Expectations for Chinese Economy Recovering

In the most recent survey for October (8–17 October 2019), the expectations regarding the Chinese economy have increased by 11.9 points. The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, is currently at minus 5.8 points (September 2019: minus 17.7 points). Last month’s decline of 12.8 points was thus largely offset by the rise recorded in October.

The CEP indicator has, however, been below its long-term average of 1.2 points for twenty months now and has been experiencing an almost uninterrupted series of negative readings for seven months. The point forecasts for real gross domestic product (GDP) growth are at 6.2 per cent for 2019; for 2020, they are at 6.0 per cent. Both values were slightly revised upwards compared to the previous month.

According to the first estimate of the National Bureau of Statistics of China, China’s real gross domestic product grew by 6.0 per cent in the third quarter compared to the previous year. In the first quarter, growth was still at 6.4 per cent, in the second quarter at 6.2 per cent. In order to achieve the growth of 6.2 per cent currently forecast by the experts for 2019, growth in the fourth quarter would have to rise to 6.2 per cent.

“This is a rather optimistic target, unless an end to the trade conflict with the USA is quickly determined and implemented. The clearly negative expectations regarding Chinese exports and imports for the coming months, however, tell another story. The corresponding indicators are both at double-digit negative levels,” says Dr.  Michael Schröder, senior researcher in the Research Department “International Finance and Financial Management”at ZEW Mannheim and project leader of the CEP survey.

The assessment of the current economic situation has fallen by 1.8 points, and now stands at minus 11.5 points. The indicator regarding the assessment of the current situation has thus been remaining close to or below zero for thirteen months now. This month it is particularly striking that the share of experts assessing the current situation as “very bad” has increased sharply. 19.2 per cent of the survey participants consider China’s economic situation to be “very bad”; overall, just under 31 per cent believe that it is “bad” or “very bad”.