Reuters:

China's GDP in the first half year went up by 2.5%, much lower than the annual growth target of around 5.5%. What do you think of the recovery momentum in the year's second half? Will new measures to stabilize growth be rolled out, especially in boosting consumption and private investment? Thank you. 

Fu Linghui:

Thank you for your questions. In the first half of the year, the Chinese economy was affected by the complex and grim external environment and the epidemic resurgence. With concerted efforts of all sectors, we maintained a hard-won positive economic growth in the second quarter. For the next stage, stagflation risks of the global economy are rising, and there are still many unstable and uncertain factors in the recovery of the domestic economy. But China's economy has strong resilience and great potential, and its long-term positive trend has not changed. By implementing policies and measures to stabilize growth, China's economy is expected to improve gradually. 

First, the country's economy has resilience. Despite the shocks caused by the epidemic resurgence, the country's economic aggregate remained considerable and enjoyed the advantages of a solid material foundation and a super-large market. The economic aggregate reached 56 trillion yuan in the year's first half, with the industrial added value approaching 20 trillion yuan, the value added created by the service sector exceeding 30 trillion yuan, and the fixed-asset investment exceeding 27 trillion yuan. Retail sales dropped slightly but still exceeded 21 trillion yuan. All these figures have strengthened our strength and confidence in coping with various risks and challenges. 

Second, there is potential for the recovery of demand. In terms of investment, we continued to make efforts to stabilize investment, with the issuance and use of special bonds being accelerated, significant projects being advanced, and investment in infrastructure being boosted. Investment is expected to play a more prominent role in stabilizing growth. In the first half of the year, infrastructure investment grew by 7.1% year on year, a 0.4 percentage point higher than in the first five months. Regarding leading indicators, total planned investment in new projects rose 22.9% year on year in the first half of the year, maintaining rapid growth. In terms of consumption, as the epidemic prevention and control improved, offline consumption scenarios gradually recovered. Consumption is expected to continue to recover, fueled by policies to promote consumption. The country's imports and exports have strong resilience in terms of foreign trade. We continue to encourage smooth freight and logistics services. The imports and exports of the Yangtze River Delta region have recovered quickly, the business environment at ports has continued to improve, and there is a good foundation for maintaining steady and high-quality growth of foreign trade. The imports and exports rose 9.5% in May year on year, up 9.4 percentage points from April. The imports and exports rose 14.3% in June year on year, up 4.8 percentage points from May. 

Third, there are pillars for production recovery. In terms of industries, the total value added of the industrial enterprises above the designated size resumed positive growth in May, up 0.7% year on year and up 3.9% year on year in June. As the resumption of work and production is accelerated and bottlenecks in industrial and supply chains are unclogged, the leading role of key sectors, such as the auto and electronic industries, is expected to grow. In particular, the accelerated recovery of production in areas heavily affected by the epidemic in the second quarter has contributed to the stable industrial growth. The manufacturing purchasing manager's index (PMI) climbed above the tipping point again in June. The Production and Operation Expectation Index rose to 55.2%, showing the confidence of manufacturing companies has continued to grow. In terms of the service sector, as the epidemic prevention and control improved, the service production reversed the decline in June, with the Index of Services Production shifting from decline to an increase of 1.3% year on year, with the recovery momentum of the contact and cluster industries being apparent. As life and work quickly return to normal, service market demand has gradually picked up, business confidence has recovered, and the service sector is expected to improve. In June, the PMI for services was 54.3%, a return to expansionary territory. The Business Activity Expectation Index for services was 61%, rising for the second consecutive month. In terms of transport and logistics, smooth transport and logistics services have supported the further recovery of production. Freight turnover rose 5.7% in June year on year, up 2.3 percentage points from the previous month. The logistics performance index (LPI) was 52.1%, up 2.8 percentage points from the last month. 

Fourth, innovative development injects growth impetus. In recent years, China has further put into action the innovation-driven development strategy, vigorously promoted industrial transformation and upgrading, and effectively boosted new drivers of growth. Due to the COVID-19 pandemic, traditional industries have made a faster shift to digital-driven, internet-based, and smart-tech models, and new industries and new drivers have continued to maintain their steady and rapid growth, offering continuously enhanced support to the economic growth and being conducive to promoting the sustained recovery of the economy. In the second quarter, the value-added of high-tech manufacturing enterprises above the designated size increased by 5.7% year on year, 5 percentage points faster than the growth rate of industries above the designated size. The added value of information transmission, software and information technology service industries increased by 7.6%, 7.2 percentage points higher than the growth rate of the GDP.

Fifth, macro policies have helped guarantee growth. Since the second quarter, facing downward pressure on the economy, the CPC Central Committee and the State Council have timely issued 33 policies and measures in six aspects to stabilize the growth. All regions and departments have responded quickly and implemented these policies and measures in an effective way. In June, the State Council further strengthened its deployment and called for accelerating the solid implementation of a package of policies and measures to stabilize the economy. From the recent situation of the economic operation, we can see investment in infrastructure has been accelerated significantly, the consumption of bulk commodities such as automobiles has notably rebounded, the flow of logistics and people has become smoother, the expectation and confidence of enterprises have gradually improved, and the policies to ensure stable growth have been working effectively. In the next stage, the intended effect of policies such as refunding large-scale VAT credits, issuing and using special bonds, and strengthening the financial support for the real economy will continue to be unleashed, helping promote sustained recovery and sound development of the economy.

In general, as the epidemic prevention and control situation has improved and the policies have shown effects, China will further harness its strengths as a large economy with broad market space, strong development resilience, sufficient reform dividends, and strong governance capacity, and China's economy is expected to continue to recover. We should also notice that there are still instability and uncertainties in the external environment, and China is under the triple pressures of shrinking demand, disrupted supply, and weakening expectations. Therefore, we need to continue to make unremitting efforts to stabilize the macroeconomic performance and promote the sustained recovery of the economy. Thank you.