Economic Expectations for China Bright Despite Decline in CEP Indicator

According to the most recent survey for November (26/10/2017–15/11/2017), the economic outlook for China dropped by 9.7 points to a new value of 7.6 points (October: 17.3 points). The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, has once again come in well above the long-term average of 5.4 points and signals a comparatively positive outlook for Chinese economic growth.

The assessment of the current economic situation currently stands at 25.8 points, and has remained almost unchanged compared to previous month’s value of 26.9 points. The economic situation thus continues to be rated very positively.

Looking at the assessments of the individual sectors of the Chinese economy, the construction sector scored much worse than in the previous month, plummeting from 23.8 points to 10.7 points. Similarly, in some regions real estate prices are expected to fall dramatically in the next twelve months. For instance, real estate prices in Beijing and Tianjin are expected to dive even further into negative territory, with the corresponding indicators falling to minus 5.6 points and minus 1.9 points, respectively.

This development is, however, somewhat different when considered in the long term. Since the beginning of the survey, the expectations regarding the construction sector have been experiencing a slight upward trend. This trend seems to remain unabated despite the decline currently witnessed. This indicates an increase in real estate supply.

Prices for real estate, by contrast, are showing a negative trend, with expectations having reached a peak around the turn of the year 2015/2016. “It remains to be seen whether this is already an indicator for the price bubble in the Chinese real estate market deflating,” says Dr. Michael Schröder, senior researcher in ZEW’s Research Department “International Finance and Financial Management” and project leader of the CEP survey.

For further information please contact

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