Market confidence highlighted for stable investment

China has the ability to halt the decline in fixed-asset investment and push for a gradual stabilization in 2026, but it will hinge on restoring private-sector confidence and aligning investment policy more closely with structural reforms, leading economists said.

The recent slowdown in investment reflects a long-term downward adjustment in the savings rate, medium-term structural imbalances between investment and consumption, and short-term pressures from local government debt and weak corporate investment sentiment, said Wang Yiming, vice-chairman of the China Center for International Economic Exchanges.

Data from the National Bureau of Statistics show that China's fixed-asset investment decreased by 3.8 percent in 2025, following a 2.6 percent decline in the first 11 months of last year.

Despite the headwinds, Wang said China has the conditions to stabilize investment in 2026. "China still has significant investment space, particularly in areas such as technological upgrading of traditional industries, breakthroughs in core technologies, urban renewal, rural infrastructure and public services."

Meanwhile, he noted that the 15th Five-Year Plan (2026-30) is expected to open up large new markets.

Data from the National Development and Reform Commission show that upgrading traditional industries over the next five years could unlock an additional market space of around 10 trillion yuan ($1.44 trillion).

Wang said emerging industries — including new energy, new materials, aerospace and the low-altitude economy — are likely to give rise to multiple trillion-yuan markets. Over a longer horizon, future industries such as quantum technology, biomanufacturing, hydrogen energy, nuclear fusion, brain-computer interfaces, embodied intelligence and sixth-generation mobile communications could become new growth engines.

Looking forward, Wang said he believes the policy support for stabilizing investment is set to strengthen this year. "Going forward, China will continue to make good use of central budget investment, ultra-long-term special treasury bonds and local government special bonds, with funding directed toward national strategic priorities, new infrastructure, key technologies and public services,"Wang said.

To further expand investment, Wang said it is advisable for the government to start with the early rollout of major projects under the 15th Five-Year Plan in areas such as strategic trunk corridors, new energy systems, major water conservation projects, large-scale science and technology infrastructure, and urban renewal.

He also called for a higher share of investment in projects for improving people's livelihoods and restoring confidence and vitality in private investment.

Wang's views were echoed by Chen Yongjie, vice-president of the Beijing Dacheng Enterprise Research Institute, who said that as the private sector accounts for about 60 percent of China's GDP, weak private investment has become a key reason behind the slowdown in investment growth.

To revive private investment, Chen called for broader market access in key sectors, support for cross-regional and overseas investment, lower costs through tax incentives and streamlined approvals, and more stable policy expectations backed by stronger government credibility.

He also urged greater financial support, including policy-backed investment funds to leverage large private projects, expanded direct financing channels and improved risk-sharing mechanisms.

When it comes to government investment, Zhang Yuxian, former director of the Department of Economic Forecasting at the State Information Center, said China's investment dynamics have fundamentally changed as industrialization and urbanization enter a more mature phase.

"In the past, during rapid industrialization and urbanization, government investment had strong growth-driving effects and could crowd in private investment," Zhang said. "Today, government investment has shifted from a long-term variable to a short-term one."

Local governments can no longer rely on large-scale construction of new industrial parks or new districts to fuel growth, he added.

"Under these new conditions, investment policy must be better integrated with reform policy, and more reforms are needed to activate investment, especially private investment."

Looking at the whole of 2026, Du Yue, director of the general research office at the investment research institute of the Chinese Academy of Macroeconomic Research, said expanding infrastructure investment will be challenging, but there still remains ample space and resilience.

Du called for a larger scale of central government borrowing for investment, alongside diversified channels to strengthen local fiscal capacity, in order to avoid crowding out investment funds.

"Improving the quality and efficiency of how policy funds are used is critical," Du said, adding that stronger efforts are also needed to attract private investment and speed up project preparation and approvals at the local level.

ouyangshijia@chinadaily.com.cn