CNBC:
I have several questions. My first question is about the consumption sector. According to the government work report, there will be different ways to promote consumption. What are the considerations behind that? And how will these measures be carried out? The government work report also mentioned risks from overseas. So what are the significant aspects and considerations for supporting foreign investment? Thanks.
Xiang Dong:
I will first answer your questions about consumption.
Last year, China's consumption sector recovered, with the retail sales of consumer goods and per capita consumption expenditure growing by 12.5% and 12.6%, respectively, both higher than 2020. Final consumption expenditure drove China's GDP growth by 5.3 percentage points during the past year. It contributed 65.4% of China's economic growth, playing a primary role among the three major growth drives.
At the same time, we should recognize that last year's consumption sector recovered from the low base in 2020. If we look at the average growth rate over the past two years, the growth rate of the consumption sector is still lower than the pre-pandemic level. Especially affected by the ongoing COVID-19 pandemic, consumption of consumer services remains in the doldrums, with the growth of revenues from the tourism and accommodation sector and box office revenue still lower than in pre-pandemic 2019.
China is a large consumption market with enormous potential. For example, the number of motor vehicles per thousand people is less than half of that in Japan and South Korea, and a quarter in the United States. Another example is that the per capita consumer spending on services only accounts for 44% of the total consumption expenditure, which is lower than that of other countries at the same development stage. Also, China's consumption sector upgrades rapidly in recent years, and people's demand for high-end consumption is substantial. However, the potential is not fully released due to the supply shortage.
This year's government work report said that China would promote sustained consumption recovery. And there are concrete measures to be put into place, which are as follows: First, we will boost the recovery in consumption of consumer services. This is the biggest weakness we need to strengthen to recover the consumption sector. And consumption of consumer services has the most significant potential. Second, we will keep major consumption stable. Last year, the sales of new energy vehicles rocketed to 3.82 million, up by 160%. This year, we will continue to support consumer spending on new energy vehicles. At the same time, we will promote spending on green and smart home appliances in rural areas as well as the replacement of old home appliances. Third, we will promote consumer spending at the community, township, and county levels. Efforts will include strengthening the building of community-level consumer services facilities in urban areas and county-level commercial systems and developing e-commerce and express delivery services in rural areas to promote and upgrade consumption by providing convenience and accessibility. In addition, we need to focus on improving the quality of products and services, to meet people's needs better.
Your question about the consumption sector is, in fact, a question about expanding domestic demand. Growing domestic demand includes efforts to promote the consumption sector and investment. The government work report also mentioned effective investment. China has enormous potential and space to expand effective investment. Investment from the central government budget will reach 640 billion yuan this year. Special-purpose bonds for local governments will total 3.65 trillion yuan. There is still carry-over from last year. The government spending is expanding compared to the previous year. We will focus on supporting the major projects in the 14th Five-Year Plan, infrastructure projects related to urban utility networks and others, and strengthening weaknesses in ensuring people's well-being. Private investment accounts for a large proportion of China's investment. And we will use government investment funds rationally and work to play its role in leading and driving effective investment.
Your question about foreign investment will go to Mr. Liu.
Liu Rihong:
Thank you for your question. Opening up is China's basic national policy, and the use of foreign capital makes a major part of China's opening up. You probably have seen the data released by the relevant authorities regarding China's utilization of foreign investment last year, which showed that its actual use of foreign capital exceeded 1 trillion yuan, or more than $170 billion, for the first time. Why has China been able to maintain such a growth rate in its use of foreign investment against the backdrop of the pandemic? From my point of view, the reasons are as follows:
First, China's effective pandemic prevention and control have created a favorable environment for enterprises to ensure normal production and operation. It's fair to say that Chinese economy has become a "stabilizer" and "safe haven" for the global economy over the past two years.
Second, China has complete industrial and supply chains, and the Chinese people are hard-working and talented. Therefore, foreign enterprises have become optimistic about the Chinese market, and are willing to achieve shared success and common development with such a huge market.
Regarding the policies on foreign investment in this year's government work report, I'd like to give you a brief introduction in the following aspects: First, it will ensure the implementation of national treatment for foreign-invested enterprises. In recent years, China has been downsizing its negative lists of market access for foreign investment, and the access to Chinese market has been improved. For example, items on the national negative list and the negative list for pilot free trade zones have been cut by nine and 10, respectively, over the past two years after the breakout of the pandemic. Such reduction is impressive. At present, foreign ownership caps on automobile manufacturing companies have been removed, and restrictions on foreign investment in the manufacturing sector in pilot free trade zones have been removed, achieving remarkable progress in opening up. After the negative lists become shorter, we will work to ensure that foreign investment can access sectors beyond the negative lists in a law-based and equal manner. Therefore, this year's report pointed out that we will fully observe the negative list for foreign investment and ensure national treatment for all foreign-invested enterprises, so as to ensure fair competition among all types of businesses. Second, besides the negative lists, we have a catalog of industries for foreign investment, which from my point of view, is a positive list. After years of practice, our negative lists are becoming shorter and shorter, while the positive lists are growing longer. What is a positive list? Foreign enterprises will obtain some preferential treatment in terms of tax and land use if they invest in the sectors or regions on the list. This was mentioned in this year's report, as it pointed out that we will encourage foreign-invested enterprises to move into a broader range of sectors. Third, we will build and improve the platforms for China's opening up. What are these platforms? They are pilot free trade zones, the Hainan Free Trade Port, economic development zones and integrated bonded areas. In addition, more comprehensive trials on the opening of the service sector are expected to be launched this year. China is a large country, so it has been an important experience for us to launch pilots first while pursuing opening up. Those aforementioned platforms have been launched to implement pilot standards and rules for the opening up. Over the past years, a lot of achievements have been made and enabled us to establish relevant systems, and thereby have been promoted nationwide.
Thanks to these policies, I believe, just as the report says: "The vast, open Chinese market is sure to provide even greater business opportunities for foreign enterprises in China."
Thank you.
