Commentary Directory

Chinese fixed asset investment in the year-to-date period through August was up 3.2% YoY, down from 3.4% YoY in July and from 5.8% YoY in the same year-to-date period in August 2022. Once again, we continue to see private sector investment struggle. At this point, private investment is down -0.7% YoY despite the fact that there should be some sort of post-COVID restriction boom. Propping up investment is public investment that has improved 7.4% YoY in the same period. Manufacturing investment beats out the investment in commodity and services sectors, up 8.8% YoY. Investment has boomed in electrical machinery and equipment manufacturing (up 38.6% YoY) along with booms in electricity, heat, gas, and water production (26.5% YoY), auto manufacturing (19.1% YoY), and transportation services (11.3% YoY). Other categories of investment have seen slight to no growth in investment.

Investment data demonstrates how the Chinese government wants to guide forward China’s economy in the post-COVID period since the growth in fixed asset investment is entirely a result of public efforts to provide liquidity. Beijing remains committed to competing with the US in high tech manufacturing and green energy technology. The investment in auto manufacturing is almost certainly all funneled towards electric cars as indicated by the sharp 13.8% YoY increase in EVs. Electrical machinery and equipment investment has gone towards growing computer chip manufacturing as evidenced by the 21.1% YoY increase in integrated circuits. Despite the strong intervention from the government, the struggles of the private sector are more impactful in the growth discuss. And at this point, weak liquidity will continue to hamper China’s ability to post strong GDP results in 2023.