中国思考-北京将如何应对疲弱的资本开支-China Musings-How Will Beijing React to Weak Capex

Summary of Key Points from the Conference Call Industry Overview - The focus is on the Chinese economy, particularly regarding fixed asset investment (FAI) and gross capital formation (GCF) trends in 2025 and beyond [1][2][3]. Core Insights and Arguments 1. Growth Projections: Despite weak FAI, GCF resilience and fall stimulus are expected to keep 2025 growth on track to reach 5% [1][6]. 2. Investment Disconnect: There is a notable disconnect between macro fundamentals and stock market performance, with domestic demand data weakening significantly in 3Q and October [2][11]. 3. FAI Methodology Changes: The National Bureau of Statistics (NBS) has shifted its FAI methodology from "project progress" to "financial spending" since 2018, improving data quality but introducing potential time lags between FAI and GCF [3][8]. 4. Factors Contributing to Weaker FAI: - Tighter government financing has constrained new project starts. - Anti-involution measures and potential under-reporting by local governments may have suppressed reported FAI figures. - Weaker land sales in 3Q added downward pressure on FAI [4][5]. 5. GCF Stability: Although weak FAI in 3Q25 may signal a slowdown in GCF in 4Q25, fiscal expansion measures and a trade détente are expected to cushion the impact, potentially stabilizing GCF [5][10]. Additional Important Insights 1. Policy Measures for 2026: Incremental policy levers are anticipated, including front-loaded fiscal policies and housing market guardrails to support domestic demand [1][12][11]. 2. Housing Market Risks: The property market is under stress with record-high inventory and declining prices, raising concerns about the potential need for restructuring among developers [13][14]. 3. Consumption Support: There is a focus on service consumption support in 2026, with expectations for trade-in programs and other measures to stimulate demand [17][18]. 4. Fiscal Constraints: Public debt is at 113% of GDP, limiting the government's ability to shift focus towards consumption-driven growth [19]. Conclusion - The overall outlook suggests a slow-burn reflation scenario, with GDP expected to move out of deflation by 2026. Policy adjustments in infrastructure, housing, and consumption are likely to be reactive rather than proactive, providing a floor for growth [18][19].