China Central Television (CCTV):

You just mentioned that some of the economic indicators were still declining in August, which has drawn public concern. How do you see the overall economic performance of that month? Thank you.

Liu Aihua:

Thanks for your question. According to what I introduced just now, the Chinese economy has both maintained stability while taking a turn for the better, which can be seen in the following five aspects:

First, growth is stabilizing. According to the main growth indicators, the added value of industries above designated size from January to August increased by 6.7 percent, up 0.7 percentage points year-on-year. In August alone, the rise was 6.0 percent year-on-year, indicating maintenance of steady growth. From January to August, the service sector producer price index reached 8.3 percent, up 0.2 percentage points year-on-year; in August alone, the figure was also 8.3 percent, up 0.9 percentage points year-on-year. So, the growth was quite steady in regard to the production side. In terms of demand, total retail sales of consumer goods grew by 10.4 percent in the first eight months of this year, up 0.1 percentage point over last year. Investment growth also remained stable, with a year-on-year increase of 7.8 percent in fixed asset investment during the period. Investment in areas of perceived weakness also maintained rapid growth. Moreover, imports and exports maintained double-digit growth. Therefore, demand-side growth was also quite stable.

Second, employment has seen an upward turn. In August, the surveyed unemployment rate in urban areas remained stable, with the figure remaining below 5 percent in 31 major cities, a slight decline over the previous month. The weekly working time in industrialized enterprises increased by 0.07 hours compared to July. A total of 9.74 million jobs were created in urban areas from January to August, up 260,000 year-on-year. August saw a slight rise over July.

Third, increases in commodity prices have remained mild. In August, the consumer price index (CPI) rose by 1.8 percent year-on-year, and 0.4 percent month-on-month. This can be considered a moderate level compared to the same period in previous years and when set against other major world economies.

Fourth, the structure is continued to be optimized. In terms of industrial structure, high-tech industries have maintained relatively rapid growth, with their added value rising by 12.9 percent year-on-year in August, up 0.8 percentage points over the previous month; the added value of equipment manufacturing industries rose by 11.6 percent, up 0.9 percentage points. At the same time, manufacturing industries with high-energy consumption saw a slowdown, with growth of 2.9 percent in August, down 0.4 percentage points. In regard to the demand side, products that meet higher consumer demand grew fast. In August, sports and entertainment products as well as communications equipment registered double-digit growth, up 14.9 percent and 12.2 percent year-on-year respectively. The investment structure is also improving. On one hand, investment in high-tech manufacturing grew by 19.5 percent year-on-year; on the other hand, traditional sectors are also speeding up their transformation showed by the fact that investment in technological improvement for manufacturing grew by 11.4 percent from January to August. In addition, investment in infrastructure and in areas of perceived weakness also picked up. Since the beginning of this year, infrastructure investment has risen by 19.8 percent year-on-year; investment in environmental protection, public facilities, road transportation and other areas of perceived weakness enjoyed a growth of over 20 percent. Therefore, investment in industrial upgrading is quite obvious.

Fifth, quality has improved. From January to July, profits in industrialized enterprises above designated size increased by 21.2 percent, up 14.3 percentage points year-on-year. Operating profits of the service sector in the same period grew by 22.6 percent. Fiscal revenue continued a desirable growth rate. From January to August, general public budgets grew by 9.8 percent overall.

From the above five indicators, we can see that, from January to August, China's economic growth was within a proper range with deepened structural adjustment, improved quality and positive and steady growth momentum.

Phoenix TV:

We have noticed that the PPI rose to 6.3 percent in Augustafter three consecutive months of flat growth.What do you think of the rebound of PPI in the case of the overall decline of growth rates of several major indexes, involving the just-mentioned investment, consumption, imports and exports? Thank you.

Liu Aihua:

Thank you for your question. PPIhad a year-on-year growth rate of 6.3 percent in August, and the growth rate hasslightly expanded compared with last month. And itsmonth-on-month growth rate is also slightly expanding.Why? I think there are two main reasons.

First, the domestic supply-side structural reform has continued to advance. In terms of PPI's internal structure, PPI's rise is actually a structural boost. In August, the rise of PPI mainly came from the means of production, while the growth rate fromconsumer goods were relatively stable.

Second, changes in the prices of major international commodities had an impact on the rebound of PPI.Data from relevant international organizations show that in August there were a rise inprices ofmany upstream products. This was mainly caused by the recent sustained recovery of world economy and the steadily expanding of international markets which has a great demand for China's raw materials.

Here are some examples. The international energy price rose by 4.4 percent in August, the metaland mineralprice by 8.2 percent, and the raw material priceby 2.3 percent. The prices of major international commodities also rose invarying degrees. This impact of external factors cannot be ignored, either.In general, both domestic and international factors have contributed to the rebound of PPI in August.

Over the next period, the rise of PPI will have pushing-up factors and pulling-down factors. The pushing-up factors will include the just-mentioned sustained advancing of domestic supply-side structural reform and the continuedrising of major international commodities.

But there will be certain pulling-down factors, too.PPI's year-on-year growth turned from negative to positive for the first time in September last year. This base will appear as a comparatively large increase, which will also have a certain impact on PPI's year-on-year growth in September this year.

So from a whole point of view, the trend of PPI is yet to be seen. Thank you.

Economic Daily:

Since the second half of the year began, the statistics of production, consumption and investment have been falling. Now, there's a saying that the bonus brought about by the supply-side structural reform is shrinking. Can you please comment on this opinion. In addition, as our reform keeps on moving ahead, what will the next phase of the economic trend be like? Thank you.

Liu Aihua:

Thank you for your questions. Looking at the general picture, we can see certain numbers have indeed shown a slowdown in this month's statistics. However, if we observe the economy as a whole, there is a need to consider it from multiple angles and in multiple dimensions. The short-term ups-and-lows are often affected by some non-economic factors, such as climate and cardinal numbers, which do not necessarily reflect the overall trend. For example, in the recent two months, July and August, you know the high-temperature and often rainy weather can affect many indices. Because of this oppressive kind of weather, many industrial enterprises suspend their production and take advantage of the lull to undertake maintenance. So, the regular production and operation may be influenced, which will also affect the year-on-year growth of industrial production. Furthermore, we have mentioned that consumer prices have seen a larger increase on a month-on-month basis, and this is also due to the weather factor. For example, due to the weather, the cost of storing fresh vegetables will be higher. So, when we evaluate the economic situation, we should not only look at the year-on-year growth, but also the month-on-month and accumulated growth figures. When we look at it from various perspectives, in general the basic situation of economy in August did not change. Production and demand are stable, and the economic structure continues to be adjusted, and the quality and benefit are also on the rise. The stable and positively improving trend is not changed.

When there are no fundamental changes, the trend for the second half of the year will continue in a good direction. And there are three major factors to support that.

First, the base is stable. As supply-side structural reform continues, the enterprises' operations and benefits keep on improving, as the residents' income is improving in a stable way, and fiscal incomes are growing faster. The three major income sources are performing at their best rate in recent years, and this is very rare. The micro-foundations are positive, which has laid a stable base for the macroeconomic positive trend. For example, in regard to the consumers, in the past half year, incomes have actually grown 7.3 percent, or 0.8 percent faster on a year-on-year basis. This is a high speed when we look at recent years. When residents' incomes grow faster, this will promote upgraded consumption. In addition, as the supply-side has seen stable improvement of quality and level, so the consumption will have chance to stay in fast lane and continue to grow. From the perspective of investment, as enterprise profitability keeps on rising and the market demands keep on improving, this will strengthen the investment capabilities of enterprises and enlarge the investment space. And from the perspective of foreign demand, currently the world economy continues its revival and our export products have enhanced their competitiveness, so we have a relatively solid base for foreign needs to grow stably and positively. So, looking at the three demands, the base for the demand to stably enlarge is becoming better and more stable.

Second, there are clear signs of increased vigor. Thanks to the boost by public entrepreneurship and innovation, there are many more new entities appearing. In August, the number of newly-registered enterprises reached 17,000 a day, faster than the figures last year. Besides, new industries and new models are also fast developing. From January to August, in the online retail volume, the physical commodities' value of retail sales increased by 29.2 percent year-on-year, and non-physical commodities' value of retail sales grew even faster, increasing by 52.9 percent year-on-year. This dynamic new growth also created new impetus and vitality into overall economic growth, and will make the economic growth more stable and better.

Third, the prospects are very positive. As noted already, in August, the manufacturing industry's Purchasing Managers'Index was 51.7 percent, which has stayed above the critical point for 13 straight months. The non-manufacturing PMI activity was 53.4 percent, while the consumer confidence index also remains at a high level. Recently, the international community also have stronger confidence in China's economic development. So many international organizations have raised their projections of China's economic growth.

So, from these three aspects - first, more solid foundation; second, strengthened vigor; third, positive prospects - we can see that the short-term fundamental base for economic growth has not changed, and the stable and positive trend will continue.

Nikkei:

Industrial production has slowed down for two straight months. Besides the weather factor, is there any other reason in your view? Some local governments are currently strengthening their regulations on environmental protection, so how does that impact industrial production?

Liu Aihua:

First, industrial production may indeed have slowed down, but it still maintained steady growth. From January to August, the added value of industrial enterprises with annual revenue of at least 20 million yuan from their main business operations increased by 6.7 percent year-on-year, up 0.7 percentage point. Industrial production grew by 0.46 percent in August, up 0.05 percentage point from July.

Second, due to the hot and rainy days, industrial production in July and August did see a slowdown. However, this slowdown is also related to structural adjustment. The added value of industries with extensive energy consumption grew by 2.9 percent, 0.4 percentage point less than the previous month. Meanwhile, other industries that have speeded up their transformation and upgrading managed to raise their production. The added value of manufacturing industries rose by 6.9 percent, high-tech industries rose by 12.9 percent, and equipment manufacturing industries grew by 11.6 percent, respectively 0.2, 0.8 and 0.9 percentage point higher than the previous month.

The productive activities of industries with extensive energy consumption has slowed down, but, on the whole, we were able to speed up transformation and upgrading. Therefore, it shows we are following the new vision of development, which will not only boost short-term economic development but also give sustainable and fresh impetus to medium and long-term development. Thank you.

Reuters:

Recently, the exchange rate of RMB has been appreciating significantly. What is the impact on China's exports and macro economy? Thank you.

Liu Aihua:

Thank you for your question. I think the RMB appreciation reflects the fact that China's economic development was progressing steadily with some improvement, and it has boosted the confidence in China's economic fundamentals from home and abroad.

Based on this fact, I think China's economy can maintain the current trend and seek further development. There will be more and more factors to support the further development of the economy, which will grow at a medium and even high speed with higher quality. The exchange rate of RMB will also maintain a reasonable growth rate. Thank you.

CNR:

I have two questions. First, the investment in real estate development in the first eight months has witnessed a relatively stable increase, both the housing areas being newly developed and sold continued to grow year on year. Do you think the investment increase will last in the second half of this year? In addition, the "golden September and silver October" are usually the best months for the real estate industry, but some argue that September and October this year will witness a sluggish performance compared to previous years. What do you think of this? The second question is: we have also seen that PPI and CPI have been rising year-on-year. Does it mean that inflationary pressures still exist? How do you think the CPI will change in the H2? Thank you.

Liu Aihua:

Thanks for your questions. Let me address your first question about the real estate market first. The regulation on the real estate market since last year has manifested its effects in two aspects.

First, the housing prices in popular cities have kept rising too quickly. As seen from the housing prices of 70 large and medium cities in July, the year-on-year increases of new commercial housing prices in 15 first-tier cities and popular second-tier cities have all slowed down markedly, ranging from 0.8 percentage points to 4.9 percentage points; with month-on-month increases have narrowed down as well. Second, de-stocking has speeded up. By the end of August, the areas of commodity housing for sale had fallen by 12 percent year on year, and one percentage point higher than that of the end of last month.

As you said, real estate sales are still growing at a relatively fast rate. From January to August, the national commercial housing sales grew by 12.7 percent. During the same period, the investment in real estate development increased by 7.9 percent year on year at a relatively steady speed. In addition, from the supply side, the recent policies of some government departments including pilot rental housing will expand the supply of commercial housing and channel some of the demand. Therefore, the real estate market is expected to maintain a steady and healthy development overall under the exploration and efforts of all the regions and various government departments.

The second question is about the CPI. In August, the CPI rose 1.8 percent year on year and 0.4 percent from the previous month. In fact, the expansion of the CPI increase in August is mainly attributed to seasonal factors. The month-on-month increase of CPI was mainly due to rising food prices, which contributed a share of about 0.24 percentage points to the month-on-month increase of the CPI according to our measurements and calculations.

Non-food prices rose 0.2 percent month on month, an increase basically equivalent to that of last month. The rise in food prices was mainly due to the rise in the prices of eggs, fresh vegetables, pork and chicken. High temperatures were the main reason for the decline in egg production, which explained a month-on-month increase of egg prices by 16.2 percent. High temperatures and rainfall as well as strong convection weather increased the costs for storing and transporting fresh vegetables, and which led to a month-on-month increase of egg prices by 8.5 percent.

The price of chicken and pork rose by 3.0 percent and 1.3 percent respectively. The CPI rose by about 0.32 percentage point under the influence of the above four items. You are concerned about the trend of the CPI and whether its change will lead to inflation, I think the answer is no, because the CPI increased by only 1.5 percent from January to August, and the food supply is relatively adequate at present. This year, the summer crops and the early season rice yield are greater than last year, and the autumn crops are growing well so far.

Therefore, the overall supply of agricultural products is relatively adequate, and thus, food prices will not increase much. Moreover, the prices of industrial consumer goods showed a relatively low increase of 0.6 percent from January to August. Comparably, the prices of services increased by more by 2.9 percent, but under the continuous supply-side structural reform, the quality and level of services kept improving, so the prices were not supposed to show a large increase. Thus, overall, there will be no problem in fulfilling the objective of controlling price inflation for the whole year. Thank you.

Xi Yanchun:

The press conference ends up here. Thanks again for Ms. Liu Aihua, and thank you all.