For the past three decades, as China’s economy has developed into a global powerhouse, investment has grown reliably each year.
That is about to change. This year, China’s investments in assets like new factories, public infrastructure and housing are expected to fall for the first time since the late 1980s, ushering in a more conservative era for an economy that has reshaped the global order with years of robust growth.
The shift also signals that investing in China is no longer a surefire bet, even as Beijing continues to project confidence with economic growth estimates of 5 percent. But, as is often the case with the country’s economic data, the investment slump has raised more questions than answers.
A real estate crisis in China has dragged on for five years with no end in sight, sapping the strength from one of the economy’s pillars. Local governments, strapped for cash because of the property downturn, are not pouring money into infrastructure projects as they did during previous periods of economic malaise. Beijing’s crackdown on excessive competition among Chinese manufacturers has chilled the climate for capital investment to fuel expansion.
From January to October, a broad measure called fixed-asset investment has fallen 1.7 percent from the same period last year. The slide began in the second half of this year and accelerated with a sharp, double-digit decline in October. Analysts believe that investment dipped again in November, with that data scheduled to be released on Monday.
Investment in property, infrastructure and manufacturing — the three major components that make up the figure — are all declining at the same time. In the past, a downturn in one area was offset by spending in another segment. It is rare for all three pillars of investment to fall at once. The government typically has stepped in to manage downturns by bolstering real estate or spending lavishly on infrastructure. Beijing has been reluctant to act boldly this year to help.
“This is a historically significant change,” said Dan Wang, a director on Eurasia Group’s China team. “This is a different style of managing the economy in the short term.”
