Situation to remain in 2016 due to overcapacity: analysts
Growth in China's fixed-assets investment dropped to a 15-year low of 10 percent in 2015, down from a rate of 15.7 percent in 2014, data from the National Bureau of Statistics (NBS) showed Tuesday.
The country's fixed-assets investment, covering investment in infrastructure and the manufacturing sector, totaled 55.16 trillion yuan ($8.38 trillion) in 2015, the data showed.
Investment in the manufacturing sector was up 8.1 percent year-on-year in 2015, down 5.4 percentage points from the rise in 2014. And investment in infrastructure surged 17.2 percent in 2015, but was still well below the rate of 21.5 percent in 2014, according to the NBS data.
Also, despite a recent rebound in housing prices and transactions, growth in property investment is still cooling, having slowed to 1 percent year-on-year in 2015, down from a rate of 10.5 percent in 2014, the NBS said.
"Subdued growth in investment has been a major factor weighing on the overall economy," Liu Xuezhi, an analyst at Bank of Communications, told the Global Times Tuesday.
The NBS announced Tuesday that China's GDP growth dropped to a 25-year low of 6.9 percent in 2015, down from the rate of 7.3 percent in 2014.
Overcapacity issue
Many traditional pillar industries for the Chinese economy are struggling with a supply glut at present, which has been the major reason for the lower growth in investment, analysts said.
For instance, despite a strong recovery for housing prices in first-tier cities like Beijing and Shanghai, most small cities in the country still have huge inventories of unsold property, resulting in the slower growth in investment.
Sluggish property investment has also resulted in shrinking demand for commodities like steel and cement. The NBS data showed that China's crude steel production in 2015 dipped 2.3 percent to around 804 million tons, the first drop in almost 20 years.
Electricity production also dropped for the first time in more than four decades. Total power production dropped 0.2 percent year-on-year in 2015, given smaller demand for power amid the economic slowdown, according to the NBS.
"Persistent overcapacity pressure will continue to weigh on fixed-assets investment in 2016," Zhuang Jian, a senior economist with the Asian Development Bank, told the Global Times Tuesday.
Investment still crucial
The Chinese economy is still facing substantial downward pressure in 2016, with analysts predicting that GDP growth may dip further to around 6.5 percent this year, as two of the three main growth engines, investment and exports, have lost steam.
Consumption is now the major driving force, experts said. Total retail sales topped 30 trillion yuan in 2015, up 10.7 percent from 2014, according to the NBS. Consumption contributed 66.4 percent to China's GDP growth in 2015, according to Liu from Bank of Communications.
However, even though China is shifting toward greater reliance on consumption, investment is still crucial for economic growth, analysts said.
"Stabilizing infrastructure investment will be a key task for the government in 2016," Liu said, adding that although reducing capacity is painful, it is necessary for the restructuring effort and will benefit the economy in the long run.
As the economy has continued to slow despite monetary easing since late 2014, analysts said that the government will step up its fiscal policy measures in 2016 to support investment.
"The fiscal deficit is likely to be lifted to 2.5 percent of GDP or higher, up from 2.3 percent in 2015," ANZ Research wrote in a report that was sent to the Global Times on Tuesday.
"Infrastructure still needs huge investment, such as transportation and other areas that could benefit people's daily lives," Zhuang said.
