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Beijing signals concern over falling investment at party summit

JOE LEAHY — BEIJING

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China’s leaders have for the first time explicitly committed to reversing a fall in investment, one of main drivers of growth in the world’s second-largest economy.

The pledge, made at the end of a twoday economic policy conference of senior Communist party officials, was the first official indication that a sharp slowdown in fixed-asset investment in recent months is worrying leaders.

“We will promote the stabilisation and recovery of investment,” said a report of the meeting, which was chaired by President Xi Jinping. This would be achieved by increasing central government investment, implementing key projects and stimulating private investment, said the report published by state news agency Xinhua.

Government data released last month showed that China’s fixed-asset investment fell 1.7 per cent in the year to October, following a 0.5 per cent decline recorded for the year to September.

The decline in reported investment in China suggested Xi’s campaign against excessive industrial competition, a problem Beijing calls neijuan or “involution”, might be affecting the economy.

The two-day party economic work conference, which ended yesterday and sets out priorities for the coming year, said China would thoroughly tackle involution, but the Xinhua report did not say how this would be done without undermining investment.

The meeting also agreed to revitalise China’s ailing property sector and invest in high-tech industries, Xinhua said.

China’s economy has for decades relied heavily for growth on investment, particularly in infrastructure and property, but also in recent years in high-end manufacturing of products from electric vehicles to semiconductors.

China does not release standalone monthly fixed-asset investment (FAI) comparisons, but the pace of the yearto-date decline revealed last month implied a sudden year-on-year drop of 11 per cent in October.

Goldman Sachs analysts have estimated that about 60 per cent of the fall in FAI was due to statistical corrections of previously over-reported data.

They said that a still significant 40 per cent of the decline could be attributed to Beijing’s “anti-involution” policies — which could be deterring local authorities from allowing new investment in industry — as well as to China’s property crisis and slowing infrastructurerelated fiscal spending. Nomura chief China economist Ting Lu said that the conference’s call to promote a recovery in investment “decisively demonstrates that the top leadership is well aware of the recent slump in FAI”.

Lu said Beijing would probably direct more of the proceeds of local government bond issuance and other financing tools towards infrastructure projects in order to boost investment.

The readout from the meeting also showed Beijing was aware of a slump in demand in the second half of this year but was not yet prepared to launch a large economic stimulus, he said.

“The memo indicates Beijing will ramp up policy support in coming months but it is yet to formulate and execute a decisive stimulus programme, which would address the root causes and could effectively stabilise growth,” Lu said.

Beijing sig­nals con­cern over fall­ing invest­ment at party sum­mit

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