Reuters:

Production data were satisfactory back in March, and production has now returned to pre-epidemic levels. However, consumption remains sluggish, leading to an uneven economic recovery. Will new policies be introduced to balance this situation? What will it take to convince Chinese consumers to spend more instead of putting more money in the bank?

Fu Linghui:

Thank you for your questions. From the situation in the first quarter, consumption growth has rebounded significantly. Since this year, with epidemic prevention and control making a quick and smooth transition to a new stage, pro-consumption policies have continued to pay dividends, and sales have rebounded significantly. In particular, the improvement in service consumption is more obvious. Consumption played a greater role in driving economic growth. As we have talked about, the contribution of the final consumption to economic growth in the first quarter reached 66.6%, a significant rebound over the whole of last year. Among the three major demands, consumption demand has become the most significant factor for driving economic growth. From the perspective of sales, total retail sales of consumer goods in the first quarter rose 5.8% year on year, compared with a 2.7% decline in the fourth quarter of last year, which indicates that consumption is gradually rebounding and improving.

From the main features, first, the service consumption rebounded significantly. As the impact of the epidemic gradually receded, consumption scenarios increased, and offline consumption grew quickly with residents going out for dining, entertainment and travel. In the first quarter, the catering sector saw the revenue increasing by 13.9% year on year. In the same period, the year-on-year nominal growth of national per capita consumption expenditure on services were 6.2%, significantly higher than that of national per capita consumption expenditure in total, and the national consumption expenditure on services' proportion in the national consumption expenditure in total was 0.3 percentage points higher year on year. 

Second, the growth of merchandise sales showed a positive trend. With the gradual release of consumer demand, the accelerated growth of upgraded consumption, and the continued growth of consumption required by basic living, a steady rebound has been seen in commodity sales. In the first quarter, retail sales grew by 4.9% year on year, compared with a 1.7% decline in the fourth quarter of last year. Among businesses above designated size, nearly 70% of the 18 categories of goods saw year-on-year growth in the value of retail sales. The retail sales of grain, oil, and foodstuff, and garments, footwear, hats, and knitwear, namely goods for basic living, increased by 7.5% and 9% year on year, respectively. Retail sales of gold, silver and jewelry, and cosmetics, namely nonessentials, increased by 13.6% and 5.9%, respectively.

Third, the growth of online and offline consumption accelerated. With the improvement in circulation, online consumption continues to develop in a good direction. In the first quarter, the online retail sales of physical goods grew by 7.3% year on year, continuing to maintain rapid growth. At the same time, with the recovery of offline consumption, the retail sales of physical stores gradually improved. In the first quarter, retail sales in physical stores above designated size increased by 3.6% year on year, with the growth rate 3.2 percentage points higher than in January and February.

Fourth, the propensity of residents to consume has rebounded. As the economy stabilized and rebounded, the employment situation gradually improved, the consumption scenarios continued to increase, and residents' confidence in consumption improved, which led to a rise in the average propensity to consume. In the first quarter, the national average propensity to consume was 62%, an increase of 0.2 percentage points over the same period last year.

In general, overall consumption has restored the good momentum. But we note that consumer spending needs to be further encouraged. Going forward, we must use every possible means to increase people's incomes, and work actively to increase supply quality to effectively combine expanding consumption with supply-side structural reform, which will unleash consumption potential, promote economic development and improve people's wellbeing. Thank you.