Economic Outlook for China Weakens Further

Economic expectations for China further declined in January 2015. The CEP Indicator, which reflects the expectations of international financial experts regarding China's macroeconomic development over the next twelve months, decreases by 14.2 points to a level of minus 7.6 points in the current survey period (January 12-26, 2015). The CEP Indicator has reached negative territory for the first time since the survey began in 2013 and continues to fall short of its long-term average of 11.9 points. A negative indicator value means that the majority of analysts within the panel expect overall economic activity to shrink.

In accordance with the increased share of pessimistic assessments, the financial analysts’ average GDP growth forecast for 2015 decreases from 7.2 per cent in December 2014 to now 7.1 per cent. For the current quarter the experts’ mean projection is a slightly higher growth rate of 7.2 percent. For the year 2016, the mean projection is 7.0 percent.

In co-movement with the economic outlook, the assessment of the current macroeconomic situation in China weakens by six points in comparison to the previous month, now standing at minus 3.8 points. Inflation expectations hardly changed: the analysts’ mean expected inflation rate in a three and twelve month horizon, respectively, remains at 1.6 and 1.9 per cent. This falls short of the actual annual inflation rate of two percent in 2014.

While major Chinese stock markets are expected to improve in the course of upcoming months, the experts see decreasing money market interest rates in the course of the year. On average, they see the interest rate for three-month interbank loans (SHIBOR) at 4.7 per cent in a horizon of three months and at 4.6 per cent in a one-year horizon.

For further information please contact

Dr. Oliver Lerbs, phone 0621 / 1235-147, E-Mail lerbs@zew.de

Prof. Dr. Michael Schröder, phone 0621 / 1235-140, E-Mail schroeder@zew.de