Reuters:

What is your economic outlook for the fourth quarter or next year? Also, has China made sufficient policies in preparation for a further economic downturn, and how should China react to the spillover effect brought by the U.S. Federal Reserve's policy changes? Thank you.

Fu Linghui:

Thank you for your questions. The economic trends in the next phase have drawn much attention. Since the beginning of this year, China has made considerable progress in its economic recovery. Although the country's economic growth slowed down in the third quarter due to many factors such as the pandemic, floods and a higher base number, it still showed strong resilience and vitality. In general, China's economy will sustain the momentum of continued recovery and move toward high-quality development, and the country has the ability to achieve its projected targets and tasks for socioeconomic development for the whole year.

First, economic recovery is well supported. In terms of consumption, stable employment and a continued rise in residents' incomes are conducive to higher spending power. The stable domestic epidemic prevention and control situation, a better consumption environment, and improving social security will also help to raise consumers' willingness to make purchases. In the first three quarters, Chinese per capita nominal consumer spending rose 15.8% year on year, with a two-year average growth of 5.7%, both higher than those of the first half of 2021. In terms of investment, business profits maintained relatively fast growth, the current rate of capacity utilization remains at a higher level, and supportive policies in the real economy will continue to take effect. All will help to improve investment in manufacturing. In the first three quarters, manufacturing investment registered a two-year average growth of 3.3%, showing a general trend of improvement. There have also emerged more favorable factors for the growth of infrastructure investment. This year marks the beginning of the 14th Five-Year Plan (2021-2025). With major projects starting construction one after another and special government bonds issued at a faster pace, there will be more infrastructure investment. In the first three quarters, the two-year average growth rate of infrastructure investment was 0.4%, up 0.2 percentage point compared with the period January to August. In terms of imports and exports, against the background of the global economic recovery, China boasts a complete industrial system and strong supporting capacity, which enables enterprises to meet the demands of the changing global market. China's exports are hence expected to maintain faster growth. At the same time, the domestic economic rebound can also drive China's imports. In the first three quarters, China's imports and exports expanded 22.7% year on year.

Second, progress has been achieved and stability ensured in industrial development. Despite the combined impact of the pandemic, floods and other adverse factors, the trend toward promoting quality and upgrading has remained unchanged. The overall situation of grain production is stable with increased output of summer grain crops and early season rice. Owing to the expanded sown area and general favorable climate conditions, the fall bumper harvest is in sight. The pace of industrial digitalization has also been stepped up. In the first three quarters, among industries above designated size, the added value of high-tech manufacturing industry increased by 20.1% year on year. The output of integrated circuits and industrial robots has grown substantially. The modern service industries also maintained sound growth momentum. In the first three quarters, the added value of the industries of information transmission, software and information technology increased by 19.3% year on year. With the continuous recovery of the Chinese economy and the steady pursuit of high-quality development, China's industries will keep heading in a positive direction. 

Third, innovation-driven power has been greatly strengthened. With the deepening reform to delegate power, streamline administration, optimize government services and the steady development of supply-side reform, China's innovation development has maintained sound growth and injected powerful vitality into economic development. According to a report released by the World Intellectual Property Organization (WIPO), China ranked 12th in the latest Global Innovation Index 2021, two places higher than last year. We have kept increasing the innovation input. In 2020, China's spending on research and development increased by 10.2% year on year, accounting for 2.4% of total GDP, close to the average level of countries in the Organization for Economic Co-operation and Development (OECD). With the optimized innovation environment and the improved supporting policies, we will further increase expenditure on technological innovation with enterprises as the main body. Innovative products are constantly emerging. A flow of major technological achievements in the fields of manned spaceflight, deep-water exploration and quantum science and technology have been revealed to the public. The bio-pharmaceutical industries, including vaccines and innovative medicines, have also achieved rapid growth. In the first three quarters, the added value of the pharmaceutical industry increased by 29.2% year on year. The innovative vitality has been greatly unleashed. In the first three quarters, the online retail sales of physical commodities and the trade of cross-border e-commerce saw a year-on-year increase of 15.2% and 20.1%, respectively. The outputs of new energy products and smart products also grew rapidly.

Regarding the policy aspect that you mentioned, it is fair to say that the government has accumulated a wealth of experience in making adjustments and controls. Over the past few years, on the basis of range-based regulation, we have strengthened directional and targeted regulations. We are fully capable of ensuring the economy operates within a reasonable range, and promoting the sound development of the economy. At present, China's financial strength has grown noticeably. Due to the relatively large space of monetary policies, we are capable of launching forceful measures in a timely manner according to changes in the situation, in a bid to promote the steady development of the economy, such as with the feasible monetary policy adjustments for major economies. Since this year, financial management departments have made a set of policy arrangements, and reduced the potential spillover effects brought about by the policy adjustments in major developed economies. Thank you.