China’s fixed asset investment growth has been on a downward trend this year, with a rare contraction in September. Both private and foreign investments, which are key indicators of investor confidence in China’s economic outlook, have been particularly weak. Several economic institutions predict that in the fourth quarter of this year and in 2026, the Chinese economy will further slow down.
According to data released by China’s National Bureau of Statistics on Monday, the fixed asset investment contracted by 0.5% in the first three quarters of this year, while analysts surveyed by Reuters had previously expected a growth of 0.1%. The last time China experienced a contraction in fixed asset investment was during the 2020 pandemic, based on data from Wind Information since 1992.
Zhang Zhiwei, CEO and chief economist at Bank Yin Asset Management Co., expressed concern over the decline in fixed asset investment in a report. He warned that the economy faces downward pressure on growth in the fourth quarter.
In contrast to the pandemic-driven contraction in fixed asset investment in 2020, this year’s contraction is heavily influenced by a decrease in real estate investment. Data from the monthly statistics released by the National Bureau of Statistics of China shows that real estate investment has declined for 36 consecutive months, with a 13.9% year-on-year decrease from January to September this year and a 12.9% decrease from January to August.
Bruce Pang, an adjunct associate professor at the Chinese University of Hong Kong’s Business School, cited by CNBC, pointed out that the prolonged weakness in real estate investment may indicate a structural adjustment, suggesting that investments may never return to previous levels.
Since March this year, China’s fixed asset investment growth has declined from 4.2% to -0.5% in September, reflecting a continued lack of investor confidence in the economic outlook. Private investment, which is a key gauge of investor sentiment, has also remained subdued. From June to September, private investment saw consecutive year-on-year declines of 0.6%, 1.5%, 2.3%, and 3.1%, with only marginal growth in March and April (cumulative data from the beginning of the year to the respective months).
The situation is even worse for foreign investment. Since February 2024, the year-on-year growth of fixed asset investment by foreign-invested enterprises has been declining continuously. From February to September this year (data for January not available), foreign investment witnessed year-on-year declines of 10.0%, 9.5%, 11.4%, 13.4%, 13.6%, 14.7%, 15.4%, and 12.6%.
Eswar Prasad, an economics professor at Cornell University, noted in an email that weak investment, especially in the private sector, reflects a lack of confidence in the economic growth prospects and government policies supporting growth.
Liu Ting, chief China economist at Nomura Securities, stated in a recent report that the traditional economy, particularly the real estate sector, will continue to be the backbone of the economy. Beijing must address the rot in the real estate industry between 2026 and 2030 for multiple reasons. Overinvestment in new industries like electric vehicles has already backfired.
The International Monetary Fund (IMF) has previously warned that the Chinese economic outlook remains weak, with ongoing contraction in real estate investment and the economy teetering on the edge of a debt-deflation cycle.
Economists generally agree that the massive stimulus package implemented by the Chinese government during the 2008 global financial crisis led to significant debt accumulation, resulting in overcapacity. Today, China’s economic situation is starkly different from 2008, with local governments, companies, and residents burdened by debt. The previous model of boosting the economy through massive investments has not only caused overcapacity but has also exacerbated industry competition and monetary tightening, further accelerating the debt crisis.
In the third quarter of 2025, China’s economy grew by 4.8% year-on-year, lower than the 5.2% growth in the second quarter. Many economic institutions predict that in the fourth quarter of this year and in 2026, the Chinese economy will further slow down.
Economists surveyed by Reuters anticipate that the Chinese economic growth rate will slow to around 4.3% in the fourth quarter and beyond. The IMF projects that China’s economic growth rate will slow to 4.2% next year, aligning with the median forecast by economists surveyed by Bloomberg.
Apart from the contraction in investments, consumption has also declined in September, suggesting a weakening impact of policies driving the economy. Social retail sales in September amounted to 4.1971 trillion yuan, growing by 3.0% year-on-year, lower than August’s 3.4%. While appliance sales saw a slight increase of 3.3%, the growth for the first three quarters of this year was 25.3%, indicating a waning support from consumption subsidy programs.
Exports have been the main driver of China’s economy in the first three quarters, but if the U.S. and China fail to reach a trade agreement, President Trump has threatened to impose an additional 100% tariff on Chinese goods on November 1, potentially raising tariffs on China to 155%. The sustainability of exports as a pillar of China’s economy is uncertain.
Chang Shu, chief economist for Bloomberg Asia, analyzed that China’s economy is facing deep-rooted structural issues, ranging from weakened growth momentum to continued stagnation in the real estate market and entrenched monetary tightening. Unlike the temporary impact of the pandemic during the previous five-year plan period, the external environment has deteriorated significantly with increased U.S. trade and tech restrictions, weakening the contribution of exports to the economy. The transformation of the Chinese economy is no longer a long-term goal but an imperative.