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China capex growth hits three-year low as weak economy, trade war drag

Capital investment by Chinese firms has reached its slowest pace in three years amid the Hong Kong protests. Factors contributing to this lack of capital investment include a weakening economy, tight credit, and ongoing trade war with the US, resulting in dented sales growth and cash reserves. Analysts expect the slowdown to intensify as companies spend more time turning inventory into sales with smaller profit gains. The outlook of the Chinese economy became even more unclear after US President Donald Trump said a trade deal with China may be delayed until after the US 2020 presidential elections. Analysts report that economic data from China is volatile and that things may worsen before they improve.

The weak investment period is creating problems in regenerating the Chinese economy, with credit conditions tight and credit growth slowing. The Chinese government has taken steps to encourage lending, but they have little interest in lending to small firms as a consequence of the trade war and unclear economic outlook. Revenue grew in 2019 to date by just 6.7%, and net profit rose 7.8% compared to 22% two years prior.

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OODA Analyst

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