Growth Rates of Investment in Fixed Assets

In the second half of 2016, the excess capacity in manufacturing, the overstocking in real estate, and financial risks implied by high corporate leverage, will continue to curtail investment growth. Especially, the private investment growth is expected to slow down.

Growth of the FAI (excluding rural households) is forecast to expand by 9.72% in 2016, 0.47 percentage points lower than that in 2015. Its rate is expected to fall to 6.38% in 2017, 3.34 percentage points lower than that in 2016. Owing to the frenzied housing market, the total FAI picked up by 10.38% in the first quarter of 2016, but dropped to 8.13% in the second quarter. In the second half of 2016, the FAI is expected to be promoted by active fiscal policy. Its growth is projected to rise 10.26 and 10.11% in the third and fourth quarter respectively. Owing to downturn in property and shrinking of private investment, its growth rate in 2017 is expected to fluctuate around low levels, which reaches the highest of the whole year, say, 7.04%, in the second quarter.

The social FAI growth rate in 2016 is projected to stay at 8.97%, an increase of

0.84 percentage points over 2015. It is expected to fall to 6.51% in 2017. In terms of Source offunds, as shown by Table 2.2, the growth rate of FAI from state budget is forecast to maintain at 20.1% in 2016, and then slightly fall to 19.67% in 2017. The growth rate of FAI from domestic loans is expected to rebound to 14.87% in 2016, and then decline to 8.4%. The growth rate of FAI form self-funding is projected to reach 1.6% in 2016, and then climb to 2.02% in 2017. The growth rate of FAI from others is expected to rise to 39.93%, and then fall to 19.1% in 2017. In summary, due to the slowdown of manufacturing and private investment growth, the structure of Source of funds is expected to change, where the FAI from self-funding would drop dramatically, and those from others and domestic loans would expand slightly (see Fig. 2.7).

Table 2.2 Projected growth of total FAI by Source of funds (%)

Source CQMM team calculations

Fig. 2.7 Projected growth rates of FAI.YoY. Note fii denotes real FAI growth rates. Source CQMM team calculations