Expectations for China Decline, But Outlook Remains Positive

In the March 2021 survey (9–17 March 2021), the CEP indicator decreased by 21.2 points to a new value of 42.8 points. Despite this sharp decline, the indicator remains at a very high level. The CEP indicator, based on the China Economic Panel (CEP) and conducted by ZEW Mannheim in cooperation with Fudan University, Shanghai, reflects the economic expectations of international financial market experts for China on a 12-month basis.

The assessment of the current economic situation in China has also declined. The corresponding indicator currently stands at 42.9 points, 12.9 points lower than in the previous month. However, the economic outlook is still very positive.

“The financial market experts have revised their forecasts for real gross domestic product (GDP) slightly downwards. The forecasts thus reflect the targets set by the recently concluded Chinese National People’s Congress (NPC),” says Dr. Michael Schröder, who coordinates the survey in ZEW’s Research Department “International Finance and Financial Management”. For 2021, the NPC set a real GDP growth target of “over 6.0 per cent”. 6.0 per cent is also precisely the average GDP growth forecast given by the experts in the CEP survey in March. In the previous month, the forecast was still 6.5 per cent. For 2022, the GDP forecasts were lowered from 5.5 per cent to 5.2 per cent in the current survey.

The experts do not see any major inflation risks at present. Over the course of one year, consumer prices are expected to climb 2.1 per cent and producer prices are predicted to rise very moderately by 1.7 per cent. According to these forecasts, the inflation rate for consumers is expected to remain below the value of three per cent, which the NPC proclaimed as a target for 2021.

“Economic expectations for the most important economic regions – with the exception of Beijing – have also declined significantly. However, the outlook remains positive for almost all regions. Only Hong Kong’s economic development is expected to deteriorate over the next twelve months,” says Schröder.