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China’s Fixed-Asset Investments Ease in June: A Matter of Concern

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China’s fixed asset investments miss expectations

According to the National Bureau of Statistics, China’s urban fixed-asset investments grew by 9.0% year-over-year (or YoY) in the first six months of 2016, compared with a 9.6% growth from January to May 2016. The ongoing decline in investments in the manufacturing and infrastructure sectors resulted in lower fixed asset investments in June.

Meanwhile, private investments in fixed assets also continued to slow. Investments by private companies slowed to 2.8% YoY in the first six months of 2016, compared with a 3.9% growth in January to May. Furthermore, property investments rose by 6.1% YoY in the first half of 2016, compared with a 7.0% growth in January to May. Due to declining private fixed asset investments, it is expected that the government may have to pump in more money to achieve the target growth rate of 6.5%–7%.

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China approved 96 fixed asset investment projects

As reported by China Daily USA, NDRC (National Development and Reform Commission) spokesperson Zhao Chenxin announced that “China’s top economic planner approved 96 fixed-asset investment projects with total investment reaching 461.6 billion yuan ($71 billion) in the first six months of 2016,” and that in June, the NDRC “approved 23 projects involving 151.1 billion yuan, which cover transportation, high technology and water conservation.”

Investment impact

The persistent decline in private fixed asset investments is unhealthy for China’s economic growth, as the government will have to keep pumping money into the system, which will increase the debt burden. Companies such as Taiwan Semiconductor (TSM), China Petroleum & Chemical (SNP), and CNOOC (CEO) are impacted by a decline in fixed asset investments. Funds such as the iShares China Large-Cap ETF (FXI) and the iShares MSCI Hong Kong ETF (EWH), which invest in the aforementioned companies, are also impacted. In the next article, we’ll look at China’s retail sales data.

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