ZEW Survey: Economic Optimism for China Dampened

By Constanze Schmitz

Industry Trends

According to a recent survey conducted by the Centre for European Economic Research (ZEW) and the Fudan University (Shanghai), the economic outlook for China has declined significantly, falling by 17.8 points (April 2017: 17.7 points). The rather optimistic sentiment witnessed in the previous survey has thus faded somewhat. The China Economic Panel (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 0.1 points, falling below the long-term average of 5.2 points. The assessment of the current economic situation has also dampened and fell by 5.4 points to a current level of 12.2 points.

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In May, the CEP Indicator has declined significantly and is now at minus 0.1 points.

What is remarkable, however, is that the point forecasts show a slight improvement. For instance, the forecasts for the third quarter of 2017 increased from 6.6 per cent to 6.7 per cent. The overall forecast for 2017 also improved, climbing from 6.6 to 6.7 per cent.

How can these different survey results be explained given that they seem contradictory at first glance? "The sentiment indicators are probably more susceptible to recent or forthcoming events," explains Dr. Michael Schröder, senior researcher in ZEW's Research Department "International Finance and Financial Management" and project leader of the CEP survey. The economic sentiment dampened somewhat possibly due to the decline in the annual rate of change in industrial production, which fell from 7.6 percent in March to 6.5 percent in April. Alongside a quarterly growth rate of the real GDP of 1.3 percent in the first quarter of 2017 – which is rather weak, at least in Chinese terms – the indicators points towards a rather restrained start to the year. In accordance with China's current five-year plan, however, financial market experts still expect to see strong growth throughout the year.

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