As China’s investment growth continues to slow down, the official media Economic Daily commented that China’s economy cannot and will not follow the old path of relying on investment to stimulate growth. Instead, it must focus investment on key areas and weak links. Adhere to precise and effective investment guidance.
The “Economic Daily” sponsored by the State Council of China published a commentary on Saturday (November 18) titled “Stabilizing investment and not following the old path of “strong stimulus””. The article pointed out that China’s investment growth has continued to slow down this year, and the market has two concerns about this. On the one hand, if investment performance continues to be weak, it may lead to an imbalance in economic growth momentum. On the other hand, the marginal benefit of investment is gradually weakening. If the investment expansion measures continue to be increased, will it return to the old path of “strong stimulus” in investment and even lead to a new round of overcapacity?
The latest data released by the National Bureau of Statistics of China last week showed that China’s fixed asset investment increased by 2.9% year-on-year in the first 10 months of this year, a growth rate that was 0.2 percentage points lower than the first three quarters. Among the three main areas of investment, only manufacturing investment maintained a growth rate of 6.2% in the first nine months until October. Infrastructure investment increased by 5.9% year-on-year in the first 10 months, 0.3 percentage points lower than the first three quarters; real estate development investment fell by 9.3%, a decline that was 0.2 percentage points larger than the first three quarters, becoming the main factor dragging down investment growth.
While domestic investment has slowed, foreign investment into China has also continued to decrease. According to data released by the Ministry of Commerce of China on Friday (17th), the actual amount of foreign capital used in the first 10 months of this year was 987.01 billion yuan (RMB, approximately 184 billion Singapore dollars), a year-on-year decrease of 9.4%, which was the fifth consecutive month of decline, and the decline was expand further.
The article points out that in the long run, as China’s economy shifts from high-speed growth to high-quality development, investment growth will no longer be able to “surge”; however, the slowdown in growth does not mean that potential has been fully released, and stabilizing investment is both necessary and conditional. .
The article emphasized: “China’s economy cannot and will not follow the old path of relying on investment to stimulate growth. However, this does not mean that there is no need to invest, but that blind investment and low-level duplication of construction should be avoided.” Stabilizing investment is not simply to boost investment growth. Instead, we will focus investment on key areas and weak links, adhere to a precise and effective investment orientation, accelerate the improvement of weak areas, and support the construction of new infrastructure, new urbanization, transportation, water conservancy and other major projects.
Regarding private investment, which accounts for the bulk of overall investment, the article specifically points out that private investment is an important force in promoting economic development, stabilizing overall investment, and expanding social employment. It is necessary to further deepen the reform of the investment and financing system, better leverage the driving and amplifying effect of government investment on social investment, implement policies and measures to promote the development and growth of the private economy, and further mobilize the enthusiasm of private investment.
Fu Fangjian, an associate professor at Singapore Management University’s Lee Kong Chian School of Business, analyzed in an interview with Lianhe Zaobao that although policies to stabilize the property market have been introduced from time to time recently, this official media comment shows that the government will no longer vigorously support the real estate industry with overall oversupply and overcapacity in the future. Instead, it will look for new growth points.
Fu Fangjian also noticed that Chinese President Xi Jinping’s speech to the American business community during his trip to the United States last week to attend the Asia-Pacific Economic Cooperation (APEC) Summit sent a clear signal to encourage foreign companies to invest in China. “Foreign investment in China may be invested in high-growth fields such as electric vehicles and new energy, which is also in line with official expectations for future investment.”
Bloomberg on Sunday (19th) quoted Jia Genliang, a professor at the School of Economics at Renmin University of China, as saying that China should increase the average deficit rate to above 5% in the next 10 years to more effectively stimulate domestic demand. In addition, the government should also invest in the digital economy, green energy and core technologies, allowing these industries to replace real estate and traditional infrastructure as new growth engines.
Jia Genliang also said, “We also need to make strategic investments in the next industrial revolution in fields such as nanotechnology, new energy and bioengineering.”