BEIJING—A slowdown in private investment in China in May overshadowed other, more-upbeat economic data, contributing to a 3.2% drop in Shanghai shares and fueling concerns that growth in the second quarter could be weaker than in the first.
Several reports released Monday suggested pockets of relative strength in the world’s second-largest economy. But fixed-asset investment expanded by a weaker-than-expected annual clip of 9.6% in the first five months of the year, compared with 10.5% growth through April. Even worse, the private investment portion grew by a mere 3.9% in January-May, down from an already weak 5.2% in January-April.
A slowdown in private investment is particularly worrisome because it indicates that companies are holding off spending, signaling limited confidence in the future and denying the economy what is often more effective and sustainable investment than government spending.
Sheng Laiyun, a spokesman with the country’s National Bureau of Statistics, cited overcapacity and a difficulty in obtaining financing as reasons private companies are reluctant to invest, though he said China’s economic fundamentals remain sound. “The slowdown in private investment shows that economic growth momentum needs to be strengthened,” he said.