BEIJING - China's fixed asset investment, an important gauge of infrastructure spending, slowed to its weakest pace in 16 years, government statistics showed Monday, a worrying trend despite other signs of economic stabilisation in the Asian giant.
The moderation comes after a record credit binge in the first quarter of the year, a splurge aimed at stimulating China's slowing economy.
Fixed asset investment rose 9.6% in the first five months of the year, according to the National Bureau of Statistics.
The world's number two economy, a key driver of global expansion, grew just 6.9% in 2015, the weakest rate in a quarter of a century.
The investment results fell far short of economists' median forecast of 10.4% in a survey by Bloomberg News and was the slowest pace of expansion since May 2000.
But factory production and consumer spending showed steady growth for the period, the government data indicated, as industrial output rose 6% year-on-year in May, matching the figure for April, while retail sales were up 10%.
"The national economy extended a stabilising and progressing trend that emerged since the start of the year with positive factors accumulating," said Sheng Laiyun, spokesman for the National Bureau of Statistics.
"But we must be aware that the international environment remains complicated and severe, the painful domestic structural adjustments continue, and the economy is still under downward pressure."
The data show that overall industrial conditions were broadly stable, Julian Evans-Pritchard of Capital Economics said in a note, but added that growth was "increasingly reliant on rapid state sector investment" that is likely to drop off later this year.
Private investment slows
Private investment growth also weakened, with a 3.9% increase in the first five months of the year.
"The slowdown in private investment growth indeed showed the intrinsic driver of China's economic growth is yet to be strengthened," said Sheng.
He blamed the weakening on factors including the difficulty for private firms to get loans, industrial overcapacity, and limited access for private firms to some sectors.
Beijing has promised to take steps to address these problems, pledging to cut red tape and release the economic power of small and medium enterprises.
But as with other reform vows, talk seems to have outweighed action and complaints from private enterprises remain abundant.
Following Monday's release, analysts said that this month's overall figures may endanger China's growth target of 6.5 to 7% in the second quarter.
The numbers may lead authorities to use more aggressive fiscal policies such as faster approval of infrastructure projects, analysts with ANZ Research said.
"If fixed asset investment declines further in June, the 6.5% threshold is at risk," it said, a sentiment echoed by Nomura.
As part of the programme to avoid that outcome, a possible first step towards a feared "hard landing", Beijing has pledged to reduce overcapacity and excess inventory in its industrial sectors, with the country's ailing steel industry a key target.
But output rose 1.8% on-year in May, even as US and European steelmakers have accused bloated Chinese firms of dumping excess production on foreign markets.
Foreign governments say they have seen little movement towards implementing promises to tackle the problem.
Chinese stocks were sharply lower, with the benchmark Shanghai Composite Index falling 2.4% in late trade.