Xinhua News Agency:
Can China's economy sustain the impacts of the economic and trade frictions with the United States? How will China respond to the downward pressure on its economy?
Lian Weiliang:
Thank you for these questions. Undoubtedly, America's punitive tariffs on US$200 billion of its imports from China will have both direct and indirect impacts on the Chinese economy, with the influence on some industries and regions being comparatively big. Yet, although the impact is unavoidable, the risks are generally controllable, and the Chinese economy has the ability to hedge through boosting domestic demand. The risks are controllable, because of support from at least three aspects: the resilience of the Chinese economy as a whole, the potential of expanded domestic demand, and the increasing competitiveness of market entities.
First, the Chinese economy has overall resilience. The size of the economy reached US$12.7 trillion last year, with exports hitting US$2.26 trillion, so that US$200 billion only accounts for 8.8 percent. If the contribution of the processing trade is considered, the influence of (the ongoing trade frictions) on added value can be reduced even further. An important characteristic with the Chinese economy is that it has a complete range of industries and multi-element components, and various parts can complement and replace each other, which means the Chinese economy can demonstrate strong resilience and tenacity while responding to any external impact.
Looking back at the development of the Chinese economy, we have actually experienced several tests, in which external demand plummeted. For instance, China's total export-import volume dropped eight percent, in dollar prices, in 2015 and 6.8 percent in 2016, which both exerted huge downward pressure on overall economic growth. However, relying on expanding domestic demand and deepening supply-side structural reforms, we maintained economic growth within a rational range. Currently, the Chinese economy is in the phase of transforming from high-speed to high-quality growth, attaching more significance to the quality of economic growth. So, its resilience and capacity to cope with any impacts are stronger.
Second, the Chinese economy has much potential in terms of domestic demand. China has nearly 1.4 billion people, which is even more than the total population of all developed economies, and annual per capita income is now nearly US$9,000, with an obvious trend of consumption upgrading. It is fair to say the domestic market has huge potential. Meanwhile, as a developing country, where regional development gaps have yet to be bridged, China still has many problems and weaknesses, so it also has huge potential in increasing investment.
All these factors have created favorable conditions for the Chinese economy to respond to external fluctuations. The economic operations in the first eight months this year proved this judgment. The additional American tariffs on US$50 billion worth of imports from China took effect in two batches on July 6 and August 23 respectively. China's industrial added value growth in August was 0.1 percentage points higher than the previous month as well as the same period of last year. The total volume of retail sales in August was 0.2 percentage points higher than July. Investment in manufacturing industries in that month was three percentage points faster than the same period of last year, and 0.2 percentage points higher than that achieved from January to July. It is noteworthy total power consumption from January to August increased by nine percent, the fastest growth since 2011.
Third, the competitiveness of market entities constantly increases. Although export-oriented enterprises meet many difficulties, their ability to adapt to market changes, expand markets and promote science and technology innovation, will enable them to withstand market tests in the process of coping with challenges arising from the decline of external demand. The Central Committee of the Communist Party of China and the State Council attach great importance to the influences of Sino-U.S. trade frictions, and have taken a series of positive measures, stressing that we must do our own business well, and focus on the necessity of keeping stability in six fields: employment, finance, foreign trade, foreign investment, investment and expectations.
In regard to dealing with the economic downturn due to China-U.S. trade friction, the following three specific measures can be adopted: first, expand domestic demand and strengthen areas of weakness more efficiently; second, take more effective steps to lighten burdens and improve the business environment, third, introduce more effective policies to boost restructuring and improve capabilities.
First, in regard to expanding domestic demand and strengthening areas of weakness more efficiently, a guideline issued by the Communist Party of China (CPC) Central Committee and the State Council recently aims to further tap the country's domestic consumption potential. The guideline outlines fifteen specific measures to upgrade consumption and tap this potential. We will focus on strengthening weaknesses in the areas of infrastructure development, people's well-being, public services, agriculture and ecological and environmental protection, while deepening supply-side structural reform in which we will ensure private investment plays an important role and improve the confidence of private investors.
Second, in taking more effective steps to lighten burdens and improve the business environment, China will further ease the burden on companies through additional cuts on taxes and fees, deepen reforms in streamlining the administration, delegate powers, and improve regulation and services to further improve China's business environment and deepen the country's opening up. All these measures are applied equally to both Chinese and foreign companies. We will continue to adhere to the socialist basic economic system while unwaveringly seeking to encourage, support and guide the development of the non-public sector to stabilize social expectations and boost development confidence.
Third, in regard to introducing more effective policies to boost restructuring and improve capabilities, we will provide more support for Chinese companies to explore international markets to strengthen win-win cooperation with the European Union, Japan, Russia, ASEAN and Africa and develop a diversified trade market based on the Belt and Road Initiative. We will also encourage Chinese companies to improve their adaptability to market changes, which requires them to optimize their product structure, to develop products that can meet diversified market needs and improve innovation capacity and core competence.
As a general comment, the Chinese economy has sufficient resilience and potential. China is fully capable of hedging the impact of China-U.S. trade friction through promoting high-quality development by expanding domestic demand, and we have full ability, confidence and conditions to keep the Chinese economy on a steady course. Thank you.
