MNI: China's Fixed-asset Investment To Stabilise In 2026

China’s fixed-asset investment (FAI) growth is likely to stabilise later this year after contracting 3.8% in 2025, as major national projects under the current Five-Year Plan begin to materialise in the second half, policy advisors told MNI, adding that the medium-term growth outlook remains subdued amid broader structural economic changes.

“Authorities have advanced some major projects ahead of schedule since Q4, and this will be reflected in investment data from H2 taking into consideration the time lag between approval, bidding and forming physical workload,” said Lu Donghong, associate research fellow at the Chongyang Institute for Financial Studies at Renmin University. He expects the investment cycle to peak in 2027-2028.

Central fiscal expansion will support the rebound, including a potential CNY1.5-1.8 trillion issuance of ultra-long-term special treasury bonds, up from CNY1.3 trillion in 2025, along with around CNY800 billion in central government budgetary investment to support long-cycle public welfare projects and ease infrastructure bottlenecks, Lu added. (See MNI: China NPC To Unveil More Off-Deficit Debt, Rate Cut Eyed)

At the local level, authorities may moderately raise the special-purpose bond quota from CNY4.4 trillion in 2025 to around CNY5 trillion, said Lu. He noted that the policy – allowing the bonds to serve as project capital by as much as 30% – will be utilised more fully to leverage bank loans and social capital to create a "multiplier effect."

“Reduced land supply amid the property downturn has also lowered infrastructure demand, and this situation may persist for another six to twelve months,” said Yang Xiaoyi, senior researcher at local government investment advisory firm BRI Data. She noted that local governments are prioritising special bonds for projects underway and resolving off-balance sheet debts, limiting their motivation for new investment. (See MNI: China’s Property Market To Continue Decline Over 2026)

FOCUS SHIFT

Annual local investment plans show limited expansion in major hubs but greater emphasis on new infrastructure, such as computing power, and urban livelihood projects, said Su Jian, professor of economics at the School of Economics and the director of the National Center for Economic Research at Peking University.

Inland provinces still have room to expand traditional infrastructure, but their contribution to overall investment growth will remain limited, he noted, adding that FAI growth still has a chance to turn positive in H2 considering the lower comparison base over the same period last year.

Su stressed that maintaining the GDP target at “around 5%” is key to sustaining local government momentum amid fiscal constraints and hidden debt burdens. 

Lu noted that as investment shifts from scale-driven expansion toward assets with stronger knock-on effects and strategic resilience, median FAI growth is likely to settle at 3-4% as a new norm. High-tech investment, though double-digit in recent years, remains insufficient to offset weakness in real estate and traditional manufacturing in the near term, he continued. 

WEAK PRIVATE INVESTMENT

Private investment remained subdued amid a race-to-the-bottom competition domestically and geopolitical tensions, with manufacturing investment up just 0.6% y/y in 2025, said prominent economist Zhang Yansheng.

Achieving broader Five-Year Plan objectives – developing new quality productive forces, building a modern industrial system, and unifying the domestic market – will take time forming a top-down consensus and filtering through bureaucracy and society, Zhang added. Shifts in major-power relations could further complicate and slow structural reform efforts.

China needs a renewed ideological push to prioritise economic development and lift confidence and expectations across society over the next two to three years. Investment will remain under pressure during this adjustment phase, requiring continued reliance on government-led spending to support domestic demand in the short term, he concluded.