Phoenix TV:
We have noticed that the supply-side has recovered faster than the demand-side, as shown by the statistics. What problems will this imbalance in recovery bring? And what policies will be adopted as part of your efforts to deal with these problems? In particular, what efforts will be taken to make up for the lack of domestic demand? Thank you.
Liu Aihua:
Thank you for your question. Your observation is well noted and it is indeed a matter of public concern. Since this year, the supply-side has been recovering faster than the demand-side as far as the cross-sectional data is concerned. I would like to share my views on this matter from several aspects:
First, the COVID-19 epidemic in the first half of this year had an unprecedented impact on the economy, production and people's lives, including their decision-making toward production and life. Its impact on different sectors and various decisions may be due to our lack of experience. So far, the industrial sector has seen better recovery with positive growth for three consecutive months. The production index of the service sector has registered positive growth for two consecutive months, with some businesses in this sector recovering faster, while other sectors such as accommodation and catering are still in deep decline. In comparison, we have also observed that the supply-side has been recovering faster than the demand-side at present. This may be related to the impact of the epidemic on decision-making by different market players. For instance, the production organization on the supply-side may be a process of centralized decision-making, while on the demand-side it may be more a case of decentralized decisions. That is why there have been some differences in the effects of policies.
Second, cross-sectionally speaking, the supply-side recovers faster than the demand-side, and there are differences even within supply and demand respectively. On the supply-side, the recovery of the industrial sector is faster than that of the service sector, with different performances at different stages. For example, when industrial production slumped after being hit hard by the epidemic, some businesses in the service sector, including financial services, information transmission, software and information services, have indeed shown strong resilience. This shows that some businesses have risen against the tide and bucked the trend during the epidemic. The demand-side is also out of sync. Although the retail and investment data is declining, investments are recovering better than consumption, which reflects that the epidemic's impact on investment is smaller than on consumption. Now, there are still some restrictions on consumption involving contacts and gathering, such as accommodation and catering. This recovery will come slowly.
Third, let's look at the longitudinal trends. In terms of time longitudinally, both the supply-side and the demand-side have shown a trend of rebound or narrowing decline. Despite their different paces, the overall recovery cannot be denied. This may be an objective manifestation of gradual economic recovery from the impact of the epidemic. In terms of macro-policies, a total of 90 policies have been adopted involving enterprise bailouts. We will adhere to the fundamental strategy of expanding domestic demand on the demand-side. With these policies, we will gradually realize unimpeded flow in the economy and production demand, thus finally pushing the overall economy back onto a normal track.
