Yicai:

What is your comment on the GDP growth rate in the third quarter? What are the highlights and positive changes in the economic performance during this period of time? Thank you.

Sheng Laiyun:

Thank you for your questions. 2023 marks the first year of China's economic recovery following a three-year period of pandemic-induced setbacks. Based on the economic data in the first three quarters released earlier, the national economy has withstood external risks and challenges, as well as the downward pressure from multiple intertwined domestic factors. As a result, the national economy has sustained a recovery momentum. Such momentum was more prominent, especially in the third quarter, as positive changes have taken place in multiple fields and indicators. These changes are mainly seen in the following aspects:

First, economic growth has experienced a steady recovery. As mentioned earlier, the GDP in the first three quarters saw a 5.2% year-on-year increase, with that of the third quarter growing 4.9% year on year, which is slower than the second quarter. This is mainly attributed to an increased economic aggregate when compared to the same period last year. As we know, the pandemic dealt a relatively heavy blow to the country in the second quarter of 2022, resulting in a GDP growth rate of only 0.4%. Nevertheless, the economy rebounded with a 3.9% growth rate in the third quarter. Therefore, after deducting economic aggregate factors, the average two-year growth rate of GDP in the third quarter of this year reached 4.4%, 1.1 percentage points higher than the second quarter. In this sense, we need to consider both year-on-year and month-on-month figures when evaluating economic recovery. From a month-on-month perspective, GDP grew by 1.3% in the third quarter of this year, 0.8 percentage points higher than the second quarter, demonstrating a consistent momentum of economic recovery. China's economic growth rate, be it the year-on-year figure or the aggregated figure for the first three quarters, ranks top among major economies in the world. This signifies a positive change.

Second, employment has improved. As I said earlier, the urban surveyed unemployment rate averaged 5.3% in the first three quarters, 0.3 percentage points lower than the same period last year, and the unemployment situation has been gradually improving month by month. The surveyed unemployment rate averaged 5.2% in the third quarter and stood at 5% in September. The improving employment situation is a significant indicator of economic recovery. This represents another positive change.

Third, prices have been kept generally stable. In September, China's CPI saw a month-on-month increase of 0.2% and remained unchanged compared with the same period last year. The figure grew by 0.4% year on year in the first three quarters of this year. The decline in the country's producer price index (PPI) has slowed down for three consecutive months. Specifically, the PPI in September dropped 2.5% year on year. The decline narrowed by nearly 3 percentage points, from the lowest point in June. This suggests that domestic demand is growing steadily.

Fourth, foreign trade has showcased better-than-expected growth. According to data released by the General Administration of Customs (GAC), in the first three quarters of this year, the total value of foreign trade experienced a 0.2% year-on-year decrease, remaining basically consistent with figures from the same period last year. This year, the world economy has been experiencing downward fluctuations with a decline in external demand. In addition, China's foreign trade sustained a high growth rate in previous years, and the total value remains relatively huge. Given this, concerns had previously arisen regarding how the foreign trade volume would experience a significant decline this year. However, based on the actual performance, the decline in the third quarter has significantly slowed down and exceeded expectations. This has provided crucial support for a steady economic recovery.

Fifth, the Chinese market has witnessed an increase in activity among market players. As mentioned earlier, there was a recovery in both the total retail sales of consumer goods and the consumption of services in the first three quarters of this year. During the Mid-Autumn Festival and the National Day holidays, there was a strong growth momentum in passenger flow, tourism spending, and revenues in the hotel and catering industries. This shows that the Chinese market is experiencing a higher level of activity, showcasing the potential and vitality of market consumption.

Sixth, business expectations have improved. The purchasing managers' index (PMI) for China's manufacturing sector was published recently, and the figure in September came in at 50.2%. Despite continuous declines in previous months, the PMI reading has once again stayed above the threshold, indicating economic expansion. This points to a sound recovery of China's real economy.

Seventh, the agricultural sector has posted a sound momentum. Despite a slight decline in summer grain production caused by unfavorable natural conditions, the prospects of the country's autumn grain production are promising, with a slight increase in grain acreage. Moreover, the increase in rainy weather is also generally conducive to the production of autumn grain. Preliminary estimates indicate that the annual grain output could potentially reach another historic high. In addition, the country's livestock industry has experienced steady growth, and the supply of agricultural products remains sufficient. This also lays a solid foundation for a continued and steady economic recovery.

Eighth, high-quality development has achieved concrete progress, and the quality of economic development has improved. From the perspective of innovation, the investment in high-tech industries grew rapidly, and the volume in the first three quarters of this year grew by 11.4%. The new energy vehicles, lithium batteries, and photovoltaic cells maintained fast growing momentum. According to statistics released by Customs, the export of these three goods in the first three quarters of this year rose by 41.7%, a relatively high figure. Another indicator is personal income. The incomes of both urban and rural residents grew steadily, and in the first three quarters of this year, China's personal income increased by 5.9% year on year in real terms, higher than GDP growth. The growth of enterprises' profits was ameliorated. From January to August, the growth of profits of industrial enterprises with an annual revenue of 20 million yuan or above from their main business operations was negative, but the drop rate was 3.8 percentage points less than the figure from January to July. In addition, in August, the growth of the business income of industrial enterprises turned from negative to positive, and the profits of enterprises grew by 17.2%.

The above-mentioned positive changes in eight respects show that the Chinese economy has shown an encouraging rebound momentum and demonstrates great resilience, potential, and vitality, which proves that the macro-economic policies made by the CPC Central Committee are powerful and effective. Of course, we need to be acutely aware that the economy is still in recovery, and some of the positive changes are preliminary. Whether some positive changes can be sustainable still needs observation. The challenges from the external environment and inadequate internal demand during the process of economic operation has not been relieved fundamentally. The basis for a steady economic recovery needs to be consolidated. In the next phase, we should take concrete actions to enhance the basis.