ZEW-PwC China Economic Barometer: German Companies in China Concerned about the Future

Managers of German companies active in China fear a further slowdown of the Chinese economy: they estimate the probability of an economic downturn in the next twelve months to be 45%, compared to a figure of 36% in the previous quarter. The probability of the economic situation improving is still only estimated at 17% (previous quarter: 22%), so a clear shift in sentiment amongst German decision-makers has taken place since the previous quarter. These are the results of the ZEW-PwC China Economic Barometer, a quarterly survey of the Centre for European Economic Research (ZEW) in co-operation with PwC. A total of 47 managers took part in the current survey in September 2015.

“The results of the survey show a noticeable depression in sentiment, which we are also observing in conversations with local decision-makers”, says Thomas Heck, Head of PwC’s China Business Group in Shanghai. “Meanwhile, half of German companies anticipate falling demand for German goods and services over the coming half year due to the slowdown of the Chinese economy,” Heck stated. Expectations for sales of German products in China have clearly diminished since the previous quarter; nevertheless,managers are still more optimistic about development prospects for German companies than for the overall Chinese economy.

Low interest rates and increased public spending to combat the downturn

German companies are also expecting the Chinese government to make robust, continuous effort to prevent further economic slowdown. In the current survey, this is showneven more clearly than in the third quarter of 2015: 90% of decision-makers expect the government to further increase public debt; 70% predict the Chinese Central Bank will further decrease interest rates for short-term loans. There is doubt whether these measures will suffice to strengthen the economy. “The managers surveyed evidently do not believe that the expected decrease in interest rates will directly boost private consumption”, says Thomas Heck. The companies also do not anticipate more favourable conditions to arise as a result of changes in regulatory parameters any time soon.

“Virtually all sectors are affected by the Chinese economic downturn”, explains Professor Michael Schröder from the Centre for European Economic Research (ZEW). “Investment expectations for most sectors in the coming six months are negative.” These results are especially true for the steel/metal sector with a score of minus 59 points and the construction sector with a score of minus 56.3 points. However, forecasts for the services sector (39.3) as well as the information and telecommunications sector (34.6) are surprisingly positive.

Expectations for the German automotive and supply sector in China

A special question in the current ZEW-PwC China Economic Barometer addresses the possible repercussions for German companies given the economic weakness of the Chinese automotive sector. “No consistent outlook of German managers has emerged, which indicates a high level of uncertainty regarding prospects for the future development”,explains Professor Michael Schröder. Thirty-six per cent of survey participants expect the market share of German car manufacturers to increase, whereas 38% foresee a decrease in the German market share. Twenty-six percent of companies anticipate no change. Expectations for the supply sector are somewhat more restrained: only 24% expect an increase in the German market share, whereas 38% predict a decrease and just as many predict no significant change.

For more information please contact

Dr. Oliver Lerbs (ZEW), Phone +49 621/1235-147, E-mail lerbs@zew.de

Professor Dr. Michael Schröder (ZEW), Phone +49 621/1235-368,  E-mail schroeder@zew.de