China infrastructure investment slows further in August, Q3 outlook murky: ANZ Research

China’s infrastructure investment slowed further in August, dragging fixed asset investment (FAI) growth lower, indicating a still murky outlook in the third quarter of this year, according to the latest report from ANZ Research.

The further weakness in infrastructure investment was the major factor driving FAI growth lower in August. The former slowed to 4.2 percent y/y ytd in the month from 5.7 percent in July, marking a historical low. Its contribution to FAI growth also shrank by 0.3ppt from July.

The slow approval process for infrastructure projects could be partly responsible, although the government has become more clearly supportive of investment since late July. IP and retail sales moderately rebounded in August, which can hopefully lift growth at the margin.

The rebound in developers’ source of funding may provide upside surprise to property investment. Although growth of property investment edged lower to 10.1 percent y/y ytd in August from 10.2 percent in July, developers’ source of funding accelerated for the second consecutive month, rising 6.9 percent y/y ytd in August (vs July: 6.4), lifted by higher growth (August: 11.2 ytd y/y vs 10.4 percent prior) in self-raised funding. The growth of advanced payment also stayed solid, rising 15.1 percent y/y ytd.

"Following the rebound in China’s credit impulse in August, we expect the policy impact to gradually show up in the coming quarters, if not months," the report commented.