Economic Expectations Continue to Sink as End of Year Approaches

In the most recent survey conducted in December (4–13 December 2017) expectations for the Chinese economy fell once again, leaving the index at a level of minus 10.7 points, 18.3 points lower than in November. The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, has thus once again come in well below the long-term average of 5.1 points.

However, this decline in the economic sentiment should be put into perspective. Looking at the answers given by the surveyed economic experts, their responses largely shifted from the category “slight improvement” to “slight decline”, with not a single response predicting a “strong decline”. The quantitative growth forecasts for the fourth quarter of 2017 and the first quarter of 2018 saw a downward adjustment, though of only 0.1 percentage points, to give a current level of 6.7 per cent. The decline in the economic sentiment thus only indicates a slight reduction in actual growth.

Meanwhile, the assessment of the economic situation in China from the latest survey remains relatively high at 24.1 points compared to 25.8 points in November. 

Growing scepticism

“China’s economic prospects are thus overall still relatively positive, despite the growing scepticism indicated by the latest survey results,” says Dr. Michael Schröder, senior researcher in the ZEW Research Department “International Finance and Financial Management” and head of the CEP survey project.

According to the survey results, this more subdued sentiment is reflected in almost all sectors of the Chinese economy, with the exception of “utilities and energy”, “information technology and telecommunication” and “service providers”, which all exhibited an improvement in economic expectations.

There was also a decline in the economic outlook over the next twelve months for almost all of China’s important economic regions. According to the assessment of the survey participants, this is likely to have a dampening effect on real estate prices in these regions. The economic sector with the most pessimistic assessment by far was the construction sector, which could be due to Chinese President Xi Jinping’s planned introduction of measures intended to restrict real estate speculation.

For further information please contact

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