Expectations for Chinese Economy Recovering
China Economic PanelCEP Indicator Has Risen to a New Reading of Minus 11.9 Points
According to the most recent survey for April (3–17 April 2019), the economic outlook for China has improved again. The CEP Indicator, which is based on the China Economic Panel and reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, is currently at minus 11.9 points, 13.1 points higher compared to the March survey. Despite this improvement, the indicator remains below its long-term average of 1.8 points and has been doing so for 13 months now. The assessment of the current economic situation has also improved, leaving the index at a level of minus 7.2 points, 6.7 points higher than in the previous month.
“The rise in the CEP indicator shows that the economic policy plans and measures of the Chinese government (reducing the VAT, lowering the minimum reserve ratio, etc.) have led the experts to expect only a moderate decline in economic growth,“ says Dr. Michael Schröder, senior researcher in the Research Department “International Finance and Financial Management” at the ZEW – Leibniz Centre for European Economic Research and project leader of the CEP survey.
With growth expectations of 6.1 per cent for the current year (0.1 percentage points lower than in the March survey), the point forecasts for the Chinese real gross domestic product have dropped to the lower end of the target range of 6 to 6.5 per cent. The forecast for 2020 remains unchanged at 6.0 per cent. However, the experts were slightly too pessimistic in their expectations for the first quarter of 2019. Forecasts for real GDP growth in the first quarter were 0.2 percentage points below the actual growth rate of 6.4 per cent. It is therefore possible that the point forecast for 2019 could be slightly revised upwards in the next survey.
Assessment regarding the development of Chinese exports deteriorates
Despite the government’s support measures, the survey participants expect private consumption and private investment to slow, with both indicators being currently in negative territory. The assessment regarding the development of Chinese exports has also deteriorated further, with the corresponding sub-indicator dropping 6.8 points to a new level of minus 13.1 points. “Apparently, the experts have no confidence that a new trade agreement between China and the USA will quickly show positive effects,“ says Michael Schröder.
According to the experts, the measures to stimulate the economy are likely to have a significant effect on government consumption as well as on domestic and foreign debt, with all three expectation indicators rising sharply.
Overall, China’s economic development in the coming months is still considered to be rather fragile. The expected impact of weaker growth on employment (drop in expectations by 33.4 points from zero points) has become stronger than previously thought, highlighting the urgent need for a successful economic policy in China.
