China Research

April 2015

1. Do you think that the main economic and social reforms that were set up by China’s political leaders at the Third Plenum in November 2013 can be implemented roughly successfully by 2020 – the officially announced evaluation year?

Yes: 54 % No: 46 %

2. Which three envisaged areas will be the most difficult ones to reform (ranked)?

Financial markets

Institutions

Environment

3. Where do you see the three major challenges to the reform policy come from (ranked)?

Politics

Slow moves of institutions

Lack of understanding through the whole system of decisions makers

4. Considering your answers above on the importance of better quality of growth – as stressed repeatedly by the government – what kind of GDP effects do you expect in the forthcoming years

GDP-growth rates will improve until 2020
compared to current growth rates –

GDP-growth rates will stabilize at a level
of 6-7% in the years to 2020 73 %

GDP-growth rates will decline considerably
until 2020 compared to current growth rates 27 %

The quality of data will in the forthcoming years

improve: 27 % deteriorate: 9 % remain unchanged: 64 %

The transparency of data will improve

Yes: 45 % No: 55 %

5. As how important would you grade a relatively successful Chinese reform policy by 2020 for the

(scale 1-5; 5 = very important)

European economy (generally): 3.7 European corporate sector: 3.5

American economy (generally): 3.7 American corporate sector: 3.8

Asian economy outside China: 4.8 Asian corporations outside China: 4.7

 

Comments:

The results of our little survey should be interpreted cautiously since only 11 experts sent their answers to us. But we think that some indications are given all the same.

The respondents are really divided on the future results of the reforms plans (as it was the case one year ago).

Not very surprising: Financial markets, institutions and the environment are considered as the most difficult areas to reform or to improve.

More than 70 percent of the panel participants believe that China’s GDP growth rate will stabilize between 6 and 7 percent in the forthcoming years; this would be quite a satisfactory development with (probably) improved quality of growth at the same time. Regrettably, no major progress is expected what concerns the quality of statistics.

A relatively successful Chinese reform policy is regarded as quite important to the European and American economy – but also to the corporate sector of these two continents. In our view, the Chinese impact will be even higher beyond 2020 if Chinese reform policy were to fail. Understandably, the rest of Asia will be even more dependent on developments in China, the panelists conclude.

 

 

Hubert Fromlet
Senior Professor of International Economics, Linnaeus University
Editorial board

 

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Summary
¤ Our so-called “temperature indicator” for the Chinese economy improved somewhat to 6.2 in December 2013 compared to 5.4 in June 2013 (10=extremely overheated). This is number that indicates quite modest growth by Chinese standards. Around 20 China experts from Asia, North America and Europe participated in this survey.

¤ The panel’s GDP projections (average, in brackets the forecasts from June 2013):
2013: 7.6 (7.6); 2013q4 7.8 (7.8); 2014: 7.6 (7.5); 2014 q4: 7.2 (7.3).
China has obviously landed on more dampened growth path.

¤ 78% of the panelists think that the currency renminbi will appreciate slightly during 2014 (1-5%).

¤ 75% of the panelists still see a kind of bubble on the real estate market.

¤ The panel’s confidence in the economic future of China is quite neutral (around 3 in a five year’s perspective on a scale from 1-5; 5=very strong) – but surprisingly somewhat above 3 (i.e. 3.5) in a ten years’ view. The latter result shows implicitly that there is some confidence that China’s reform policy during the current leadership will at least be partly successful.

¤ The three most strongly preferred reform areas seem to be – according to the panel (ranked):
financial markets, the hokou system (for registration), and, side by side: corruption and the environment.

 

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Hubert Fromlet
Visiting Professor of International Economics, Linnaeus University
Editorial board

 

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“Our “overheating indicator” for China rises to 6.5 – slightly improved outlook for 2013 and 2014“

¤ Our so-called overheating indicator for China – derived from a survey with China specialists all over the globe – gained some temperature in December compared to May 2012 (6.5; May:2012: 4.9; 1-10; 10=extremely overheated). The current GDP-growth temperature does not indicate any overheating in the general economy.

¤ GDP forecasts for China (average, percent) 2012: 7.3 2013: 7.8 2014: 8.0
For both 2013 and 2014, GDP predictions are characterized by downward biases – though on a somewhat more encouraging trend. I tend to be slightly more optimistic.

¤ One of the panel’s assumptions for Chinese growth forecasts is that around two thirds of our panel members count on a gradual but relatively modest recovery in 2013/2014 in the OECD area as a whole. Approximately, one third believes in a continued weak and disappointing performance – on average – of the entire OECD block. China’s growth sensitivity that is related to the European crisis is considered to be at 5.6 (scale 1-10; 1=no sensitivity at all) which is not negligible.

¤ Three fourths of the panelists predict that the Chinese currency renminbi (RMB) will appreciate slightly during 2013 (by 1-5 percent). All the other remaining panelists assume the RMB to remain more or less stable.

¤ 100 percent of the panelists think that there is still a dangerous price bubble on the real estate market. When it comes to the Chinese stock market, however, our China experts seem to be markedly less concerned about potential bubble risks.

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Hubert Fromlet
Professor of International Economics
Editorial board

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