Expectations for Chinese Economy Continue to Improve

According to the most recent survey for May (2–16 May 2019), the economic outlook for China has continued to improve. The CEP Indicator, which  which is based on the China Economic Panel and reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, is currently at 1.7 points (April 2019: minus 11.9 points). For the first time since March 2018, the CEP indicator has thus returned to positive territory and almost lies level with its long-term average of 1.8 points. 

At the same time, the expectations for the current economic situation have experienced yet another drop, with the corresponding indicator falling by 4.5 points to a current reading of minus 11.7 points.

The point forecast for real gross domestic product (GDP) growth for 2019 was raised by 0.1 percentage points to 6.2 per cent, while the forecast for 2020 remains unchanged at 6.0 per cent compared to the previous month. The improved forecast is likely to be attributable to the surprisingly high GDP growth in the first quarter, which with a year-on-year growth of 6.4 per cent was higher than expected. However, the forecast for 2019 of 6.2 per cent also shows that the experts expect somewhat lower growth in the following quarters and that the growth rate of 6.4 per cent seen in the first quarter will most likely remain unmatched.

The forecasts for inflation rates have been raised to 2.4 per cent for the next three months and 2.5 per cent for the next twelve months. So far, forecasts for both time horizons have been at 1.7 per cent. “A driving factor for the inflation forecasts in China is that crude oil prices are expected to rise further. However, the significant increase in liquidity in recent months to support the economy is also likely to have had an impact,” says Dr. Michael Schröder, senior researcher in the Research Department “International Finance and Financial Management” at the ZEW – Leibniz Centre for European Economic Research and project leader of the CEP survey.

The survey results show once again that the experts expect the active economic policy measures by the Chinese government to have a lasting effect, and that the official growth target of 6.0 per cent to 6.5 per cent will be achieved.