Goldman Sachs: China’s investment growth slows again as fiscal tightening and the property downturn offset high-tech bright spots

Where is the investment slowdown showing up?

Goldman Sachs’ investment tracker shows China’s real investment grew 1.9% year on year in the third quarter of 2026, down from 2.0% in the second quarter and the lowest since the fourth quarter of 2021. Goldman Sachs notes that official fixed-asset investment data may fluctuate because of statistical revisions to previously overstated figures, but alternative indicators also show investment continuing to slow.
Investment performance diverged sharply: non-state-owned enterprises’ fixed-asset investment fell more quarter on quarter than that of state-owned enterprises in the third quarter; the gap between inland regions under heavy debt pressure and coastal regions was also large. By component, the recent year-on-year contraction in investment came mainly from construction and installation, while equipment purchases still made a positive contribution.
High-tech-related investment has outperformed other investment so far this year. Goldman Sachs expects nominal capital spending by China’s major cloud providers to continue rising over the next few years, but to remain far below US levels. The gap between China and the US in operational data-center capacity is smaller, partly reflecting differences in costs and government spending.

Although the Politburo meeting in July sent stronger easing signals, government bond issuance remained slow through September, and spending growth continued to lag revenue growth. Falling land-sale revenue, reduced policy-bank support and tighter tax collection have caused the augmented fiscal deficit calculated by Goldman Sachs to narrow significantly since April.
As of September, the 12-month moving average of the augmented fiscal deficit had fallen to 9.4% of GDP, its lowest since October 2015. At the end of the third quarter, the fiscal deposit balance was up by 958 billion yuan year on year, an increase of 14%. Goldman Sachs’ fiscal spending progress indicator also declined, indicating slower use of funds already raised.
Annualized quarter-on-quarter real GDP growth rose to 4.9% in the third quarter from 3.6% in the second, but Goldman Sachs believes domestic demand momentum remains weak and estimates that the change in fiscal impulse reduced annualized quarter-on-quarter growth by 0.6 percentage points over the same period.

Land-sale revenue, new housing starts and property investment have been significantly below Goldman Sachs’ expectations this year. Although home prices in some first-tier cities have shown initial signs of stabilizing, most property activity indicators at the end of the third quarter remained 60%–90% below their 2020–2021 peaks, with new starts and land-sale revenue among those showing the largest declines.
The newly announced shift from presales to sales of completed homes will tighten financing for developers and lower property investment over the next few years. Taking account of data so far this year and policy changes, Goldman Sachs raised its estimate of the property sector’s drag on real GDP growth in 2026 from 1.5 to 1.8 percentage points, also slightly above the 1.7 percentage points in 2025.
Goldman Sachs expects the drag to fall to 1.3 percentage points in 2027 as property’s share of GDP shrinks, and to largely fade by 2030.

Goldman Sachs cut its 2026 augmented fiscal deficit forecast from 11.5% to 10.0% of GDP, below the 11.4% recorded in 2025, citing tight fiscal data during the year and delayed easing. The bank expects the quarterly fiscal drag on growth to ease slightly in the fourth quarter from the third, but fiscal policy to remain tighter than in the previous year for the full year.
Since the end of September, policies have included an additional 550 billion yuan in local government debt quotas, a 25-basis-point cut in the pledged supplementary lending rate and increased relending quotas. Goldman Sachs believes these measures are intended to reverse earlier tightening and ensure the full-year growth target of 4.5%–5.0%, rather than launch a sustained cycle of substantial easing.
The bank expects real GDP growth of 4.6% in 2026. Stronger third-quarter growth has largely secured the full-year target, and some funds from government bonds issued this year may be held for use early next year. Policy continues to prioritize support for high technology and investment, but tighter tax collection and limited incentives for local officials to launch large projects could constrain policy transmission.