CCTV:
The domestic and international situation in the first half of the year became more and more complicated . Why can the Chinese economy still maintain such a smooth operation? How do you evaluate the operation of the Chinese economy in the first half of the year? Thank you.
Mao Shengyong:
Thank you for your question. Judging from the basic situation of China's economic operation that I just introduced, the Chinese economy continued to be steady and move in the right direction in the first half of the year. It can be analyzed in the following four respects :
First, the economy is running smoothly. In terms of the growth rate, the GDP growth rate in the first half of the year was 6.8 percent, with a growth of 6.8 percent in the first quarter, 6.7 percent in the second quarter, and a stable operation in the mid-high speed range of 6.7 to 6.9 percent for 12 consecutive quarters.
From the perspective of employment, the national urban surveyed unemployment rate has been less than 5 percent for three consecutive months , and was 4.8 percent in May and June. This level is the lowest one since the establishment of the national labor monthly survey system by the National Bureau of Statistics in 2016. The surveyed unemployment rate of large cities and towns was 4.7 percent.
From the price point of view, the CPI rose by 2 percent in the first half of the year, showing a moderate upward trend, which also indicates that the supply and demand of the entire market is basically balanced. The PPI rose by 3.9 percent and its growth rate dropped by 2.7 percentage points over the same period of the previous year. Such a level is quite reasonable. On the one hand, it can ensure that the profits of industrial enterprises maintain a relatively reasonable growth rate, and at the same time, it is also beneficial to reduce the cost transmission pressure to downstream products.
2. The structure was optimized and upgraded. In terms of sectors, the service sector saw fast growth and its proportion of added value to GDP continued to grow and reached 54.3 percent, which was 0.3 percentage point higher year on year. Its contribution to economic growth increased to 60.5 percent in H1, which was 1.4 percentage points higher than the same period last year. The service sector has become more of an anchor in economic growth. The industrial transformation and upgrading is accelerating, and the planting structure of the agricultural sector has been adjusted and optimized many times. In terms of demand, the fundamental role of consumption in the economic growth has been enhancing. In H1, the contribution of consumption to economic growth registered 78.5 percent, 14.2 percentage points higher year on year. Private investment and investment in manufacturing are improving. General trade in H1 accounted for 59 percent of the total trade volume, 2.0 percentage points higher than the same period last year.
3. The dynamics transformation has sped up. With regard to the market entities, reforms to delegate power, improve government regulation and optimize government services continued to push forward this year, which helped develop and upgrade entrepreneurship and innovation. In H1, there are an average of 18,100 new market entities registering on a daily basis. In terms of new supplies, high-tech industries, and products representing technological progress, transformation and upgrading saw a fast growth. The value added of the high-tech, equipment manufacturing and strategic new industries registered fast growth at 11.6 percent, 9.2 percent and 8.7 percent respectively, clearly higher than the growth of industrial enterprises above the designated size. As far as new demand and new consumption, the consumption of services grows faster, including tourism, health, elderly care, education, and culture. The consumption of upgraded goods also registered fast growth, such as smart appliances and industrial robots.
4. Quality and profits are improving. As for the quality, the proportion of clean energy in the total energy consumption in H1 increased 1.5 percentage points year on year according to the requirements of green development and ecological civilization building The energy consumption per 10,000 yuan of GDP went down 3.2 percent year on year, a decrease higher than the expected target of 3.0 percent. In terms of profits, the following three aspects saw a sound performance. In H1, the per capita disposable income of urban and rural residents went up 6.6 percent, equal to that in Q1. The increase is roughly in sync with the economic growth and higher than the growth of the per capita GDP. Enterprises' profits retained fast growth. From January to May, the enterprises above designated size saw their profits grow 16.5 percent year on year. The business profits of service enterprises above designated size increased 9 percent. The general public budget revenue went up 10.6 percent to exceed 10 trillion yuan in H1.
To summarize the above four aspects, China's economy stayed on an upward trajectory in H1, and is set for high-quality growth. Moreover, the achievements were hard-won in the context of rising external uncertainties and internal restructuring, transforming and upgrading. Thank you.
Reuters:
In the first half of this year, the effects of trade frictions between China and the United States have not been apparent, but from the analysis, in the second half of this year, the economy may face great pressure of downturn. How do you analyze the influence over the economy and prices? Thanks.
Mao Shengyong:
Thank you for your question. My brief introduction just now shows that the overall operation of major national economic indicators was smooth in the first half of this year. Is there any effect of trade friction? I think even if there are some, they would be limited. In the second half of this year, what would the impact be? We need to wait and see. However, on the whole, the friction provoked unilaterally by the United States will affect both countries' economies. Moreover, nowadays, the world economy is further integrated, and industrial chains operate globally. Many relevant countries will be affected. Therefore, the friction will impact global economic recovery and sustain growth in world trade as well.
As for influence on prices, so far, they've remained stable. The price of imported soybeans may rise to some extent, which may affect the prices of beans and other relevant products. Overall, first, the weight of soybeans and relevant products in CPI are rather small. Second, the downstream products of beans, mainly bean extraction, may push up prices of pork and eggs, and impact cooking oil. In the first half of this year, prices of pork and cooking oil were at a lower level in our country. The price of pork dropped by 12.5 percent over the same period last year, and cooking oil 1.0 percent. Even if prices rise, the impact appears limited. In light of the trend of consumer prices in the second half of this year, the current mild rise in prices will continue.
From the following perspectives, first, monetary policy is still moderate, which will help stabilize prices on the whole. Second, let's analyze the three major elements influencing CPI. Take food prices for example. A good grain harvest in our country lays the foundation for stable price operation. In terms of service prices, the periodical reforming task of medical service prices has been fulfilled in the first half of this year in some regions. In the second half of this year, the pressure of medical service price hikes will be reduced. In terms of industrial consumer goods, on one hand, the rate of increase in prices of upstream and midstream products in PPI was less than the previous year's figure, which reduces the conductivity pressure on the prices of downstream industrial consumer products. On the other hand, the supply of industrial consumer goods has outstripped the demand, and the pressure of price hikes is not great. Third, China is promoting high-level opening-up. This year, imports will rise considerably, which will help expand domestic demand. Based on an overall analysis of these elements, our consumer prices will be constant at the level of a mild increase. Thanks!
Economic Daily:
Recent statistics show weak consumption and sluggish investment and exports. Does it mean downward economic pressure will increase in the next half of this year?
Mao Shengyong:
Thank you for your question. First, I will talk about current consumption and then the economic situation in the next half of this year.
I do not totally agree with your judgement on consumption. With all the aspects taken into consideration, consumption still maintained growth momentum and the market is sound overall. First, the consumer prices grew by 2 percent in the first half of this year, a modest growth level, which shows supply and demand of the market were basically balanced. In addition, the supply of the consumption market has been abundant over the past years. The modest growth in price shows that the demand keeps growing, otherwise the price has no backup.
From the aspect of imports, cargo imports grew by 11.5 percent in the first half of this year and service imports increased by 11.4 percent from January to May. Apart from the surge in commodity imports, the growth of consumption goods imports also contributed to that of cargo imports. For example, the cosmetics imports doubled and the aquatic and marine products imports increased by over 12 percent. The growth of imports manifested great domestic demand.
As for total retail sales of consumer goods, the fact that the figures from May and June fluctuated drew public concern. Its growth in the first half of this year is 9.4 percent, and that of the first and second quarter is 9.8 percent and 9.0 percent respectively. The growth level from 9 to 10 percent is not slow. One of the reasons is that auto sales in May and June dropped sharply due to the adjustment of the auto import tariff on July 1. These sales account for about 13 percent of the total retail sales of consumer goods, a relatively high percentage, so the total figure clearly decreased. With that factor removed, the growth rate of total retail sales of consumer goods would be about 10 percent in May and nearly 11 percent in June, rather than 8.5 percent and 9 percent respectively. And the figures in the second quarter would have been higher than those in the first quarter if the factor were removed. Therefore, the growth rate of the total retail sales of consumer goods should be interpreted comprehensively.
From the aspect of service consumption, the structure has been upgraded over the past few years, as the consumption of upgraded commodities and that of services grew rapidly. As for the household consumption expenditures in recent years, the ratio of service consumption grew by about one percentage point annually. Currently, it accounts for about 50 percent of total consumption. The continuous growth of the proportion of service consumption means that if its growth rate is counted on the basis of current prices, it will be even higher than that of physical consumption. To sum up, the current consumption in China maintains good growth momentum, rather than a sluggish one.
The second question involves economic growth in the second half of the year. The short-term economic growth mainly depends on three major demands. According to statistics in the first half of this year, domestic demand is the decisive force in the pattern of economic growth, while consumption is the pillar in domestic demand. Analytically, consumption could maintain stable and comparatively fast momentum for development in the second half of this year, given the following several factors.
First, consumption itself has the prerequisites for growth, and this inference is on a theoretical basis of economics.
Second, residents' income has grown at a relatively fast pace overall in the past few years, and consumption is believed to be a mathematical function of income.
Third, and also a very a very important point, China's economic development has entered a stage in which the upgrade of consumption structures will only speed up instead of slowing down, and that is the trend of the times.
Fourth is attributed to the adjustment of policies on imports. To upgrade the opening up and to keep up with people's ever-growing needs for a better life, China has expanded its imports over the past few years and promoted the activity and supply of the whole market as well.
So, consumption still can continue favorable growth in the second half of this year.
The first half of this year also registered a slower but stable performance in investment, particularly in the following three major areas.
First, investment in the manufacturing industry has increased for three consecutive months, and the growth momentum is expected to continue in the second half of this year.
Second, investment in real estate development increased by 9.7 percent in the first half of this year. Let's focus on two leading indexes – the total floor space of houses newly constructed and the space and costs of the land space purchased– both of which enjoyed rapid growth in the first half of this year. Based on that fact, investment in real estate is also expected to enjoy comparatively rapid growth in the second half of this year.
Third, investment in infrastructure went down in the first half of this year. However, with the completion of projects and with the progress of compliance projects, investment in infrastructure is expected to remain basically stable in the second half of this year.
Generally, total investment will remain basically unchanged in the second half of this year.
The above is the case for domestic demand. While stressing domestic demand is a decisive factor, we don't mean external demand isn't important. External demand is still a very important variable. Foreign trade maintained favorable development overall in the first half of this year. There are challenges ahead, but there are favorable conditions, too. Foreign trade will still maintain stable and comparatively fast momentum for development in the second half of this year.
In summary, China's economy will continue to maintain stable performance with good momentum for growth in the second half of this year. Thank you.
Nikkei:
You just mentioned that the growth rate of infrastructure investment has fallen faster. What is the reason behind this? Is it related to strengthening financial regulation?
Mao Shengyong:
The growth rate of infrastructure investment in the first half of this year has indeed slowed down. In this regard, we can open up perspectives. First, in past years, China's infrastructure investment ran at a high level, with a growth rate of more than 20 percent being maintained for many years. We can see that infrastructure construction made great progress in various areas. From this perspective, the current demand for infrastructure investment is less intense than in the past.
Second, from the perspective of preventing and resolving major risks, the central government has conducted a comprehensive evaluation of project compliance and rationale, including social and economic benefits, and has strengthened compliance verification for projects, including PPP projects. Through these means, some compliance projects in the second half of the year may accelerate their landing progress. Therefore, fixed asset investment, including infrastructure investment, will continue to be stable in the second half of the year. Thank you!
China News Service:
Although the NBS has released a statement on the profits of enterprises above the designated size, there are still some doubts about the figures and the statistical methods. Could you give us further explanation? Thank you.
Mao Shengyong:
The NBS has released a statement on its official website about the profits of enterprises above the designated size. Still, I would like to present more details.
First, the statistics of their profits are real and reliable. They also agree with other relevant indicators. The CPC Central Committee and the State Council attach great importance to the quality of statistics. They have issued several important documents guiding statistical work. In accordance with the requirements given in those documents, we have tightened regulations on statistical work, investigated and prosecuted violations of relevant laws, thus improving the reliability of statistics. An important reason why the figures of profits generated by enterprises above the designated size are reliable is that they agree with other relevant indicators.
Second, the calculation of industrial enterprises' profits is scientific. It has been used for two decades consecutively, so it is stable. The statistical range of profits of industrial enterprises above the designated size covers those enterprises whose annual revenue of major business is 20 million yuan or more. We know that if changes take place in some enterprises regarding production and operation, some of them might be upgraded from enterprises below the designated size to above, and vice versa. These enterprises can be either newly registered or those which have registered to close. Therefore, the number of industrial enterprises above the designated size is variable. But it is noteworthy that all enterprises, whether upgraded or downgraded, according to the statistical system, should strictly comply with the check procedure. Over the past year, the number of industrial enterprises has decreased due to strengthened law enforcement of statistics and data review. Meanwhile, how to calculate the profits of industrial enterprises above the designated size? The Statistics Bureau uses a fixed reporting period method; that is to say, if we want to calculate the profits from January to May of this year, the period from January to May will be taken as the base period. The enterprises will be divided into five categories. The first category includes those who have been on the list of enterprises above the designated size both last year and this year. Profits from these enterprises are clearly separated between last year and this year. The second category includes those which have been upgraded from enterprises below the designated size to above, due to their good economic performance. Their profits of the reporting period are those from January to May of this year, while their profits of the base period refer to last year's profits. The profits must be covered when they were below the designated size. Enterprises should submit their profits from both this year and last year, so last year's profits of those upgraded will be calculated as ones above the designated size. The third category includes those which have been downgraded from enterprises above the designated size to below. If an enterprise is downgraded during the reporting period, its profits will not be calculated as those of an enterprise above the designated size, but will be considered as those of below the designated size, whose statistics are conducted through sample surveys. The fourth category includes newly registered enterprises. If their revenue in the first year reached 20 million yuan, their profits are calculated in the reporting period. However, these enterprises do not have base numbers from last year, so their profits in the base period will be zero. The fifth category includes those enterprises which have dissolved or cancelled their registration. Their profits during the reporting period are zero, but their profits in last year must be included in base period. The fixed reporting period method has been used since 1998. It has not changed over the past two decades. The above five categories together can reflect the trend of industrial enterprises' profits in a more precise and objective way. There is no tampering with the growth rate data.
There is another point I need to stress. Besides the economic factors I just mentioned, there are some other factors that may influence the base period and reporting period of corporate profits in the industrial sector.
First, law enforcement was strengthened. From 2017 to April 2018, the NBS handled 72 major law violation cases, gave 129 people verbal warnings, and punished 79 people. Local statistics authorities also handled more than 7,000 cases violating statistical laws and regulations. In this process, we treated some law-breaking enterprises and corrected the base figures correspondingly.
Second, redundant statistical figures concerning enterprises with business in several regions and several sectors were eliminated. It has been increasingly common for enterprises to conduct business in several regions and sectors. When enforcing laws and reviewing statistics, we discovered that some enterprises submitted the figures of their headquarters and local branches repeatedly. For example, we found that an enterprise has 25 subsidiary companies, but the figures submitted from 19 subsidiaries also included the figures of the headquarters, resulting in a repetition rate of 29 percent in some major indexes . From the fourth quarter last year, we eliminated such figures according to the result of our special investigation.
Third, after introducing the reform of replacing business tax with VAT , some industrial enterprises separated non-industrial business or business in the service sector from their main business because there will be tax incentives. The statistics from taxation authorities show that in the past two years, more than 3.5 million new enterprises in construction, finance, real estate and consumer services sectors were registered. Some of them were the result of business separations. What influence will this have? It will make the profits of industrial enterprises lower than last year.
We will continue to improve our work, and all comments and suggestions are welcome. Thank you.
China Business Network TV:
What is the main risk factor that will impact the macroeconomy in the second half of this year? And what reform s does China need to deal with its challenges? Thank you.
Mao Shenyong:
Currently, China's economic operation is generally stable with good momentum, and the positive factors and factors that advance the economy to quality growth have increased and accumulated. The external variants, uncertainties and imbalance s will rise in the second half of this year. Externally, the world economy showed that it is recovering in the first half of this year, and there was also some differentiation in the recovery. But the heating up of trade protectionism constitutes a big challenge to the world economic recovery. Internally, economic development remains unbalanced and unstable in some places, thus the structural adjustment and transformation are in a crucial phase. In the future, we should continue to deepen the supply-side structural reform and expand domestic demand so as to keep the economy operating steadily within a reasonable range. Thanks.
Radio Television Hong Kong:
Will the current China-U.S. trade relations affect and make the economic growth drift out of the 6.7 percent to 6.9 percent range? And will it affect China's investment and export s? Given the control polices, will the housing price fall in the second half of this year?
Mao Shenyong:
Firstly, it will take some time to observe the influence of the trade friction with the U.S. on the Chinese economy.
Secondly, capital chases profits and votes with its feet. The Chinese market is big and growing well. The business environment is constantly improving. China is making efforts to protect the intellectual property rights of various enterprises in China and to provide fair treatment to all kinds of market players, which help inject confidence and passion in investors . That some famous brands have come to set up branches in China recently is proof of that. Particularly, foreign direct investment in China, whether it is counted in U.S. dollars or in renminbi, has retained a growing momentum. China remains a popular destination in attracting capital and foreign investment.
Thirdly, housing prices, judging from the changes in 70 medium- and large-scale cities, have remained stable. But the housing prices in some third- and fourth-tier cities have indeed risen fast. Some popular cities face mounting upward pressure. There are still some structural contradictions in the real estate industry. There are some properties in the remote inland areas and the places decreasing in population. That's why the central authorities have proposed to "tailor-make the tactics in different cities, and exercise precise control of housing prices." The central government will continue to strengthen and perfect macro control, as well as exert power on the supply side. we will expedite the creation of relevant policies for real property tax, in a bid to implement the policies of multi-subject supply, multi-channel guarantee and rent-and-sale coequality. Through these methods, we aim to promote the healthy and stable development of the realty industry and to better follow the principle that "the house is used to live instead of being used for speculation."
Hu Kaihong:
The briefing today is over. Thank you, Director Mao, and all of you.