As private sector beats retreat, SOEs ride to the rescue
China's fixed-asset investment growth slows for the first time in six months as privately owned businesses hold back
Capital investment by China’s private-sector sputtered into the second-quarter, beating a retreat in April after six straight months of advances. Still, there was no cause for major concerns as Beijing’s reserve army of state-owned enterprises stepped up to help fill the breach.
Private fixed-asset investment growth was 6.9% in the first four months of the year, a substantial pullback from 7.7% in the first quarter and which dragged total FAI to a lower than expected 8.9% from 9.2% in January-March. FAI by the state sector jumped 13.8%, up from 13.6% in the March release.
Total capex has reached 14.4 trillion yuan (US$2.1 trillion) so far this year, with the state-owned sector accounting for 36% and privately owned businesses taking up a 61% share.
The slight shift in balance coincided with a sizable scaling back of investment into the secondary sector of economy – comprised of manufacturing, mining and power companies – which softened by 0.7 of a percentage point to 3.5% versus a year ago.
A string of weak PMI, inflation and commodities import data for April have already signaled China’s industrial economy is taking a step back after an over-the-top bounce back during the first quarter.
Rapid infrastructure development (+23.3%) as well as a pickup in spending on education (+16.5%) and public facilities (+28.4%) – all key SOE strongholds – continue to keep the investment scene alive.
China’s western region showed the benefits of its position as gateway to the One Belt, One Road initiative as it recorded an 11% rise in FAI, from 9.4% in the first three months. All other regions saw capex slow or, in the case of the rusty old northeastern provinces, sink into a deeper contraction (minus-18.7% vs. minus-15.5%.)