Expectations for Chinese Economy Worsen

China Economic Panel (CEP) of ZEW and Fudan University, Shanghai

(PresseBox) ( Mannheim, )
Expectations for the Chinese business cycle have worsened dramatically in January 2016. The CEP Indicator, which reflects the expectations of international financial market experts regarding China’s
macroeconomic development over the coming twelve months, has deteriorated significantly in the current survey period (18/01/2016 - 03/02/2016), falling to a level of minus 20.7 points. This is by far the lowest value recorded since the survey was begun in mid-2013.

Falls in the sub-indicators for employment, as well as for new vehicle registrations, have been particularly stark. The worsening expectations for the Chinese economy are thought, above all, to reflect fears that a weaker development in the global economy shall result in losses in revenues gained from Chinese exports. Experts also expect to see falls in the levels of direct foreign investment being made in China. Estimated levels of domestic consumption are, however, slightly better than they were a month ago. It seems, therefore, that private consumption remains the central pillar of the Chinese economy.

In addition to worsening economic expectations, developments in the most important share indexes have been judged negatively. Even on a twelve month view, share index decreases of between ten and 15 per cent are expected.

Developments in the exchange rate for the Yuan to US Dollar are also expected to result in a loss in value of the Yuan. At the same time, experts assume that the Chinese central bank will continue to make heavy interventions, buying up currency to support the Yuan. This in turn shall result in significant falls in foreign currency reserves.


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