January-February Economics: Why Did Investment Unexpectedly Turn Positive?

The economy at the start of the year shows a pattern of “strong industry, increased investment, and stable consumption.” Considering the dual boost from the “brilliant” exports at the beginning of the year and the longest Spring Festival holiday in history, the “booming” industrial production and “steady” consumption are still expected.

What truly exceeds expectations is investment—rebounding strongly from last year’s negative growth and successfully turning positive, becoming the most noteworthy highlight in the early-year data.

Why did investment (especially infrastructure) successfully stabilize? We believe this is both unexpected and reasonable, mainly for three reasons:

First, the adjustment of the statistical scope to restore the “full picture” of infrastructure. The official National Bureau of Statistics changed the reporting scope from “narrow infrastructure” (excluding power, heat, gas, and water supply industries) to “broad infrastructure” (including these sectors), providing a more comprehensive view of infrastructure investment.

Second, fiscal efforts and accelerated fund disbursement. Although the scope changed, the quality of the “good start” in infrastructure investment remains high, thanks to fiscal expenditure efforts—fiscal deposits decreased by 350 billion yuan in February, with a year-on-year increase of about 1.6 trillion yuan less, indicating that fiscal funds are being rapidly allocated at the beginning of the year, supporting infrastructure projects.

Third, increased special bonds directed toward infrastructure. Since the beginning of the year, the proportion and scale of new special bonds allocated to infrastructure are higher than last year, injecting strong momentum into infrastructure investment. Some project funds reserved last year were concentrated in the new year, also boosting the “good start” in investment.

Manufacturing: Unwilling to fall behind, the “strong” export performance at the start of the year injects positive momentum. Manufacturing investment also shows positive signals—January-February year-on-year growth reached 3.1%, successfully breaking the overall downward trend since April 2025’s “equal tariffs,” rebounding strongly from negative growth back into positive territory. This recovery aligns with the “brilliant” export performance: historical experience shows that years with strong early-year exports often see robust manufacturing investment growth.

Focusing on specific industries, the “leading” sectors in manufacturing investment at the start of the year are mainly mid- and downstream industries. From January to February, industries such as transportation equipment, electrical machinery, and general equipment saw the fastest investment growth, while upstream industries like non-ferrous metals and chemical products still experienced negative growth. This differentiation reflects the transmission effect of recovering external demand on mid- and downstream manufacturing.

Real estate: Slightly weaker in comparison, but investment decline narrows as base effects ease. From January to February, the cumulative year-on-year growth rate of real estate development investment narrowed to -11.1% (from -17.2%), mainly due to the fading impact of high base effects. However, on the demand side, the transaction area of commercial housing remains significantly below seasonal levels, and sales growth continues to decline, indicating no clear signs of market stabilization yet.

Looking ahead, as the first year of the “14th Five-Year Plan,” stabilizing the real estate market, preventing risks, and promoting transformation remain key policy directions. With Shanghai taking the lead in introducing a package of real estate policies, it is expected that core first- and second-tier cities will follow with further adjustments. While stabilizing market expectations, policies will also focus on optimizing supply-side factors, promoting a smooth transition of the real estate industry to new models, and achieving high-quality development.

Industrial: Why is production accelerating? Under the expectation of a “good start” in the first year of the “14th Five-Year Plan,” industrial production is progressing faster this year. From January to February, the added value of industrial enterprises above designated size increased by 6.3% year-on-year, slightly above the historical average of 6.0% since 2015 (excluding 2020-2021 special years).

Particularly noteworthy is the performance of high-tech industries, which outpaced overall industrial growth significantly, becoming an important support for the early acceleration of production and reflecting early results in cultivating new productive forces.

Consumption: Recovery pace varies, with service consumption as the biggest highlight. On one hand, the extended holiday period effectively boosted service consumption such as catering and tourism. In January-February, the year-on-year growth rates of catering and service retail sales rebounded to 4.8% and 5.6%, respectively. Overall, service consumption growth outperformed merchandise consumption, becoming a key driver of early-year consumption recovery. On the other hand, driven by Spring Festival spending, the growth of daily necessities such as food and beverages, textiles, and jewelry significantly rebounded.

Related categories like “trade-in” also saw improved sales, but internal structural differences are evident. Since the beginning of the year, with the continued implementation of new policies and the promotion of consumer loan interest subsidies, sales of trade-in related products further recovered. However, structurally, there is a clear divergence: retail sales of furniture and home appliances slightly improved, while auto consumption remained negative, with no significant rebound yet, and the momentum of “trade-in” policies remains limited.

Source: Chuan Yue Global Macroeconomics

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