Read in Chinese 

Speakers:

Yao Jingyuan, special researcher of the Counselor's Office of the State Council

Xu Xianchun, professor at the School of Economics and Management at Tsinghua University, and director of China Data Center at Tsinghua University

Chairperson:

Xing Huina, deputy head of the Press Bureau of the State Council Information Office (SCIO) and spokesperson for the SCIO

Date: 

July 15, 2021

Xing Huina:

Friends from the media, good afternoon. Welcome to this briefing held by the State Council Information Office (SCIO). This morning, the SCIO held a press conference to brief you on China's economic performance in the first half of 2021, which attracted a lot of media attention. In order to help you gain a deeper understanding of the national economy, we are joined by two experts today who will give you an in-depth interpretation of the economic situation in the first half of this year.

Let me first introduce the two experts: Mr. Yao Jingyuan, special researcher of the Counselor's Office of the State Council, and Mr. Xu Xianchun, professor at the School of Economics and Management at Tsinghua University and director of China Data Center at Tsinghua University.

In today's briefing, we have invited the two experts to briefly introduce their interpretations of the economic situation in the first half of the year, and then take your questions. 

Yao Jingyuan:

In the first half of the year, seeking progress while maintaining a stable performance has been an effective method in carrying out economic work. We can clearly see that the national economy in the first half of the year has continued its stable and sound performance. We can understand the situation from the following aspects:

First, the fundamental of the economic work lies in people's livelihoods. Therefore, whether the economy is performing well is first reflected in changes to people's livelihoods. With people's livelihoods as the priority, employment is the cornerstone of their wellbeing. In the first half of this year, 6.98 million new urban jobs were created in China, accounting for 63.5% of the annual target. I think this has been a very important achievement.

Second, the fundamental criterion of economic performance is economic benefits. How should we understand it? We often look at three sources of money: the corporate profits of companies; fiscal revenue of the government; and the income of urban and rural residents of ordinary people. First, let me talk about corporate profits. From January to May, the profits of industrial enterprises above designated size increased by 83.4% year on year, and the profits of service industry enterprises above designated size increased by 1.5 times year on year, which is a high point in recent years. The government's source of money is fiscal revenue. Under the circumstances when we cut taxes and fees substantially, government fiscal revenue in the first half of this year still increased by over 20% year on year. Third, the growth in income of urban and rural residents basically kept pace with that of the national economy. Another important point is that the per capita disposable income of rural residents continues to rise faster than that of urban residents. Therefore, an important result of economic growth in the first half of this year is that the income gap between urban and rural residents has narrowed, which is in line with the new development concept.

Furthermore, China's economic structure and growth model were optimized in the first half of the year. For example, the tertiary industry accounted for 53% of the entire national economy, and consumer spending contributed 61.7% to overall economic growth. The proportion of China's industry, especially the manufacturing industry, has been declining in recent years. The outline of the 14th Five-Year Plan (2021-2015) clearly states that we must stabilize the proportion of manufacturing during the 14th Five-Year Plan period. Looking at the figure now, the proportion of manufacturing in the first half of the year increased by 1.6 percentage points compared with the same period last year, which is a very positive sign. The industrial structure has also been optimized. For example, the output of new energy vehicles has increased by more than 200%, industrial robots nearly 70%, and integrated circuits nearly 50%. Therefore, the industrial structure is optimizing, indicating that innovation is increasingly becoming an internal driving force of economic development. Another important thing is that energy consumption per unit of GDP fell in the first half of the year, which I think is not an easy achievement. Promoting peak emissions, carbon neutrality and green development have been hot topics. Energy consumption per unit of GDP fell by 2% in the first half of this year.

Indeed, despite so many major achievements in the first half of the year, there are still some problems. These problems are reflected more in terms of the structure, such as employment. I just talked about employment. We completed 63.5% of the annual target for new urban employment in the first half of the year. However, from a structural point of view, there are difficulties for college students in finding jobs. We must pay attention to this structural problem. In the second half of the year, we should develop solid policies to help college students find jobs. Another structural problem is that although the profit growth rate of industrial enterprises above designated size was not low, reaching 83.4%, the profits were made more in upstream industries, such as steel, coal, nonferrous metals, chemicals and petroleum, which is related to the rise of raw material prices in the upstream industries. In addition, from the perspective of the overall economic operations in the first half of the year, consumption should be further increased in the second half of the year so that it plays a greater role in economic growth. Looking forward to the second half of the year, I think that the main targets for China's economy set out at the beginning of the year can be successfully achieved. That is all from me for now.

Xing Huina:

Thank you, Mr. Yao Jingyuan. Next, I will give the floor to Mr. Xu Xianchun.

Xu Xianchun:

Thank you, Chairperson. Journalists, good afternoon.

It is a great pleasure and a privilege to attend this briefing and exchange my views with you. Just now, Mr. Yao shared his view on the economic situation in the first half of 2021 and the structural problems in the economy. I would like to talk about some features of the economic situation in the first half of the year from two perspectives: production and demand.

In terms of production, I would like to focus on four features. First, gross domestic product (GDP) grew faster in the first half of 2021 than it did over the same period last year, showing the momentum of continued economic recovery. According to data released by the NBS at the press conference this morning, in the first half of the year, China's GDP expanded 12.7% year-on-year. The figure puts average H1 growth for the past two years at 5.3%, a 0.3 percentage point faster than the two-year average of Q1 growth from the 2019 level. This shows that China's economic recovery continues to consolidate.

Second, the value added of the secondary industry increased faster than that of the primary and tertiary industries, which significantly powered economic growth. In the first half of 2021, the value added of the secondary industry went up 14.8% year-on-year, while the average H1 growth for the past two years stood at 6.1%. Both figures were higher than those of the primary and tertiary industries, supporting economic growth significantly in the first half of the year.

Third, the tertiary industry became the main driver of and biggest contributor to economic growth. In the first half of 2021, the value added of the tertiary industry went up 11.8% year-on-year. The figure puts the average growth for the first halves of the past two years at 4.9%. The value added of the tertiary industry accounted for 55.7% of GDP and contributed 53% of economic growth. According to my calculation, the tertiary industry drove economic growth up by 6.7 percentage points in the first half of the year – that is to say, the tertiary industry contributed to 6.7 percentage points of the 12.7% economic growth of the first half of the year.

Fourth, the secondary industry recovered relatively quickly, while the tertiary industry recovered relatively slowly in the first half of 2021. The average H1 growth for the past two years of the value added of the secondary industry stood at 6.1%, 1.1 percentage points higher than the two-year average of first-half growth from the 2019 level before COVID-19, which indicates a relatively fast recovery. In contrast, the average growth for the first halves of the past two years of the value added of the tertiary industry stood at 4.9%, 2.3 percentage points lower than the two-year average of H1 growth from the 2019 level, showing a slower recovery. In short, I think these are the four features, in terms of production, that deserve attention.

In terms of demand, I would like to focus on the following three features. First, there are three demands jointly driving economic growth, with consumer demand being the primary engine. In the first half of 2021, consumer demand contributed 61.7% to economic growth, and drove economic growth up by 7.8 percentage points – that is to say, consumer demand contributed to 7.8 percentage points of the 12.7% economic growth of the first half of the year. These figures contrast sharply with those of the same period last year. In the first quarter and first half of 2020, the economic growth was driven down by low consumer demand.

Second, the recovery of investment demand continues to consolidate and plays an important role in driving the economic growth. In the first half of 2021, investment demand contributed 19.2% toeconomic growth, and drove economic growth up by 2.4 percentage points.

Third, net export demand has shown a good performance, driving economic growth effectively. In the first half of 2021, net export demand contributed 19.1% to economic growth, and drove economic growth up by 2.4 percentage points.

To summarize, all the above are features of China's economic performance in the first half of this year in terms of production and demand. Thank you.

Xing Huina:

Thanks to the two speakers for their brief and clear explanations. Now, the floor is open for questions. Friends from the media, please state the news outlet you belong to and then ask your questions.

The Beijing News:

My question is for Mr. Yao. You mentioned just now that greater efforts will be made to promote consumption in the second half of this year, so that it will contribute to economic growth. Do you have any suggestions to make this work? Moreover, talking about foreign trade, as the COVID-19 pandemic gradually comes under control abroad, what are your thoughts regarding the trend of China's foreign trade? Thank you. 

Yao Jingyuan:

It is important to ensure China's economic growth is more reliant on domestic demand instead of exports when it comes to transforming economic growth patterns. What is domestic demand? It is composed of two aspects — investment and consumption. We used to depend on investment to stimulate domestic demand. However, we need to ensure consumption's leading role in the "three-horse troika" pulling the economy ahead. The Central Economic Work Conference has identified the specific roles that investment, export and consumption will play in boosting economic development. In terms of consumption, the conference considers it as the foundation, emphasizing its importance in leveraging the fundamental role of consumption in promoting economic growth. We are building a new development paradigm in which domestic circulation will play the primary role, and domestic and international circulations will reinforce each other. But why do we need to build such a new paradigm? In terms of domestic circulation, the largest strength of the Chinese economy lies in its vast domestic market. China, with its population of 1.4 billion, has realized a moderately prosperous society in all respects, with around 400 million people classed in the middle-income category, which is equal to the combined populations of the United States and Japan. The principal contradiction facing the Chinese economy has evolved to exist between unbalanced and inadequate development and the people's ever-growing needs for a better life. Given this, we need to focus on China's second centenary goal, and meet people's needs for a better life, as this is the most powerful internal driving force for China's economic growth. 

Obviously, the largest strength of the Chinese economy lies in its huge domestic market and great potential for domestic demand. General Secretary Xi Jinping has said that the ultimate goal for advancing economic development is to meet people's needs for a better life. In this regard, consumption should play its fundamental role in boosting economic growth while China is striving toward its second centenary goal.

Talking about consumption, we all know that it was the hardest hit area by the pandemic last year. In the first quarter of 2010, China's total retail sales of social consumer goods dropped 19% year on year. A fall of 19% was the slowest growth rate in six decades. Human contact is necessary when it comes to consumption activities, but due to the quarantine measures adopted to address the pandemic, consumption was seriously affected last year. During the recovery later on, we put our focus on the resumption of work and production. In addition, we also managed to reopen businesses. The positive role of consumption in boosting economic growth did not completely resume last year. In the first quarter of this year, consumption remained weak, but in the second quarter, its contribution to economic growth improved. These represent China's huge consumption potential.

In terms of China's future economic development, why can we achieve economic upgrading and transformation? Consumption is vital to achieving the second centenary goal. How can consumption be promoted? I think reform is the solution. To expand consumption, the ultimate solution is to increase people's incomes. In the first half of this year, China's per capita disposable income increased basically in line with the growth in GDP, which is also one of the targets of the 14th Five-Year Plan. I think it is important to further increase the incomes of urban and rural residents through reforms. For example, the Fifth Plenary Session of the 19th CPC Central Committee formulated that we will raise the proportion of labor remuneration in the primary distribution. We used to pursue high-speed growth under the past growth pattern, which is why capital and land played more important roles in promoting economic growth. Therefore, in the primary distribution, we prioritized capital and land, and the proportion of labor was relatively low when it came to labor. In this case, we need to tackle this problem through reforms.

Moreover, since we are building a complete domestic circulation market, instead of a closed internal loop, I think we should eliminate regulations that are hampering consumption activities. I think China has great consumption potential, and I'd like to use an example to illustrate why. Take the production of automobiles as an example, which was also talked about during the press conference this morning. In 1978, China's total auto production was 150,000. Now, that number has surpassed 20 million thanks to four decades of rapid development. There have been some problems facing us in terms of production and sales over the past two months, about which some people are concerned. There is still a gap in car ownership per 1,000 people between China and developed countries. The U.S. has more than 800 cars per 1,000 people, and Japan has around 600, while China's current level is about 200. As such, there is huge potential in the Chinese market. Given this, we need to make concrete efforts in the future to expand consumption. Thank you. 

CCTV:

We learnt from this morning's press conference that the service sector continued to recover in the first half of this year. What's your opinion on the role of service sector in the overall economic recovery? Since the start of the pandemic, modern service industry, including information transmission, software and information technology services, have demonstrated favorable momentum, but the growth rate of added value of some parts of the service sector has been relatively low. How would you evaluate that? Thank you.

Xu Xianchun:

Thank you! The National Bureau of Statistics (NBS) released the statistics of the national economy for the first half of the year this morning. During the first half of this year, the tertiary industry increased by 11.8% year-on-year, with an average two-year growth of 4.9%. This was lower than the secondary industry, as the secondary industry increased by 14.8% year-on-year, with an average two-year growth of 6.1%. However, the total added value of the tertiary industry accounts for a relatively high proportion of GDP, which was 55.7% in the first half of the year, and its contribution to economic growth reached 53%. So, it plays a vital role in stimulating the economic growth. 

The growth of added value of the tertiary industry was polarized in the first half of the year. The growth rate of modern service industry was relatively fast. Specifically, the added value of information transmission, software and information technology services increased by 20.3% year-on-year, with an average two-year growth of 17%. In the first five months of the year, the total profits of large high-tech services businesses went up by 27.4% year-on-year, with an average two-year growth of 12.5%, 4.2 percentage points higher than that of large services businesses as a whole. At the same time some parts of the service sector had lower growth rates in added value, such as wholesale and retail trades. The average two-year growth was relatively low, which is significantly lower than the growth rate in the same period in 2019 before COVID-19 outbreak. The contact services sector, such as accommodation, catering, rental and business services, was more severely affected by the epidemic and still grew negatively on average over this two-year period. In short, during the first half of the year, the growth of added value in the service sector was polarized. The growth rate of modern service industry was relatively fast, while the growth rates of contact type and traditional services were relatively low, with some still witnessing negative growth.

In fact, modern service industry has been demonstrating favorable momentum in recent years. For example, from 2017 to 2019, the added value of information transmission, software and information technology services grew at an average annual rate of about 23%. We know that the economic growth rate has fallen back during this period. China's GDP increased 6.9%, 6.7% and 6% respectively in 2017, 2018, 2019. The added value of information transmission, software and information technology services maintained a growth rate of more than 20%, which played an important role in slowing down the decline in economic growth. Hobbled by the coronavirus, China's GDP shrank 6.8% in the first three months of 2020. Under these circumstances, information transmission, software and information technology services rose by 13.2% against the tide and bucked the trend during the epidemic, contributing 0.6 percentage point to the GDP growth. If there was no 13.2% growth in information transmission, software and information technology services, the GDP decline would not be 6.8%. If this sector had also grown negatively, the decline in GDP would have been even greater. The added value of information transmission, software and information technology services maintained rapid growth in the second quarter, the third quarter and the fourth quarter. They were up by 15.7%, 18.8% and 19.7% respectively. The increasing quarter-on-quarter trend played an important role in the quarterly recovery of economic growth.

Therefore, the modern service industry has played an crucial role in stimulating economic growth, inhibiting the declining economic growth rates in previous years, slowing down the economic decline in the first quarter of last year, and making contributions to resuming economic growth in the following three quarters of 2020. With the rapid development of information technology, I believe that the modern service industry will maintain a relatively rapid growth, and will be a vital driving force for China's economic growth in the future. Thank you!

The New York Times:

I have two questions. First, in the past decade, we have never seen such a huge difference between nominal GDP growth and real GDP growth as during this year. What's the reason behind the difference, and does it indicate severe inflation? Second, how can retail sales maintain a relatively high growth when auto sales are so weak? Thank you.

Xu Xianchun:

For your first question, I think it's normal to see an obvious difference between nominal GDP growth and real GDP growth in the first half of this year. As we know, China's PPI registered a high growth, as the index is greatly affected by international bulk commodity prices. Our study suggested that China's PPI is closely related to PPI of OECD countries and international bulk commodity prices. The rise in international bulk commodity prices has pushed up China's PPI. Since the value-added of industry accounts for more than 30% of GDP, the increase in PPI is bound to create a difference between nominal GDP growth and real GDP growth. The CPI grew by only 0.5% in the first half of the year, while the growth of PPI was relatively high. A rise in PPI will drive up the GDP deflator. That's my answer to the first question.

Yao Jingyuan:

Automobiles are not the most important part of China's consumption. From the perspective of the Engel's coefficient, food accounts for 30% of household spending in China. Therefore, food is the most important part of China's consumption, as it constitutes the largest bit of people's basic expenses. Generally, to assess China's overall consumption situation, including the trend of CPI, we need to focus on changes in the food sector. 

Red Star News:

My questions involve two issues. The first is pork prices. According to the press conference this morning, pork prices in China went down by 19.3%. Will the decline cause the prices to be lower than the cost of pig breeding? What's the reason behind the downward trend? What measures should be taken if the prices further drop? Will the country's purchase and storage policies effectively keep the market stable? Second, in the first half of the year, China's PPI went up by 5.1% year-on-year. What's the reason behind the increase? Will this increase lead to higher industrial costs and losses for industrial enterprises? What impact will a high PPI and a low CPI have on the national economy? Will it cause ripple effects to consumer prices? Thank you.

Yao Jingyuan:

Both issues are of great concern to the people. There is an economic law called the cobweb theory. To put it simply, the theory means that the current output of a product determines its current price, which in turn determines its output in the next period. When the current output of a product is large, its price will fall, and so will its output in the next period. The decrease in output will in turn lead to an increasing price.

There has already been much research worldwide about cobweb theory and its application for agricultural products. Over the past decade, we have accumulated numerous positive experience. In the beginning of 2018, there was a rebound in pork prices. According to my research in 2019, each pig can make a profit of 2,000 yuan, and profits can reach 20 million yuan when raising 10,000 hogs. Pork prices have now risen to 80 yuan per kilogram, and the public complains. This is mainly due to the decrease in the supply of pigs, i.e., the number of pigs available for slaughter. In 2019 and 2020, there was a drop in the number of pigs available for slaughter — down by almost a third — resulting in a rise in pork prices. Therefore, people increased their spending on raising pigs, and the number of pigs available for slaughter rose. There were also some other factors in 2019 that affected prices, for example, swine flu. Over the past two years, we have witnessed a rapid recovery in the number of pigs available for slaughter and growing piglet replenishment. At the end of June, pig stocks numbered 439.11 million, recovering to historically normal levels. So pork prices began to decrease. From June to August, the summer months, the decline in meat consumption leads to a drop in pork prices. 

You asked about whether the pork prices dropped to the cost price. Indeed, individual pig farmers have already sold pigs at below-cost prices, while large-scale pig breeding farms continue to make profits. We usually take several measures to stabilize pork prices. Besides increasing pig imports, we now put more effort into expanding government reserve purchases. We have already summarized many helpful experiences, and the National Development and Reform Commission is actively working on implementing these measures. Now, pork prices have dropped too sharply. People living in urban areas hope to purchase pork at the lowest possible price. But for farmers and the pig breeding industry, we need to stabilize prices. So the government has taken measures to purchase pork as part of its effort to stabilize the market and prices. In the next round, when the pork prices go up, the government will sell the pork from state reserves at a lower price in a bid to moderate pork prices. We have now accumulated much more experience and this will not be a matter of concern. 

As to your second question, the price of upstream raw materials has now risen. China's producer price index (PPI) increased 8.8% year on year in June, the highest level seen over the past few years. Increasing prices in upstream raw materials are due to loose fiscal and monetary policies that the U.S. and some countries have taken. So there has been a rise in the prices of bulk raw materials in the international market, such as oil, steel, and non-ferrous metals. Raw materials have also witnessed rising prices in the international market. China is the world's biggest bulk commodity importer, and the rising prices of raw materials in the international market will surely affect the domestic market through imports. In the domestic market, the downstream manufacturing companies will be most pressured, which will require us to pay more attention to prices in the second half of this year. The rising prices of upstream raw materials such as oil, coal, steel, non-ferrous metals, and chemicals will definitely influence downstream companies, and that's exactly what sparks concerns. 

I see that people are worried about how changes in the PPI may affect the CPI (consumer price index), which may eventually lead to growing inflation. I don't think this is a major issue. What concerns us most is that if manufacturing companies find difficulty in moving out and the prices of upstream raw materials can not be stabilized, these companies will face additional difficulties and challenges. I also believe that manufacturers should turn the pressure resulting from soaring prices of upstream raw materials and power resources into driving forces for the innovation and technological advances in companies. However, boosting the capacity for innovation, technological advances, and management doesn't happen overnight. So what measures should we take? In accordance with the deployment and decisions of the CPC Central Committee and the State Council, we will strengthen work to ensure supplies and stabilize the prices of major upstream raw materials and power resources. There is no problem with that, and it is not a matter of concern. According to the guiding principles, since we are committed to peaking carbon emissions and achieving carbon neutrality, to some extent, we don't support expanding steel production. However, once we lift restrictions, there will be a rise in steel production, as well as in coal. Coal prices have recently increased, but prices will stabilize as long as we encourage production and expand production while ensuring supply. We have confidence in our production capacity, and prices will stabilize. China's PPI increased 8.8% year on year in June, down by 0.2 percentage point from May, which is a hard-won achievement. I'm confident that we will stabilize prices in upstream raw materials and maintain a stable trend in the second half of this year. I know many people are worried about inflation. The CPI may edge up during the second half of the year, especially in September, when there is increased meat consumption during the Mid-Autumn Festival and National Day holiday. Even so, CPI growth is expected to stay below 3% throughout the whole year. I suggest that we should now place more focus on easing manufacturing companies' difficulties. 

Global Times:

I have two questions. The first question is: the data released this morning shows that China's economic growth rate in the first half of the year reached 12.7% — how do you view this level of economic growth compared to the rest of the world? What do you predict for the whole year? My second question is: Mr. Yao just mentioned the goal of building a moderately prosperous society and the second centenary goal. It took China only 40 years from proposing to build a moderately prosperous society to finishing building a moderately prosperous society in all aspects, so I would like to know, what do you think of China's economic achievements over the past 40 years? Do you think China can continue to create such an economic miracle or achieve higher levels of growth on its path toward its second centenary goal? Thank you.

Xu Xianchun:

Thank you for your questions! Regarding your question of how to evaluate the 12.7% economic growth in the first half of the year in comparison to the rest of the world, here is my answer: the period most severely hit by the COVID-19 epidemic in China was the first quarter of last year, and it also affected the first half of last year, so the base number for the same period last year was low, and the 12.7% growth rate in the first half of this year appears to be relatively high. The epidemic has hit different countries at different times, so it is not easy to compare them directly. If you want to compare, I think it might be better to use the two-year average growth data proposed by the NBS. Why do I say this? We know that year-on-year growth has a base number issue. Although year-on-year growth also reflects the actual situation and is illuminating, it is a longitudinal comparison. If comparing the year-on-year growth rates between two quarters, an issue will arise as to whether the two base figures are comparable. For example, when the NBS releases the value-added of industrial enterprises above the designated size and the total retail sales of consumer goods, it often combines January and February figures. Why? Because in some years, the Lunar New Year occurred in January and others, February. If we compare two years back to back and the Lunar New Year period does not happen in the same calendar month, differences in the base numbers will be significant. The NBS puts these two months together in order to reduce the impact of incomparable base figures.

We know that the impact of the COVID-19 epidemic on economic growth in each quarter of last year was different. Since the impact in the first quarter of last year was the greatest, the economy grew 18.3% year-on-year in the first quarter of this year, which was actually due to the 6.8% drop during the same period last year. In the second quarter of last year, the growth rate returned to 3.2%, a rebound of 10 percentage points. Therefore, last year's base figures for the two quarters are completely different. One had a decrease of 6.8%, and the other had an increase of 3.2%. If the base numbers were not built on a comparable basis, the data will be incomparable. The NBS used 2019, which was not affected by the epidemic, as the base period for comparison and conducts two-year average figures. When the base numbers are comparable, the growth rates can be comparable. In the first quarter, GDP's two-year average growth rate was 5%, and in the second quarter, it was 5.5%, an increase of 0.5 percentage point. This is comparable.

I believe the next step of economic growth will also be affected by the base number. For example, the economic growth in the third quarter of last year was 4.9%, an increase of 1.7 percentage points from the second quarter, but still lower than the growth for a normal year. That is to say, it was lower than the potential economic growth. Therefore, economic growth in the third quarter of this year is still based on a relatively low base and is likely to remain relatively high. Of course, there are many other uncertain factors, such as how the pandemic plays out overseas. China's current export situation is relatively good. An important reason is that there is a gap in supply and demand overseas due to the impact of the pandemic. China can make up for this gap because of the better control of the epidemic. After the pandemic situation improves, if overseas production resumes, this supply-demand gap may narrow, and China's exports may decrease. Taking these factors into consideration, I project that the economic growth rate in the third quarter will still be relatively fast, but it will definitely be lower than that in the second quarter of this year. The economy grew by 6.5% in the fourth quarter of last year, exceeding the growth rate in the same period in 2019. So I estimate the growth rate in the fourth quarter this year may continue to decrease. This year, GDP growth will likely decline from quarter to quarter, but the annual growth rate will still remain relatively high, and will definitely exceed the economic growth rate of recent years.

I have preliminarily calculated that the 12.7% economic growth in the first half of the year will drive the annual economic growth by about 5.7 percentage points. Therefore, even if the economic growth rate declines in the second half of the year, I think it will still drive the annual economic growth by about 3 percentage point. The annual economic growth may be between 8.5-9%. Of course, this is entirely my personal prediction. I have also seen relevant international organizations such as the World Bank (WB), the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), and the Asian Development Bank (ADB) estimate that China's economic growth rate will exceed 8% in 2021. Some domestic institutions may have higher estimates. However, this is no cause for thinking that China's current economic growth is too high because this growth rate is based on a relatively low base figure from last year. If we remove the base figure factor, the two-year average growth rate is not really high. This is an estimate for this year's economic growth. It is entirely a personal estimate and is for reference only. Please correct me if I am wrong. Thank you!

Yao Jingyuan: 

Your second question is about China's economic development. Over the last 40 years, in 1978, China's economy totaled 367.9 billion yuan, while last year the figure stood at 101 trillion yuan. Judging from this, I agree with you that China's economy has created a miracle over the past four decades. I once served in the National Bureau of Statistics (NBS), and to be honest, I was often asked whether the statistics were accurate. I gave them an accurate and undoubted indicator as an answer, which is the country's foreign exchange reserves.

I don't know if you are aware of this, China's foreign exchange reserves in 1978 were less than $200 million. While I was learning the history of the Communist Party of China some time ago, I read a story about Comrade Deng Xiaoping and his visit to France in 1975. The day before he returned to China, he recalled a small cafe in Paris where he had a cup of coffee during his work and studies in France. After he told the story, a staff member found the cafe was still there. Deng Xiaoping drank the coffee of that cafe again and mentioned that the French bread tasted good. At this time, someone suggested that before returning to China, he should buy some bread to take back as a small gift, but Comrade Deng Xiaoping said that it would cost foreign currency to buy bread. Even Comrade Deng Xiaoping had to worry about the foreign exchange when buying bread abroad at that time, but who needs to be concerned about it now? The latest data shows that as of June 30, China's foreign exchange reserves had reached $3,214 billion, a figure that can't be falsified. In the past 40 years, the country's foreign exchange reserves have increased tremendously from $200 million to $3,214 billion. Therefore, I think it's appropriate to describe China's economy in the past four decades as a miracle. 

We have achieved the first centenary goal and are now marching towards the second, which will take about 30 years to fulfill. The 30 years are divided into two phases, with each one lasting 15 years. Our goal by 2035 (after the first 15 years) is to basically realize socialist modernization. As I said some time ago, the simplest but multifaceted way to view socialist modernization is to focus on the main economic indicators like the economic aggregate. In the next 15 years, by 2035, our total economy is expected to double to more than 200 trillion yuan, based on the 101 trillion yuan last year. Our per capita GDP is $10,000 now, and doubling it means an increase to $20,000. Another important indicator is the market scale. The total retail sales of consumer goods last year registered 39 trillion yuan, and doubling it means a rise to about 80 trillion yuan. If we are to double the main indicators in the next 15 years, an economic growth rate of 4.72% or 4.73% is enough. 

To achieve the second centenary goal, the principal contradiction won't lie in speed. Mr. Xu said just now that China can achieve an economic growth rate of 8% this year. I think the growth rate could be lowered a bit during the 15th and 16th Five-Year Plan periods (2026-2030 and 2031-2035), as this will help us concentrate more on the quality of economic growth. While we were making efforts to fulfill the first centenary goal in the past four decades, we created a miracle more in terms of the growth speed. At that time, we had yet to eliminate poverty and meet the basic needs of the people, hence we needed to achieve an extraordinary economic growth rate. But from now on, as we are striving to realize the second centenary goal, we should create a miracle in growth quality, namely the high-quality development. Judging from the economic data of the first half of this year, I believe the miracle in the future will be made in high quality development. For example, we should take innovation as the fundamental driving force. Future development should be green by achieving peak carbon emissions and carbon neutrality; it should be coordinated across the eastern, central and western regions, between urban and rural areas, and among various industries; and it should be more open and shared by all to ensure that each and every one of our 1.4 billion people can fully enjoy the benefits of development. Therefore, in this respect, I quite agree with you that when we achieve the second centenary goal, China's economy will still be a miracle. However, this miracle will be different from that of the past 40 years, as the past one was more about quantity and speed and the new one will be reflected in quality. Thank you.

Hong Kong Economic Herald: 

The World Bank expects China's economy to grow by 5.4% next year, returning to its long-term trend before the COVID-19 epidemic. Mr. Yao and Mr. Xu, how do you see China's economic forecast next year? Thank you.

Xu Xianchun: 

The World Bank predicted that China's economy will grow by 5.4% next year. The World Bank is an important international institution, its forecasts are closely watched, and we often follow its predictions as well. Nonetheless, its forecasts are often revised. When the NBS issues new data, the World Bank may adjust its projections. 

How should the World Bank's prediction of 5.4% economic growth in 2022 be viewed? I agree with Mr. Yao's comments just now that China will not maintain a very high growth rate as China's GDP gradually increases. For example, China's GDP was around 10 trillion yuan in 2000, while the number exceeded the 100 trillion yuan threshold in 2020, which is 10 times higher than 20 years ago, or more than six times that in 2000 when the price factor is excluded. What does this mean? It means that one percentage point increase now is equivalent to growth of six percentage points in 2000. Therefore, we cannot count on GDP continuing at such a high speed. The CPC Central Committee and the State Council have attached high importance to high-quality economic growth, and China is shifting from high-speed growth to high-quality development. We need a certain growth rate as development is the foundation for and the key to addressing almost every problem. Economic growth is an important part of development, but instead of blindly pursuing growth rate we need high-quality development.

Looking back over the previous economic growth data: China's economic growth rate reached a peak of 14.2% in 2007; the figure was 10.6% in 2010, 6% in 2019 and last year saw a 2.3% growth due to the pandemic. Obviously, China's growth rate is gradually dropping, which I believe is quite normal. China's economy has expanded remarkably after a long period of acceleration, and one percentage point growth now is not the same as it was before. In addition, we are pursuing high-quality development. I think China's potential growth rate is between 5.5% and 6%, and it is normal for our GDP to be within this range. Over time, economic growth may decrease, but we should not be surprised at this and should be confident in achieving our future targets as long as the data is controlled within a reasonable range and we adhere to high-quality development. Thank you.

Yao Jingyuan:

I'd like to add something. I have an example to explain that different economic phases should match with different growth rates: My family welcomed in a baby granddaughter, weighing 3 kg. After a month she had reached 4.5 kg, which the doctor said was normal. However, I questioned that figure because she is just a baby and gained 50% of her weight in a single month. If we as adults, gained 50% of our weight in one month, then we should definitely go see a doctor. As such, we should understand that different growth stages face different health indexes. What Mr. Xu Xianchun said just now is quite clear: that it was reasonable to reach a high-speed growth rate in the past as we faced problems such as poverty, and a lack of food and clothing. Now we have realized our first centenary goal and are marching toward the second centenary goal, amid which China's economy has shifted from high-growth to high-quality development. Just like my granddaughter is growing up and we need to pay more attention to her studies and her ethics and morals. So, I want to say that we shouldn't be too sensitive about the speed of economic growth, whether it is an average of 4.7% in the coming 15 years, exceeds 6% or even drops below 4% in certain years. In general, the quality of growth will determine whether we can reach our second centenary goal.

Xing Huina:

One hour has now passed, but we still have two journalists with their hands raised. We'll spend the last 10 minutes to give each journalist the opportunity to ask their questions.

Cover News:

My question is on CPI. The data released this morning shows that CPI is up 0.5% year on year, lower than the inflation-control target of 3% this year. So, which are the main control policies that have taken effect? What are your predictions for the CPI trend for the whole year? And do you believe that inflation will not be a main contradiction for China's economic performance this year? Thank you.

Yao Jingyuan:

China's Consumer Price Index (CPI) rose 1.1% year-on-year in June and 0.5% year-on-year in the first half of 2021. The CPI's moderate rise can still be attributed to the intensified efforts on supply-side structural reform. How can we keep the rise of the CPI under control? Food prices account for 30% of the CPI, which is the biggest component. To ensure the stability of food prices, the prices of pork are of utmost importance. We have attached great importance to pork prices since 2019. Governments at all levels have introduced favorable policies on land use for hog production, tax reduction and exemption, and encouragement of large-scale hog breeding, to name a few of them. As of the end of June, the number of pigs available for slaughter increased to 439.11 million, returning to the historically normal level. The supplies have thus been increased. Thanks to the supply-side structural reform, the CPI can be kept stable.

In terms of the CPI, if problems emerge in the overall market sales, then they are also related with structural issues. The principal contradiction facing Chinese society has evolved and is now that between the people's ever-growing needs for a better life and unbalanced and inadequate development. The supply of things to meet the people's needs for a better life is insufficient. For example, we all need green products, but the supply is far from sufficient.

Regarding the trend of the CPI in the second half of this year, I believe that it is likely to rebound especially in September. Due to the consumption peak brought about by the Mid-Autumn Festival and the National Day holiday as well as the consolidated progress of epidemic prevention and control, consumption and demand in September will increase, which may lead to a rise in prices. At the beginning of this year, China's CPI was set to rise no more than 3% year-on-year. There shouldn't be any problems accomplishing this target. However, we should also be aware that the rise in raw material prices will lead to the rise of the CPI; that the rise of oil prices will result in the rise of chemicals prices; and that the rise of fertilizer prices will cause the rise of food prices. People are concerned about a series of problems like these. The measures we take currently to ensure the supply of commodities and keep their prices stable have been rather effective. Therefore, although the CPI may rise for one or two months in the second half of 2021, I believe that its rise can be kept within 3% throughout this year. 

Xing Huina:

We will have the last question.

China Youth Daily:

My question is about employment. In the first half of 2021, China achieved 63.5% of its annual target of creating new urban jobs. Still, the employment pressure remains relatively high in the second half of this year, as there are 9.09 million new graduates from universities and colleges. The surveyed unemployment rate among those aged between 16 and 24 also stood at around 15%. How can we cope with such employment pressure in the second half of 2021? Thank you.

Yao Jingyuan:

In the first half of this year, China achieved 63.5% of its annual target of creating new urban jobs, but the employment of college graduates is indeed a big issue. This year, there are 9.09 million new graduates from China's universities and colleges, which is a record high. The figure last year was 8.74 million. Due to the impact of the pandemic, the employment of some graduates was delayed to this year. Thus, we also need to address the employment issue of some of last year's graduates. In addition, if there weren't the pandemic, hundreds of thousands of graduates would pursue further study overseas. But this figure also plummeted now. At the end of last year, I suggested that more graduate students be enrolled so as to provide opportunities and conditions for their further study. This year, the total number of the employment supply is unprecedented. As the graduation season is underway, I suggest Party committees and governments at all levels attach great importance to the employment of graduates and spare no efforts to create jobs. Flexible employment is an excellent measure as it provides sufficient choices for every young person. Flexible employment requires further policy support, such as the social security, so that young people in this sector can feel reassured when chasing their dreams. Measures should be taken to allow every graduate to land their ideal jobs and a satisfactory salary. 

You've raised a very important question, and this should be a major task for Party committees and governments at all levels in the second half of this year. Currently, the CPC Central Committee and the State Council has attached great importance to the issue. I believe the next six months will see solid and effective results.

Xing Huina:

Today's briefing is hereby concluded. I thank the two experts for their excellent explanations, which I believe is of great help for all the friends from the media. Goodbye.

Translated and edited by Wang Yiming, Wang Qian, Li Xiao, Zhang Rui, Gong Yingchun, Li Huiru, Wang Mengru, Huang Shan, Zhang Liying, Zhang Junmian, Cui Can, He Shan, Yuan Fang, Xu Xiaoxuan, Wang Zhiyong, Zhu Bochen, Zhang Tingting, Liu Qiang, David Ball, Jay Birbeck, and Tom Arnstein. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.