Private Investment is Actually Far Worse

China Private Investment FAI Fixed Asset Investment Chart
China Private Investment FAI Fixed Asset Investment Chart

CEIC China Data Talk - October, 2016 China Premium Database + Investment + Fixed Asset Investment + Real Estate Sector + Real Estate: Investment Private fixed asset investment grew by 2.1 percent year over year during the first eight months of 2016. Yet the figure decreases to around 1.9% when excluding real estate residential investment. Although residential investment is generally considered to be a component of fixed asset investment (FAI), treating residential investment as part of FAI for private enterprises is inappropriate. In fact, FAI without the counting of residential investments such as enterprises’ FAI in operating equipment, could be regarded as the intrinsic value of FAI for enterprises. This is because these investments are inherently productive and are for future growth. They therefore represent the business executives’ perspectives and confidence in future economic performance. Since the beginning of this year, residential investment has accounted for a larger share of, and is a higher growth component of private FAI. The number turns much worse when excluding the residential investment. Some may argue that the purchase of properties by the public indicates investors’ confidence levels in future performance. While this is true to some extent, these types of investments are not productive by nature. Rather, they actually should be considered consumption expenditures. Consumption expenditure cannot increase production equipment capacity and has no incremental contribution towards economic development. Therefore, when evaluating private FAI, digging deeper into the breakdowns of FAI can reveal more pertinent findings, giving us more insights into the underlying facts. Contributed by the China Database Team Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog

27th October 2016 Private Investment is Actually Far Worse

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