China is trying to move from a construction and manufacturing economy to a consumer economy. As such the Government’s goal has been to reduce production in China’s older industries such as mining.
The drop in mining investment suggest this is working. However, the challenges facing China are huge. Many companies are heavily indebted and cannot repay that debt out of profits alone. At the same time growth is slowing in both exports and imports suggesting demand both domestically and overseas is lacklustre.
The widely accepted view seems to be that China can manage its transition and engineer a slowdown in its economy without leading to a crash. The command driven nature of the Chinese economy does mean it is unlikely to follow the same pattern as in the west, but soft landings rarely happen and at the moment too many investors expecting a fairy tale ending for China.
For now markets are taking the news in their stride.