Reuters:

Could you please tell us if economic growth in the second quarter was faster or slower than expected? What are the factors behind it? Thank you.

Fu Linghui:

Thank you for your questions. Since the start of this year, the Chinese economy has gradually returned to regular operation. It had a good start in the first quarter and continued its recovery in the second quarter. Generally speaking, the Chinese economy has shown a trend of recovery and improvement in the first half of this year. Regarding the economic performance of other countries, overall economic growth worldwide has accelerated following the adjustment of epidemic prevention and control measures. However, due to different national conditions, stages of development, and the international environment, the pace of their rapid economic growth differs significantly.

Regarding China's economic performance, since the country has fully resumed regular social and economic operations this year and production demand has gradually recovered, sectors like consumption and services, which were greatly impacted by the epidemic earlier, have accelerated their recovery and played a larger role in driving economic growth. The overall stability of agriculture and industry has provided strong support for economic recovery. In general, economic operations have gradually rebounded from the impact of the pandemic and are now back on a growth track. China's GDP grew by 5.5% year on year in the first half of this year, and by 6.3% in the second quarter. China's GDP growth rate of 5.5% is significantly faster than last year's growth rate of 3%, and also faster than the average annual growth rate of 4.5% over the past three years, indicating a notable recovery in economic growth. China's growth rate of 5.5% in the first half of the year is high in both valuation and quality.

First, China's GDP growth rate of 5.5% is faster than many other countries globally. Since the beginning of this year, worldwide economic growth has been sluggish, with major economies struggling to maintain positive growth. However, China has maintained relatively rapid economic growth, providing substantial support for global economic development. Major international organizations have recently increased their expectations for global economic growth. One of the key reasons behind this is that China has maintained its economic recovery. According to statistics released by major economies, in the first quarter of this year, GDP in the United States, the eurozone, Japan, and Brazil grew by 1.8%, 1%, 1.9%, and 4%, respectively. Even considering the situation in the second quarter, China's economic growth rate in the first half of the year remains the fastest among major economies.

Second, China's GDP growth rate of 5.5% results from structural improvement and optimized driving forces. In terms of demand, the economic growth, which was primarily driven by investment and exports last year, is now fueled by consumption and investment. In particular, consumption has played a significantly larger role in driving the economy. In the first half of 2023, final consumption expenditure contributed to over 70% of China's GDP growth. Regarding production, while the economy depended mainly on the industrial sector last year, it is now powered by a combination of the service sector and industry, with the share of the service sector growing considerably. In the first half of this year, the service sector contributed to over 60% of China's economic expansion.

Third, China's 5.5% growth was propelled by innovation and a shift in its development mode. As the innovation-driven development strategy was further implemented, new growth drivers continuously emerged, lending strong support to high-quality development. In the first half of this year, investment in high-tech industries rose 12.5% year on year, the added value of information transmission, software, and information technology services increased 12.9%, and online retail sales of physical goods grew 10.8%. Meanwhile, China's efforts toward green transformation have yielded significant results, considerably bolstering economic growth.

Judging from the environmental quality data in the first half of the year, the percentage of days with good air quality remains at a relatively high level. Among the national surface water sections monitored by the state, the proportion of sections with excellent and good water quality increased by 2.1% year-on-year. In the first half of the year, the output of new energy vehicles and solar cell products increased by 35% and 54.5%, respectively. Energy efficiency also continued to improve, with energy consumption per unit of GDP decreasing by 0.4% year on year in the same period.

Fourth, China's 5.5% growth stems from a high level of opening up and improved trade structure. Despite a sluggish global economic recovery and a slowdown in global trade and investment, China has actively enhanced its high-level opening up and fostered an upgrade in its trade structure. The nation has also strengthened economic and trade exchanges with other countries worldwide, grounded in principles of mutual benefit and win-win cooperation, leading to further progress. In the first half of the year, China's total goods imports and exports rose by 2.1% year on year, in which the proportion of general trade, carrying higher added value, in the total import and export value increased to 65.5%. The development of trade has diversified. China's trade in goods with nations along the Belt and Road Initiative in the first half of 2023 grew by 9.8% year on year, and the total imports and exports to Latin America and Africa increased by 7% and 10.5%, respectively. Cross-border e-commerce and other new foreign trade business models are rapidly evolving.

Fifth, China's 5.5% growth is driven by expanding employment and improvements in people's livelihoods. So far this year, China's urban surveyed unemployment rate decreased to 5.2% in June, mirroring the pre-pandemic level. Rising employment has resulted in higher resident income. In the first half of the year, China's per capita disposable income of both urban and rural residents grew by 5.8%, markedly faster than last year. The economic recovery has incited a higher propensity among consumers to spend, subsequently leading to an increase in consumer spending. In the first half of the year, China's per capita consumption expenditure rose by 7.6%.

Sixth, China's 5.5% growth is characterized by consolidated food and energy security. Since the start of this year, all parties have dutifully contributed to grain production. Even in the face of heavy rain during the harvest period, a plentiful harvest was secured, with the grain output achieving the second-highest in history. This laid a solid foundation for "Chinese people to hold their rice bowls firmly in their own hands." Greater efforts have been exerted to ensure energy supply. In the first half of the year, primary energy production grew by 2.7% year on year, with the output of raw coal, crude oil, and natural gas increasing by 4.4%, 2.1% and 5.4%, respectively. This effectively ensured the energy supply for production and daily life. Thank you.