a similar bias as infrastructure FAI. In coming months, manufacturing FAI growth may be weighed down by an inevitable slowdown in exports. Falling profits in the manufacturing sector could also dent FAI.”

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