1/7
China's fixed-asset investment declined 1.7% year on year in the first 10 months of 2025, more than twice the expected rate of decline, and well above the 0.5% decline during the first nine months of the year.
english.news.cn/20251114/2bcf2…
China's fixed-asset investment declined 1.7% year on year in the first 10 months of 2025, more than twice the expected rate of decline, and well above the 0.5% decline during the first nine months of the year.
english.news.cn/20251114/2bcf2…
2/7
Excluding a 14.7% decline in the property sector, investment rose by 1.7% during the first ten months of 2025, led by a 2.7% rise in manufacturing investment.
As I see it, the weakness in investment growth suggests that the fight against "involution" is working so far.
Excluding a 14.7% decline in the property sector, investment rose by 1.7% during the first ten months of 2025, led by a 2.7% rise in manufacturing investment.
As I see it, the weakness in investment growth suggests that the fight against "involution" is working so far.
3/7
It suggests that the post-2022 surge in investment in preferred manufacturing sectors, such as EVs, batteries and solar panels, is being reversed.
But this leaves us with the same questions that we were left with following the post-2022 collapse in property investment.
It suggests that the post-2022 surge in investment in preferred manufacturing sectors, such as EVs, batteries and solar panels, is being reversed.
But this leaves us with the same questions that we were left with following the post-2022 collapse in property investment.
4/7
Given the importance of investment growth in meeting the GDP growth target, will China be forced to raise investment growth, no matter how difficult it is to find good investment projects, or will it lower the GDP growth target?
Given the importance of investment growth in meeting the GDP growth target, will China be forced to raise investment growth, no matter how difficult it is to find good investment projects, or will it lower the GDP growth target?
5/7
The other components of GDP growth are consumption growth which, for all its efforts, Beijing can't seem to get to speed up, and net exports, which have contributed mightily to GDP growth in 2024 and 2025, but how much longer will the rest of the world continue to accept it?
The other components of GDP growth are consumption growth which, for all its efforts, Beijing can't seem to get to speed up, and net exports, which have contributed mightily to GDP growth in 2024 and 2025, but how much longer will the rest of the world continue to accept it?
6/7
This means that if China is to set a 5% GDP growth target in 2026, it will have no choice but to goose investment growth substantially. Given how difficult it is to identify productive investment opportunities in China, it also means growth in the debt burden will accelerate.
This means that if China is to set a 5% GDP growth target in 2026, it will have no choice but to goose investment growth substantially. Given how difficult it is to identify productive investment opportunities in China, it also means growth in the debt burden will accelerate.
7/7
My guess is that Beijing will lower the GDP growth target next year, perhaps to 4.5%, although the lower the target, the better. Even so, except in the unlikely event that it will find a way to get consumption to surge, it will still need to boost investment growth.
My guess is that Beijing will lower the GDP growth target next year, perhaps to 4.5%, although the lower the target, the better. Even so, except in the unlikely event that it will find a way to get consumption to surge, it will still need to boost investment growth.
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