ZEW-PwC China Economic Barometer - Sentiment Amongst German Business Managers in China Remains Subdued

German managers in China judge the current economic situation in the country somewhat more positively than they did in Autumn 2015. Expectations for further economic development, however, remain subdued. A high proportion of surveyed managers, 35 per cent, continue to consider it likely that an economic slowdown will occur within the coming twelve months (previous quarter: 45 per cent). An improvement in economic dynamism, however, is considered less likely, with the indicator now at 23 per cent (previous quarter: 17 per cent). This is the outcome of the latest ZEW-PwC China Economic Barometer conducted for the second quarter of 2016, which surveyed 40 executives and managers from German companies in China.

"The Chinese economy finds itself in the middle of a period of economic weakness. A fall in the exchange rate, which we saw recently, has of course created additional uncertainty. At the same time, the rate of growth in China is comparable to that seen in other large economic areas – it remains relatively high," explains Thomas Heck, partner and Director of the China Business Group of PwC in Shanghai.

Private Consumption Important for Economic Growth

In view of the current difficult economic situation in China, the surveyed managers expect that private consumption will become increasingly important in the Chinese economy. More than half of the experts assume that expenditure on consumables will increase in the coming six months. This is primarily a result of Chinese consumers' low propensity to save, but also a result of increasing levels of pay. "Despite the current unstable economic conditions, the Chinese population continues to spend. Demand for private households may come to play a central role in the Chinese economy in the coming months," says Heck.

Managers Ever More Confident with View to German Companies

When it comes to German companies' success in the Chinese market, surveyed managers are more confident than in the previous quarter. The latest ZEW-PwC economic barometer indicates that 39 per cent of the surveyed managers expect to see increasing levels of production in the first half of 2016. This is reflected in an eleven per cent increase since the previous quarter. Attitudes towards developments in turnover are also overwhelmingly optimistic: 60 per cent of managers now expect to see increasing turnovers, in the previous quarter, only 35 per cent of managers held this view. The improved attitude is reflected in expectations for investment activities. Surveyed managers expect to see increasing levels of investment in nearly all sectors; in particular in the consumer goods industry, in individual trade, in the service sector as well as amongst banks and insurance brokers. In contrast, experts do expect to see levels of investment in the steel and metal industry fall. Expectations for export activities are also negative. 38 per cent of the surveyed managers expect to see falls in Chinese exports; 50 per cent also expect imports to fall.

New Five Year Plan also Expected to Have Positive Impacts for German Businesses

The majority of managers surveyed for the ZEW-PwC China Economic Barometer view the Chinese government's five year plan positively. Amongst other things, this plan foresees an annual growth rate of 6.5 per cent, increased investment in infrastructure, as well as new environmental policy measures. "Two thirds of the surveyed managers expect to see positive impulses for the Chinese economy as a direct result of the new five year plan; merely twelve per cent expect this plan to have negative impacts on the Chinese economy," explains Dr. Michael Schröder from the Mannheim Centre for European Economic Research (ZEW). "42 per cent of surveyed managers also expect to see positive effects for their own businesses." Managers, however, still consider there to be a need for reform in the areas of legal security, environmental protection and the ease of market entry.

For more information please contact

Dr. Michael Schröder, Phone +49(0)621/1235-368, E-mail: schroeder@zew.de

ZEW-PwC China Economic Barometer Report with charts and tables