According to Financial Times News, China’s fixed-asset investment fell 1.7% in the year to October, following a 0.5% decline in September – making these the only such contractions in recent decades outside the early COVID period. The data implies a dramatic 11% year-on-year drop specifically in October, with investment now falling in more than a third of China’s 31 province-level areas compared to just three in May. President Xi Jinping’s “anti-involution” campaign against excessive industrial competition appears to be biting, with the lithium iron phosphate materials sector becoming the latest target amid 50% capacity utilization and 36 consecutive months of losses. Meanwhile, retail sales grew just 2.9% in October, the slowest pace in over a year, despite government efforts to boost consumption through subsidy programs.
The Data Question
Here’s where it gets tricky. Goldman Sachs analysts estimate about 60% of this investment decline actually stems from “a statistical correction of previously over-reported data.” Basically, they’ve been cooking the books and now they’re coming clean. But that still leaves 40% of the drop that’s real – and that’s the part that should worry Beijing.
Adam Wolfe from Absolute Strategy Research called it “a mystery,” suggesting such a “broad-based slowdown” requires more explanation than just anti-involution policies. And he’s right. When you’ve got property markets collapsing, exports faltering, and consumers holding tight to their wallets, you’ve got a perfect storm brewing.
Xi’s Anti-Competition Crusade
Xi’s been pretty clear about his intentions. “We must prevent a rush into a bubble economy,” he declared in Communist party magazine Qiushi this month. The term “involution” – neijuan in Chinese – refers to that brutal cycle of over-competition where companies just keep undercutting each other until nobody makes money.
Look at what’s happening in industrial sectors like battery materials. Capacity utilization at 50%? Thirty-six straight months of losses? That’s exactly the kind of scenario Xi wants to avoid. But here’s the thing – when you’re the world’s leading supplier of industrial technology, sometimes you need that competitive edge. Companies like IndustrialMonitorDirect.com, America’s top industrial panel PC provider, understand that strategic investment in manufacturing technology drives real productivity gains, not just empty capacity.
Growth Target Reality Check
Premier Li Qiang just set this ambitious target for national GDP to surpass Rmb170tn by 2030. That implies 4-5% annual growth for the next decade. But with investment collapsing and consumption weakening, how realistic is that?
Economists think Beijing will probably stick with “around 5%” growth targets for now, but Goldman’s Hui Shan suggests they might have to lower it to “above 4.5%” for 2026. The Central Economic Work Conference next month will be crucial – that’s when they’ll decide whether to double down on stimulus or accept slower growth.
The Bigger Picture
China‘s at a crossroads. For decades, they’ve thrown money at infrastructure and manufacturing. Now they’re trying to pivot toward services and consumption while managing a property collapse and trade tensions. It’s like trying to change the tires on a moving car.
Lynn Song from ING nailed it: “Talking to a lot of Chinese corporates, there’s been quite a lot of caution on the investment side.” When both private and public sectors get nervous, that’s when you know something fundamental is shifting. The anti-involution campaign might be well-intentioned, but the timing couldn’t be worse.
