China’s FAI expansion over first 2 months of 2019 reflects the effects of supportive policy measures, says ANZ Research

The expansion in China’s fixed asset investment (FAI) over the first two months of 2019 reflects the effects of supportive policy measures implemented in late 2018, according to the latest report from ANZ Research.

The headline FAI figure rose to 6.1 percent y/y in the January-February period (December: 5.9 percent), with infrastructure investment rising 4.3 percent y/y (December: 4.7 percent).

Although the pace of recovery is slightly slower than initially expected, the uptrend is well in place and likely to continue on the back of special local government bond issuance and approval for FAI projects in the coming months.

Growth in China’s property investment jumped significantly despite a deterioration in local developers’ funding conditions. Property investment growth jumped to 11.6 percent in the first two months of the year, lifted by investment growth in eastern and western China.

This is even more striking if the y/y contraction in land investment is considered (-13.1 percent y/y). However, funding sources had increased a mere 2.1 percent y/y during the same period, with a decline (-1.5 percent y/y) in self-raised funds.

Overall, investment remains the key near-term driver to stabilise growth as recently announced tax cuts have yet to feed through to the broader economy.

"However, we do not expect policymakers to roll out any further stimulus beyond what they offered during the National People’s Congress and existing supportive measures (including continuous RRR cuts). Nonetheless, Premier Li Keqiang’s press conference on 15 March will be keenly awaited for any clues about future supportive measures," ANZ Research further commented.