Beijing: The pace of Chinese investment growth slowed sharply in the first five months of this year, blunting a recent rally in the traditional sectors driving the world's second-largest economy and renewing uncertainty over its prospects.
The rate of fixed asset investment growth fell to 9.5 per cent, the slowest in 16 years and well below economist forecasts of 10.5 per cent, a decline aligned with a recent warning carried in the official People's Daily that China must move away from its reliance on debt-fuelled growth.
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The piece, penned by an unidentified "authoritative figure", warned increasing China's high debt levels to sustain GDP growth would lead to financial crisis.
But viewed together with improving imports and industrial output last month, analysts suggest central government policymakers are continuing to prop up short-term growth with a government infrastructure spending stimulus and fiscal support.
![Workers stand on bamboo scaffolding at a construction site in Chongqing, China.](/web/20160915042356im_/http://www.canberratimes.com.au/content/dam/images/g/p/e/1/z/5/image.related.articleLeadwide.620x349.gphx1y.png/1470364009674.jpg)
Fixed asset investment growth from the private sector was just 3.9 per cent, compared to 22.3 per cent growth from the state sector, according to economic data released by authorities on Monday.
The weak private sector investment reflects waning confidence in Chinese businesses as well as casting doubt over the government's ability to rein in debt-fuelled stimulus, particularly if it is to reach its 6.5 per cent GDP growth target for the year.
Analysts said the slowdown was also exacerbated by declining coal and iron ore investment from private enterprises, reflecting the high excess capacity in those sectors.
Raymond Yeung, ANZ's Hong Kong-based senior economist, said though Monday's data was a warning sign China might struggle to keep pace with its 6.5 per cent growth target in the second quarter, "the top leadership will still place a greater emphasis on economic rebalancing.
Real estate investment rose 7.0 percent in the first five months from the same period a year earlier, while property sales by area increased 33.2 percent. Retail sales growth in May was largely steady at 10 per cent. Industrial production rose 6 percent from a year earlier in May, matching economists' estimates.
"Since retail sales is able to maintain a growth rate of 10.0 per cent year on year and the manufacturing sector seems to have stabilised, today's data are not poor enough to press the [People's Bank of China] to ease aggressively," Mr Yeung said.
"Instead, the government will likely launch more fiscal policies such as faster approval of infrastructure projects as downside risk to growth heightens."
Chinese exports fell in May, according to data released Wednesday, as the central bank released a gloomy revised forecast due to uncertainties over global economic growth.
The government will likely launch more fiscal policies such as faster approval of infrastructure projects as downside risk to growth heightens
ANZ"s Raymond Yeung
It also comes as the International Monetary Fund warned China to take immediate steps to tackle corporate debt. China has accumulated debt faster than any major economy over the past decade, climbing to 247 per cent of GDP, according to Bloomberg Intelligence.