Jan. 19 (NBD) -- The full-year gross domestic product (GDP) in 2017 stood at 82.7122 trillion yuan (12.9 trillion U.S. dollars), representing a 6.9 percent increase in terms of comparable prices compared with a year earlier, according to the data released by the National Bureau of Statistics of China on Thursday. The Chinese economy enjoyed better-than-expected steady growth.

Ding Shuang, Head of Greater China Economic Research at Standard Chartered Bank, accepted an exclusive interview by NBD to share his views about China's GDP growth rate, foreign trade, inflation and other topics.

GDP growth rate to stay at 6.5 percent 

NBD: As China's economic growth rate of 2017 went higher than expected, what do you think of the economic growth this year?

Ding Shuang: We still keep our forecast for China's growth this year at 6.5 percent, 0.4 percent down from that of 2017, because the economic growth may meet some obstacles in the short term. For example, with the end of inventory replenishment cycle time and implementation of measures to cool the property market, the housing sales and construction of new buildings would be affected, which will reduce the investment growth and deal a blow to sales of housing-related goods.

In addition, the previous relaxed policies could be tightened due to the lower leverage as well as the control over the local government debt and bubbles in the housing market. Consumption is predicted to contribute to over two thirds of the GDP growth, while the net exports will make less but positive contribution to the growth.

It is noted that the Chinese government may maintain its target growth rate at 6.5 percent. Given that the country will still focus on building a moderately prosperous society, an annual average grow rate of 6.3 percent will suffice for the next 3 years. 

Photo/VCG

Export estimated to achieve 7 percent increase 

NBD: The export has become one of the driving forces for economic growth in 2017. The total imports and exports have climbed 14.2 percent year on year in 2017, recovering from the decline for two consecutive years. China's export reached 15.3318 trillion yuan (2.39 trillion U.S. dollars) for the year, a year-on-year rise of 10.8 percent, while the import totaled 12.4603 trillion yuan (1.94 trillion U.S. dollars), up 18.7 percent, creating a surplus of 2.8716 trillion yuan (447.51 billion U.S. dollars). So how would you regard the trade this year?

Ding Shuang: The export is forecasted to increase by 7 percent this year, and in the coming two years, China's current account surplus will still account for 1 to 2 percent of GDP. But the trade dispute between China and the U.S. could lead to a slowdown in China's export growth, thus the advantages brought by the current account surplus will be offset if the trade deficit of the service industry continue to expand.

China has kept the surplus in its current account in the past 25 years. However, if the exports are hit, a decrease in the imports will also occur, the country, therefore could reduce the imports from the U.S..

Inflation likely to reach 3.5 percent

NBD: Last year, the Consumer Price Index (CPI) rose 1.6 percent year on year, 0.4 percent lower than the percentage in 2016, and the food prices dropped 1.4 percent, down for the first time since 2003. Producer Price Index (PPI), on the other hand, went up 6.3 percent from a decline of 1.4 percent in 2016, ending a five-year fall of the index. What is your prediction of the inflation in 2018?

Ding Shuang: We think the annual CPI of 2018 will surge 1.6 percent, compared with the previous year's 1.6 percent, which is led by the rising inflation. The deflation of food prices rarely emerged last year, and the CPI has been back to normal after a slump in early 2017. 

According to the data, the food prices highly correlate with crude oil prices, partly because the agricultural production is more energy-intensive, and the rise of oil prices will boost the use of biofules. We expect the price of Brent crude oil to remain in the range of 60 to 65 U.S. dollars per barrel for most of 2018, with the average oil price to increase by 15 percent from 2017. Thus, the food inflation is expected to touch 3.5 percent this year.

While the growth rate of PPI averaged 6.3 percent last year, the metric is predicted to be lowered in 2018. The consumer prices in the downstream have started to be influenced by the input prices in the upstream. For instance, industries including the package delivery and alcohol manufacturing have seen the rise in prices in recent months.

Email: zhanglingxiao@nbd.com.cn