By Lynn Noah | May 20, 2016 10:24 am EDT
China’s fixed-asset investment fell
According to the NBS (National Bureau of Statistics), China’s urban fixed-asset investment grew by 10.5% YoY (year-over-year) to 13,259.2 billion yuan in the first four months of 2016. This was lower than the growth of 10.7% from January to March 2016. In April, the investment in urban fixed assets increased 0.72% on a month-over-month basis. The decline in investments in the manufacturing and infrastructure sectors led to lower growth in fixed-asset investment in April.
Fixed-asset investment is considered a key driver of economic growth, and data indicate that the continued decline in fixed-asset investment is due to a slowdown in demand. As a result, investments in factories, machinery, property, and other fixed assets have declined considerably YoY.
According to a statement from the NBS, “Due to weak market demand, companies’ reluctance to invest and market entrance barriers, China’s private fixed-asset investment has been decelerating since the start of this year. This will hurt the steady growth of investment and it deserves a lot of attention.”
China’s plan to prop up fixed-asset investment
According to the China’s Investment 2016 report, issued by the JIC Institute of Investment Research, major investment opportunities this year lie in three major areas: independent innovation, industry upgrades, and changes in consumption.
Recently launched national strategic plans, such as Made in China 2025 and Internet Plus, may propel the economy forward by fueling the development of industries that add value, are knowledge- and technology-intensive, and are green and low-carbon.
Even China’s central government has pledged to increase investments in infrastructure projects and public services. According to Zhao Chenxin, spokesman of the National Development and Reform Commission, a total of 15 new fixed-asset investment projects worth 34.1 billion yuan ($5.3 billion) were approved in March 2016.
The government is particularly focusing on infrastructure development in areas such as water conservation and environmental management. However, investment in the manufacturing and real estate sectors is slow due to high inventory and the increased cost of development.
You can invest in Chinese stocks through mutual funds like the Fidelity Advisor China Region Fund Class A (FHKAX) and the Guinness Atkinson China and Hong Kong Fund (ICHKX) and through ETFs such as the iShares China Large-Cap ETF (FXI) and the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR). These funds invest in companies such as Alibaba Group Holding (BABA), Baidu (BIDU), JD.com (JD), NetEase (NTES), and 58.com (WUBA).
In the next article in this series, we’ll look at China’s retail sales data.