On January 18, 2018, the National Bureau of Statistics released data showing that the GDP for the whole year of 2017 increased by 6.9% year-on-year. This is the first time that China's economic growth rate has rebounded in the past seven years.
At the same time as China's economic highlights in 2017, what will happen to the economic trend in 2018, what are the factors that support the steady growth of the economy, and what potential risks should be paid attention to? In this regard, "Daily Economic News" (hereinafter referred to as NBD) reporter interviewed Zhu Haibin, chief economist of JPMorgan China.
Risk prevention needs to maintain a certain economic growth rate NBD: Will the GDP growth target be lowered in 2018, and what is your prediction of the economic growth rate in 2018?
Zhu Haibin: It is more important to mention the quality of growth than speed. Many people ask whether it will set or lower the economic growth target in 2018. Our view is that the economic target for 2018 is expected to remain at around 6.5%.
At present, the overall economic growth performance in 2017 is exceeding expectations, and everyone's confidence in China's economic growth resilience is recovering. This is a major reason. In addition, even if the economy has exceeded the expected decline, there is enough room for adjustment from the policy tool to maintain the growth rate of around 6.5%. Moreover, to guard against risks in areas such as finance, it is necessary to maintain a certain economic growth rate, for example, about 6.5% is still very necessary. Therefore, our forecast for GDP growth in 2018 is 6.7%.
Manufacturing investment is expected to improve NBD: What are the supporting factors for economic growth in 2018?
Zhu Haibin: The Chinese economy has great resilience. First, in 2018, consumption will still maintain a very stable growth rate. Second, it is expected that exports will remain relatively good in 2017 in 2018. With the recovery of the global economy, imports and exports have rebounded significantly in 2016 compared to 2016, but the growth rate of imports and exports in 2018 may not be as high as in 2017, but overall, exports and imports can be positive in 2018. Growth will also maintain a relatively stable situation. In addition, the overall weak manufacturing investment in 2017 is expected to improve in 2018, which can partially offset the downward pressure on the economy.
NBD: What are the potential risks facing the Chinese economy in 2018?
Zhu Haibin: The risk is two-way, and the overall balance is basically. The macro-level risk factors are mainly the real estate market and Sino-US trade relations. The housing market is expected to cool slightly in 2018. The biggest uncertainty in the real estate market in 2018 is the change in the housing policy framework.
In addition, although the risk of trade friction between China and the United States is not large, it is not too optimistic about Sino-US trade relations. At the end of 2017, the US Department of Commerce issued a notice refusing to recognize China's market economy status, and in the near future, for the export industries such as China Aluminum, the United States may consider imposing special tariffs. Judging from the above situation, it is expected that the United States will continue to give pressure on China's trade. Therefore, Sino-US trade relations in 2018 cannot be viewed too optimistic, and attention should be paid to uncertainties.
The financial aspect is mainly to prevent inflation risks and the unintended consequences of falling leverage. Food prices will lead to an increase in CPI inflation, while PPI inflation will fall due to the base effect, and CPI and PPI inflation will approach in 2018. Financial deleveraging will continue, but the government needs to address the underlying issues that have led to rising financial leverage, including high savings rates, limited investment channels, and low deposit rates.
The possibility of raising interest rates will rise NBD: The 2017 Central Economic Work Conference proposed that we should continue to implement a prudent monetary policy.
Zhu Haibin: We expect monetary policy to be tight. The actual credit growth rate will continue to drop by 1-2 percentage points, and the open market operating policy interest rate will increase by 20 basis points. We expect the benchmark interest rate for deposits and loans to remain unchanged in 2018, but the possibility of raising interest rates is rising.
We expect open market operating rates to rise slightly in 2018, and the central bank will use open market operations, including multiple liquidity instruments and targeted RRR to manage liquidity. In the baseline scenario, we do not expect the deposit and loan benchmark interest rates to change, but in order to narrow the gap between policy interest rates and financial market interest rates, the possibility of policy interest rate increases is increasing. If economic growth further rises and exceeds market expectations, CPI inflation will rise, the market's expectations for the Fed's interest rate hike will be further strengthened and the US dollar will strengthen. Therefore, policy interest rate hikes may occur.
NBD: What is your judgment on the 2018 fiscal policy?
Zhu Haibin: Since the second half of 2015, fiscal policy has been expanding. It is expected that the fiscal deficit target for 2018 will remain unchanged at 3%, and the broad fiscal deficit will fall by 0.4 percentage points from 2017, from 10.9% of GDP in 2017 to 10.5%.
Due to local government fiscal discipline and increased management of PPP projects, we expect a slight tightening of fiscal policy in 2018.
In the future, fiscal reform may focus on two key areas: first, to rationalize the fiscal relationship between the local and central government; second, tax reform, including the introduction of real estate taxes, the revision of personal income tax, and the reduction of corporate tax burdens, especially Reduce the social security burden of enterprises.
At the same time as China's economic highlights in 2017, what will happen to the economic trend in 2018, what are the factors that support the steady growth of the economy, and what potential risks should be paid attention to? In this regard, "Daily Economic News" (hereinafter referred to as NBD) reporter interviewed Zhu Haibin, chief economist of JPMorgan China.
Risk prevention needs to maintain a certain economic growth rate NBD: Will the GDP growth target be lowered in 2018, and what is your prediction of the economic growth rate in 2018?
Zhu Haibin: It is more important to mention the quality of growth than speed. Many people ask whether it will set or lower the economic growth target in 2018. Our view is that the economic target for 2018 is expected to remain at around 6.5%.
At present, the overall economic growth performance in 2017 is exceeding expectations, and everyone's confidence in China's economic growth resilience is recovering. This is a major reason. In addition, even if the economy has exceeded the expected decline, there is enough room for adjustment from the policy tool to maintain the growth rate of around 6.5%. Moreover, to guard against risks in areas such as finance, it is necessary to maintain a certain economic growth rate, for example, about 6.5% is still very necessary. Therefore, our forecast for GDP growth in 2018 is 6.7%.
Manufacturing investment is expected to improve NBD: What are the supporting factors for economic growth in 2018?
Zhu Haibin: The Chinese economy has great resilience. First, in 2018, consumption will still maintain a very stable growth rate. Second, it is expected that exports will remain relatively good in 2017 in 2018. With the recovery of the global economy, imports and exports have rebounded significantly in 2016 compared to 2016, but the growth rate of imports and exports in 2018 may not be as high as in 2017, but overall, exports and imports can be positive in 2018. Growth will also maintain a relatively stable situation. In addition, the overall weak manufacturing investment in 2017 is expected to improve in 2018, which can partially offset the downward pressure on the economy.
NBD: What are the potential risks facing the Chinese economy in 2018?
Zhu Haibin: The risk is two-way, and the overall balance is basically. The macro-level risk factors are mainly the real estate market and Sino-US trade relations. The housing market is expected to cool slightly in 2018. The biggest uncertainty in the real estate market in 2018 is the change in the housing policy framework.
In addition, although the risk of trade friction between China and the United States is not large, it is not too optimistic about Sino-US trade relations. At the end of 2017, the US Department of Commerce issued a notice refusing to recognize China's market economy status, and in the near future, for the export industries such as China Aluminum, the United States may consider imposing special tariffs. Judging from the above situation, it is expected that the United States will continue to give pressure on China's trade. Therefore, Sino-US trade relations in 2018 cannot be viewed too optimistic, and attention should be paid to uncertainties.
The financial aspect is mainly to prevent inflation risks and the unintended consequences of falling leverage. Food prices will lead to an increase in CPI inflation, while PPI inflation will fall due to the base effect, and CPI and PPI inflation will approach in 2018. Financial deleveraging will continue, but the government needs to address the underlying issues that have led to rising financial leverage, including high savings rates, limited investment channels, and low deposit rates.
The possibility of raising interest rates will rise NBD: The 2017 Central Economic Work Conference proposed that we should continue to implement a prudent monetary policy.
Zhu Haibin: We expect monetary policy to be tight. The actual credit growth rate will continue to drop by 1-2 percentage points, and the open market operating policy interest rate will increase by 20 basis points. We expect the benchmark interest rate for deposits and loans to remain unchanged in 2018, but the possibility of raising interest rates is rising.
We expect open market operating rates to rise slightly in 2018, and the central bank will use open market operations, including multiple liquidity instruments and targeted RRR to manage liquidity. In the baseline scenario, we do not expect the deposit and loan benchmark interest rates to change, but in order to narrow the gap between policy interest rates and financial market interest rates, the possibility of policy interest rate increases is increasing. If economic growth further rises and exceeds market expectations, CPI inflation will rise, the market's expectations for the Fed's interest rate hike will be further strengthened and the US dollar will strengthen. Therefore, policy interest rate hikes may occur.
NBD: What is your judgment on the 2018 fiscal policy?
Zhu Haibin: Since the second half of 2015, fiscal policy has been expanding. It is expected that the fiscal deficit target for 2018 will remain unchanged at 3%, and the broad fiscal deficit will fall by 0.4 percentage points from 2017, from 10.9% of GDP in 2017 to 10.5%.
Due to local government fiscal discipline and increased management of PPP projects, we expect a slight tightening of fiscal policy in 2018.
In the future, fiscal reform may focus on two key areas: first, to rationalize the fiscal relationship between the local and central government; second, tax reform, including the introduction of real estate taxes, the revision of personal income tax, and the reduction of corporate tax burdens, especially Reduce the social security burden of enterprises.
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