Recovery in Expectations for Chinese Economy

The recent survey carried out in July (18 – 27/07/2016) indicates a recovery in expectations for the Chinese economy. The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s macroeconomic development over the coming twelve months, has increased to a current total of 6.6 points. The indicator previously totalled 0 points.

As has been the case over the past four months, the indicator continues to fluctuate within a relatively narrow range around a long-term average of 6.0 points. The surveyed experts subsequently expect to see growth of a similar amplitude to that seen in previous years. For 2016, experts expect the Chinese gross domestic product (GDP) to be subject to an annual growth of 6.6 per cent. Growth of 6.5 per cent is forecast for 2017.

As before, domestic consumption is the main driver of growth in the Chinese economy. In the recent survey, however, greater confidence was once again placed in China's export market, with the relevant indicator rising from 4.5 to 15 points. This may be down to expected improvements in economic developments in the USA and Europe. Forecasts of a weakened yuan may also have contributed to expectations of increased exports. The exchange rate for the yuan (to the US dollar) is expected to be 6.72 in three months’ time. In twelve months, it is expected to be 6.88. The exchange rate is currently 6.64 yuan to one US dollar.

Expectations for the Chinese economy are also reflected by estimated developments in share prices. Forecasts for all three stock market indexes (SSE Composite, Hang Seng, Growth Enterprise Market) have risen considerably. This indicates that the situation of large Chinese businesses is also expected to improve within the coming twelve months.

For further information please contact

Dr. Michael Schröder, Phone +49(0)621 1235-368, E-mail schroeder@zew.de