The Beijing News:

My question is for Mr. Yao. You mentioned just now that greater efforts will be made to promote consumption in the second half of this year, so that it will contribute to economic growth. Do you have any suggestions to make this work? Moreover, talking about foreign trade, as the COVID-19 pandemic gradually comes under control abroad, what are your thoughts regarding the trend of China's foreign trade? Thank you. 

Yao Jingyuan:

It is important to ensure China's economic growth is more reliant on domestic demand instead of exports when it comes to transforming economic growth patterns. What is domestic demand? It is composed of two aspects — investment and consumption. We used to depend on investment to stimulate domestic demand. However, we need to ensure consumption's leading role in the "three-horse troika" pulling the economy ahead. The Central Economic Work Conference has identified the specific roles that investment, export and consumption will play in boosting economic development. In terms of consumption, the conference considers it as the foundation, emphasizing its importance in leveraging the fundamental role of consumption in promoting economic growth. We are building a new development paradigm in which domestic circulation will play the primary role, and domestic and international circulations will reinforce each other. But why do we need to build such a new paradigm? In terms of domestic circulation, the largest strength of the Chinese economy lies in its vast domestic market. China, with its population of 1.4 billion, has realized a moderately prosperous society in all respects, with around 400 million people classed in the middle-income category, which is equal to the combined populations of the United States and Japan. The principal contradiction facing the Chinese economy has evolved to exist between unbalanced and inadequate development and the people's ever-growing needs for a better life. Given this, we need to focus on China's second centenary goal, and meet people's needs for a better life, as this is the most powerful internal driving force for China's economic growth. 

Obviously, the largest strength of the Chinese economy lies in its huge domestic market and great potential for domestic demand. General Secretary Xi Jinping has said that the ultimate goal for advancing economic development is to meet people's needs for a better life. In this regard, consumption should play its fundamental role in boosting economic growth while China is striving toward its second centenary goal.

Talking about consumption, we all know that it was the hardest hit area by the pandemic last year. In the first quarter of 2010, China's total retail sales of social consumer goods dropped 19% year on year. A fall of 19% was the slowest growth rate in six decades. Human contact is necessary when it comes to consumption activities, but due to the quarantine measures adopted to address the pandemic, consumption was seriously affected last year. During the recovery later on, we put our focus on the resumption of work and production. In addition, we also managed to reopen businesses. The positive role of consumption in boosting economic growth did not completely resume last year. In the first quarter of this year, consumption remained weak, but in the second quarter, its contribution to economic growth improved. These represent China's huge consumption potential.

In terms of China's future economic development, why can we achieve economic upgrading and transformation? Consumption is vital to achieving the second centenary goal. How can consumption be promoted? I think reform is the solution. To expand consumption, the ultimate solution is to increase people's incomes. In the first half of this year, China's per capita disposable income increased basically in line with the growth in GDP, which is also one of the targets of the 14th Five-Year Plan. I think it is important to further increase the incomes of urban and rural residents through reforms. For example, the Fifth Plenary Session of the 19th CPC Central Committee formulated that we will raise the proportion of labor remuneration in the primary distribution. We used to pursue high-speed growth under the past growth pattern, which is why capital and land played more important roles in promoting economic growth. Therefore, in the primary distribution, we prioritized capital and land, and the proportion of labor was relatively low when it came to labor. In this case, we need to tackle this problem through reforms.

Moreover, since we are building a complete domestic circulation market, instead of a closed internal loop, I think we should eliminate regulations that are hampering consumption activities. I think China has great consumption potential, and I'd like to use an example to illustrate why. Take the production of automobiles as an example, which was also talked about during the press conference this morning. In 1978, China's total auto production was 150,000. Now, that number has surpassed 20 million thanks to four decades of rapid development. There have been some problems facing us in terms of production and sales over the past two months, about which some people are concerned. There is still a gap in car ownership per 1,000 people between China and developed countries. The U.S. has more than 800 cars per 1,000 people, and Japan has around 600, while China's current level is about 200. As such, there is huge potential in the Chinese market. Given this, we need to make concrete efforts in the future to expand consumption. Thank you.