China Economic Panel (CEP) of ZEW and Fudan University (Shanghai) - Cautious Sentiment

Forecasts for the Chinese economy have further cooled down at the turn of the year. The CEP Indicator, which reflects the expectations of international financial market experts in regard to China's macroeconomic development over the coming twelve months, has deteriorated in the current survey period (12/25/15-01/11/16), falling to minus 4.5 points. The CEP Indicator has thus almost returned to its all-time low of minus 9.7 points from September 2015.

However, there are currently no signs of a significant downturn. Experts still forecast a GDP growth of 6.7 per cent in the current year for China. The massive decline in prices at the Chinese stock markets is thus not reflected in the experts' expectations included in the current CEP survey.

Experts also expect the recent depreciation of the Yuan against the USD to be continued. On a twelve-month horizon, a USD-to-Yuan exchange rate of 6.68 is expected. This is in line with the expectation of slightly decreasing interest rates in China and a growing interest spread between the United States and China. Nonetheless, experts still forecast a reduction in the People's Bank of China's monetary reserves. This is a signal that the Chinese Central Bank might continue to intervene in order to support the Yuan.

Regarding individual sectors of the Chinese economy, it is in particular the investment-goods producing industries, such as mechanical engineering and electronics, which are assessed more positively than in the previous month. A month-on-month increase is also expected for the energy and construction sectors.

The more positive expectations for the construction sector are also reflected in real estate price forecasts. Further real estate price increases are expected in almost all major economic regions in China, in particular in Beijing, Shanghai, Guangzhou and Shenzhen.

For further information please contact

Professor Dr. Michael Schröder, Phone +49(0)621/1235-140, E-mail schroeder@zew.de