Machinery production in China is expected to slow down this year, expanding by 6.9%, the slowest rate since 2012, according to the Chinese Machinery Production Quarterly Tracker report from IHS.

Weakening levels of manufacturing activities in China are indicated by low purchasing manager index (PMI) levels reported by financial service institutions like HSBC and NBS.

“China over the past several years has had among the highest growth rates in the world," says Jay Tang, analyst for Asia-Pacific industrial automation at IHS. “With the latest machinery production numbers showing a major deceleration, everyone now must accept that the Chinese economy is shifting to slower growth."

The areas struggling the most in 2014 were construction machinery, metal working, mining machinery, paper and paperboard machinery and textile machinery because of overcapacity and weak demand. IHS says that more time is needed to solve these problems.

On the flip side, some industries serving domestic consumption grew in 2014. These included: agricultural machinery; elevators and escalators; electronics and electronics assembly; oil and gas; medical and scientific; food; beverage and tobacco machinery; and packaging machinery.

Overall, the Chinese economy will continue to decelerate in the coming quarters because of past excesses and the lack of organic growth, according to IHS.

In particular, the glut in the Chinese housing market and the country’s surplus industrial capacity, along with the excesses in lending that financed them, have weighed down the economy and constrained the government from implementing aggressive stimulus policies. Despite the recent easing of house-purchase restriction policies and targeted credit easing for the real estate market, there is continued housing price deflation and also a recession in construction, IHS says.

Such factors suggest a fundamental change in price expectations in the Chinese real estate market. Any increases in growth in recent quarters have been mostly because of the government’s targeted, small-scale stimulus.

Even a rebound in exports has been unsteady because of continued weakness in the Eurozone and an “underwhelming recovery” in the United States, IHS says.

As a result of all these elements, the Chinese economy currently lacks the impetus to generate sustainable organic growth, and a further deceleration in Chinese economic expansion is forecast by IHS in 2015.