Much of the economic weakness rippling through emerging markets is “made in China”. A slump in Chinese investment growth has hammered global demand for commodities and some manufactured products, triggering a chain reaction that is depressing EM exports, deepening deflationary pressures and even sapping consumer demand. The key questions, therefore, are: what lies behind the Chinese investment rout and how long is it likely to last? First, the magnitude of China’s investment slump this year is likely to have been much greater than official figures show. Beijing’s official monthly data series tracks “fixed asset investment” (FAI), which grew by 11.4 per cent year on year in June — not the sort of figure that might be expected to elicit alarm. But FAI readings are inflated by several elements — such as sales of land and other assets — that do not add to the country’s productive capital stock. A cleaner measure of how much companies are investing in boosting their productive capacities — and therefore in their futures — is gross fixed capital formation (GFCF), which strips out extraneous items to capture capital goods deployment. By this yardstick, investment is tanking. Annual real growth in gross capital formation hit 6.6 per cent in 2014, down from 10.2 per cent in 2013 and a peak of 25 per cent in 2009.