As investment slumps, China shifts

Investment in manufacturing, infrastructure and property is expected to fall this year, a remarkable turn for an economy whose growth reshaped the world, write Daisuke Wakabayashi from Seoul and Amy Chang Chien from Taipei

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An auto factory in Ningbo, China. The Chinese government has discouraged manufacturers of electric vehicles from engaging in ruthless competition.

For the past three decades, as China’s economy has developed into a global powerhouse, investment has grown reliably each year.

That is about to change. This year, China's investments in assets like new factories, public infrastructure and housing are expected to fall for the first time since the late 1980s, ushering in a more conservative era for an economy that has reshaped the global order with years of robust growth.

The shift also signals that investing in China is no longer a surefire bet, even as Beijing continues to project confidence with economic growth estimates of 5%. But, as is often the case with the country’s economic data, the investment slump has raised more questions than answers.

A real estate crisis in China has dragged on for five years with no end in sight, sapping the strength from one of the economy's pillars. Local governments, strapped for cash because of the property downturn, are not pouring money into infrastructure projects as they did during previous periods of economic malaise. Beijing's crackdown on excessive competition among Chinese manufacturers has chilled the climate for capital investment to fuel expansion.

From January to October, a broad measure called fixed-asset investment has fallen 1.7% from the same period last year. The slide began in the second half of this year and accelerated with a sharp, double-digit decline in October. Analysts believe that investment dipped again in November, with that data scheduled to be released yesterday.