China’s economy continues to decline. In the first half of this year, national fixed asset investment decreased by 5.7% year-on-year, significantly lower than market expectations and the decline widened.
On July 15, data released by China’s National Bureau of Statistics showed that from January to June, the total fixed asset investment nationwide (excluding rural households) was 22.637 trillion yuan, a decrease of 5.7% year-on-year, further widening from the 4.1% decline in the first five months. Deducting real estate development investment, the cumulative year-on-year decrease in investment expanded by 1.5% to 2.7%.
Looking at the different industries, investment in the primary industry was 460 billion yuan, an increase of 0.9% year-on-year; investment in the secondary industry was 8.312 trillion yuan, a decrease of 1.1%; and investment in the tertiary industry was 13.865 trillion yuan, down by 8.4%.
The performance of investment in the first half of the year was significantly lower than market expectations. A recent survey by Caixin Media of 11 domestic and foreign institutions showed that the average forecast of economists for the cumulative growth rate of investment from January to June was -4.7%, with a predicted range of -5.4% to -3.6%. In other words, the actual investment performance was below the lower limit of the forecast range.
Caixin reported that after turning negative year-on-year in the first five months, the cumulative year-on-year decline in manufacturing investment from January to June expanded by 0.8 percentage points to 1.2%; infrastructure investment shifted from a 0.6% increase to a 1.1% decrease, marking the first negative turn of the year with a 1.7 percentage point decline; and the decline in real estate development investment widened by 1.8 percentage points to 18.0%.
There is a noticeable differentiation in industry within manufacturing investment. In the period of January to June, investment in the automobile manufacturing industry saw a 1.5 percentage point increase in decline to 4.2%, while investment in industries like general equipment manufacturing, special equipment manufacturing, pharmaceutical manufacturing, and metal products saw declines in expansion or deceleration in growth.
As for infrastructure investment, the cumulative growth rate in transportation, warehousing, and postal services slowed by 4.5 percentage points to 2.6%, with road transportation investment’s decline widening to 7.7%; water conservancy, environmental protection, and public facilities management investments also expanded their declines to 6.5%.
Real estate investment continues to be sluggish, dragging down overall investment in the long term. According to Caixin’s calculations, real estate investment month-on-month in June dropped by 24.4% year-on-year, the same as in May. Looking at leading indicators for that month, sales of commercial housing continued to weaken, with sales area and sales volume decreasing by 14.3% and 13.9% respectively; the decline in newly started construction area widened by 1.4 percentage points to 26.0%.
Furthermore, the year-on-year decline in investment in January to June widened by 1.4 percentage points to 8.5%, continually underperforming at the macro level; excluding real estate development, the decline in monthly investment was 4.9%, with the decline also at 1.4 percentage points wider. State-owned investment growth turned negative from January to May, with the first half of the year seeing a 2.3% decline, which was an increase of 1.9 percentage points. However, it still exceeded the growth rate of monthly investment.
Earlier, Bloomberg’s Chief Economist for Asia, Chang Shuang, stated that China’s economy is facing deep structural problems, from weakening growth drivers to the prolonged slump in the real estate market, and to the deeply entrenched monetary tightening, which is different from the severe but temporary impact of the previous five-year planning period due to the epidemic. With the United States intensifying trade and technology restrictions, the external environment has worsened significantly, and the contribution of exports to the economy will weaken. The transformation of China’s economy is no longer a long-term goal but a necessity.