Private Investment the Key to Understanding China’s Economic Future: State-owned Media

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A leading state-owned economics journal has highlighted the importance of the recovery of private investment in the wake of efforts by China to contain the impacts of the COVID-19 pandemic.

According to an article published by the Economic Observer and re-published by the People’s Daily, private investment is playing an increasingly critical role in China, and an understanding of it is imperative to broader economic analysis.

“Private investment represents the strength of the market,” said the Economic Observer. “We believe that you cannot research and assess China’s economic future if you do not understand private investment.”

Private investment in China took a major hit from the COVID-19 pandemic, declining 26.4% YoY in the January-February period when the outbreak first became particularly acute, and 18.8% in the first quarter.

This compares to a 24.1% decline in government investment in the January-February period, and a 12.8% drop in the first quarter.

Economic Observer points out that while YoY growth in Chinese government investment returned to positive territory by the end of the first half of 2020 with a 2.1% increase, it was not until November that private investment saw an uptick of just 0.2%.

The state-owned publication nonetheless expects private investment to see a robust recovery due to its importance in China’s digital economic era.

“If you consider that China is entering the digital economic era, enterprises will definitely increase their weighting in future investment, and we believe that we will not need to wait too long before private investment returns to its original position.

“However, structural changes to private investment could be more pronounced – this is an endogenous driver of structural adjustments for the Chinese economy.”

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