Expectations for China Continue to Rise

In the January 2021 survey (11–20 January 2021), the CEP indicator increased by 23.6 points to a new reading of 54.9 points, thus returning to the very high level seen in November 2020. 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 dropped slightly by 1.6 points to a still very high value of 42.2 points. This positive assessment reflects China’s rather good economic growth performance in 2020 compared to that of the EU or the USA. China’s gross domestic product (GDP) only showed a decline in the first quarter of 2020 before growing again by 6.5 per cent in the fourth quarter of 2020 (compared to the same quarter of the previous year). In 2020 as a whole, the economy grew 2.3 per cent.

In the first quarter of 2021, real GDP growth is expected to increase even further and, according to the forecasts, will reach eight per cent (relative to the previous year). In the course of the year, however, the forecasts show that the dynamic recovery will weaken slightly: real GDP is projected to increase by 5.9 per cent in the second quarter. This is also the expected growth rate for the whole of 2021. The survey participants continue to assume that the Chinese government will promote growth with supportive economic policy measures. Accordingly, they expect a further increase in government and corporate debt.

“The positive outlook for China for the current year is visible in virtually all sectors covered in our survey as well as in all important economic regions of China. Only for Hong Kong and, to a lesser extent, Tianjin are the prospects clearly below average,” says Dr. Michael Schröder, who coordinates the survey in ZEW’s Research Department “International Finance and Financial Management”.

For 2022, however, the experts assume that the long-term downward trend in GDP growth rates will take hold of the Chinese economy again. They expect economic growth of only 4.9 per cent in 2022, which would be rather modest by Chinese standards.