MNI: China's Investment Likely To Decline In 2026 - Advisors

Source: MRI Markets

Update: Sep 14th, 2026  11:38 AM

China's fixed-asset investment will likely continue to decline this year, with weakness persisting over the next one-two years as the economy shifts towards new growth drivers, advisors told MNI, adding infrastructure investment may turn positive as early as Q4 amid a policy push.

Government-led infrastructure construction will likely rebound on faster disbursement of funds, helping to partly cushion the property investment slump, as broader fixed-asset investment falls an expected 4-5% year-on-year this year, narrowing from the 6.7% drop in the first seven months, said Gong Liutang, director of the Institute for Advanced Study at Wuhan University.

Lu Donghong, associate research fellow at the Chongyang Institute for Financial Studies at Renmin University, sees a wider range of 4-6% decline over 2026, adding that Q3 would mark the trough before a Q4 recovery driven by physical workloads generated by accelerated sales of local government special bonds in Q3 and the disbursement of CNY800 billion in policy-based financial instruments starting in September.

Wen Bin, chief economist at China Minsheng Bank, expects fixed-asset investment to fall slightly further by 7% in the Jan-Aug period. The National Bureau of Statistics is due to release the latest data on Tuesday.

INFRASTRUCTURE SPEND

Lu noted it takes three-six months to generate physical workloads after funds are disbursed, but a lack of projects meeting the criteria and local authorities' caution over projects amid debt repayment pressure remain medium-term constraints.

Gong highlighted the declining effectiveness of fiscal and monetary policies, saying they are now only about two-thirds as effective as they used to be. Last year's CNY500 billion in policy-based financial instruments, intended to replenish the capital of major projects, leveraged 14 times the initial investment to generate about CNY7 trillion in total investment.

This year's CNY800 billion may only be able to leverage 10 times, he said, calling for renewed measures to activate private investment, which fell 9.4% y/y in the first seven months, as government debt-financed investment has its limits. (See MNI: Advisors See New Bond Quotas To Bolster China Growth: https://www.mnimarkets.com/articles/mni-advisors-see-new-bond-quotas-to-bolster -china-growth-1785998704977)

Lu argued this year's CNY800 billion was mainly invested in the so-called "six networks", including computing power and communications infrastructure, which have long return cycles and uncertain operating cash flows. This makes it difficult to leverage tenfold or more in matching loans given banks' low risk appetite.

STRUCTURAL GROWTH

The economy, however, remains on track to meet its annual growth target of 4.5-5%, as authorities tend to tolerate slower growth against the backdrop of economic transition, Gong said. "Given the 4.7% growth recorded in H1, only about 4.3% more growth on average in H2 is needed to reach the lower end of the target range," he said.

Despite the official emphasis on structural upgrades, including 5% year-on-year growth in high-tech investment during the January-July period, Lu warned that its scale and impact on upstream and downstream industries are not comparable with traditional infrastructure. "Structural upgrades can provide a buffer for about one-two years, during which the total volume of investment should stabilise to feed through and sustain the upgrade," Lu said, adding that a sustained decline in investment volumes would hurt corporate profits and household incomes and further weaken demand for new industries.

Gong estimates investment growth will likely face downward pressure in the first half of the 15th Five-Year Plan period (2026-2030), as the property market may gradually reach a new equilibrium around 2028, provided housing inventories and local government implicit debt are addressed and a new housing development model established. He remains optimistic that the economy will make substantial progress in transitioning from old to new growth drivers over the next five years. By 2030, the value-added of the so-called "Three New" economy is projected to rise from 18.01% of GDP in 2024 to over 20%, with per capita GDP likely to increase further from 2025's level of about USD14,000.

"It is a crucial period for achieving the country's 2035 goal of reaching its per capita GDP level of a moderately developed nation," Gong said. "It will become increasingly difficult to reach the goal if the transition proves significantly slower than anticipated."