Expectations for Chinese Economy Worsen

In the most recent survey for December (2–10 December 2019), the expectations regarding the Chinese economy worsened. 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 8.9 points, 5.0 points below previous month’s reading (November 2019: minus 3.9 points).

The point forecasts for 2019 real gross domestic product (GDP) growth were also lowered, to 5.9 per cent, thus even slipping slightly below the six per cent mark. In the previous month, expectations were still at 6.1 points. The GDP forecast for 2020 has been reduced from 5.8 per cent in the previous month to currently 5.5 per cent. “This is a very marked decline which expresses the growing concern about the further development of China’s economy, 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.

What is striking in the current survey is that the indicators for government consumption and for domestic and foreign debt have risen significantly. “This reflects the expectation that the Chinese government will further strengthen its active economic policy and to this end will substantially increase government spending,” says Schröder.

The ongoing protests in Hong Kong against the Chinese government are now clearly manifesting themselves in regional economic expectations, with the corresponding indicator for Hong Kong dropping 23.4 points to minus 21.8 points. At the same time, the protests are expected to have a strong effect on Hong Kong’s real estate prices. At minus 30.5 points, the corresponding indicator is currently at a very low level, signalling lasting negative effects on Hong Kong’s economy.