SCIO briefing on China's economy in H1

Speaker:

Mao Shengyong, spokesperson of the National Bureau of Statistics (NBS) and director general of the Department of Comprehensive Statistics.

Chairperson:

Shou Xiaoli, Press Bureau of State Council Information Office

Date:

July 15, 2019

Shou Xiaoli:

Ladies and gentlemen, good morning. Welcome to this press conference. Today, we are releasing China’s economic data. We are pleased to welcome Mr. Mao Shengyong, the spokesperson of the National Bureau of Statistics (NBS) and director general of the Department of Comprehensive Statistics, to introduce China’s economic performance in the first half of 2019 and answer some of your questions.

Now, I'll give the floor to Mr. Mao.

Mao Shengyong:

Thank you. Ladies, gentlemen, friends from the media, good morning everyone. I’ll first give you a brief introduction of China’s economic performance in the first half of 2019, and then answer some of your questions.

In the first half this year, China’s economy remained stable while making further progress. In view of the complex domestic and international environment, under the firm leadership of the Communist Party of China (CPC) Central Committee with Comrade Xi Jinping at its core, all regions and departments implemented the decisions and arrangements made by the CPC Central Committee and the State Council, and followed the general principle of pursuing progress while ensuring stability. We adopted the new development philosophy, promoted high-quality development, focused on supply-side structural reform, and further improved our efforts in reform and opening up. We also intensified efforts to ensure stable employment, a stable financial sector, stable foreign trade, stable foreign investment, stable domestic investment, and stable market expectations. Due to these efforts, the Chinese economy has been operating within a proper range, and remained stable while making further progress.

According to preliminary statistics, in the first half this year, GDP reached 45.09 trillion yuan, up 6.3% year-on-year in comparable prices. On a quarterly basis, the year-on-year increase was 6.4% and 6.2% respectively. In regard to the different industrial sectors, the added value of the primary, secondary and tertiary industries was 2.32 trillion yuan, 18.00 trillion yuan and 24.77 trillion yuan respectively, up 3.0%, 5.8% and 7.0% year-on-year.

Mao Shengyong:

First, the agricultural sector posted a sound performance following a bumper harvest of summer grain.

In the first half of this year, the added value of the crop farming sector posted a year-over-year increase of 3.9%, and the growth rate was 0.5 percentage point lower than that of the first quarter. The overall output of summer grain amounted to 141.74 million tons, 2.93 million tons more than last year, showing a yearly growth of 2.1%, which met the highest record (registered in 2017) of summer grain production. The structure of crop farming continues to be improved, as the planting area for cotton and soybean increased. On a year-on-year basis, in the first half, the output of eggs increased 3.6%; the output of milk increased by 1.7%; the output of pork, beef, mutton and poultry decreased 2.1% to 39.11 million tons. Specifically, the output of beef, mutton and poultry were up by 2.4%, 1.5%, and 5.6% respectively, while the output of pork was down by 5.5%.

Second, industrial production was generally stable, and the proportion of high-tech manufacturing rose.

In the first half of this year, the growth of the total value added of industrial enterprises above the designated size was 6.0%, and the growth rate was 0.5 percentage point lower than that of the first quarter. Meanwhile, the growth of the total value added of industrial enterprises above the designated size in June was 6.3%, and the growth rate was 1.3 percentage points higher than that of May, up 0.68% on a month-on-month basis. An analysis by types of ownership showed that the value added of state holding enterprises was up by 5.0%; that of share-holding enterprises up by 7.3%; and enterprises funded by foreign investors or investors from Hong Kong, Macao, and Taiwan up by 1.4%.

In terms of sectors, the value added of the mining industry increased by 3.5%; that of manufacturing increased by 6.4%; and that of the production and supply of electricity, thermal power, gas and water increased by 7.3%. The value added of strategic emerging industries grew by 7.7% year-on-year, or 1.7 percentage points higher than that of the industrial enterprises above the designated size. The added value of the high-tech manufacturing increased by 9.0%, or 3.0 percentage points higher than that of industrial enterprises above the designated size, accounting for 13.8% of all industrial enterprises above the designated size, and this proportion is 0.8 percentage point higher than that in the same period last year. The production of new energy vehicles and solar batteries showed a year-on-year growth by 34.6% and 20.1% respectively.

From January to May, the profits made by industrial enterprises above the designated size stood at 2.38 trillion yuan, down 2.3% year-on-year. The decrease was 1.1 percentage points lower than that from the first four months. The profits made by industrial enterprises above the designated size in May grew by 1.1%, while the profits in April decreased by 3.7% on a year-on-year basis. The profit rate of business revenue of industrial enterprises above the designated size was 5.72%, 0.2 percentage point higher than that from the first four months.

Third, the service sector grew rapidly and the modern service industry is booming.

In the first half of this year, the service sector took on a sound momentum of development. Respectively, the year-on-year growth of information transmission, software and information technology service, that of leasing and business service, that of transportation, storage and postal service, and that of financial sector stood at 20.6%, 7.8%, 7.3%, and 7.3%, which is 13.6 percentage points, 0.8 percentage point, 0.3 percentage point and 0.3 percentage point faster than the growth of the tertiary sector.

In the first half of this year, the Index of Services Production increased by 7.3% year-on-year, and the growth rate drop by 0.1 percentage point from the first quarter. In June, the index was up by 7.1%, 0.1 percentage point higher than that in May. The Business Activity Index for services was 53.4% in June, which continued to stand above the 50-point mark separating growth from contraction. The index was 60.3%, showing a high-level performance.

The business revenue of service enterprises above the designated size from January to May increased by 10.1% on a year-on-year basis, and the growth rate was 0.3 percentage point faster than that from the first four months. Of those, the business revenue of strategic emerging services, high-tech services and technology services demonstrated fast growth, which increased by 12.5%, 12.3% and 12.0% respectively, or 2.4 percentage points, 2.2 percentage points and 1.9 percentage points faster than the growth of the service enterprises above the designated size.

Mao Shengyong:

Fourth, the market sales increased steadily, with the growth rate and proportion of online retail continuing to increase.

In the first half of this year, the retail sales of consumer goods totaled 19.52 trillion yuan, up 8.4% year on year, 0.1 percentage point faster than the first quarter. In June, the total retail sales of consumer goods was 3.39 trillion yuan, up 9.8% year on year, 1.2 percentage points faster than the previous month, and up 0.96% month on month. In a breakdown by location of business units, in the first half of this year, the retail sales of consumer goods in urban areas was 16.69 trillion yuan, up 8.3% year on year; that in rural areas was 2.83 trillion yuan, up 9.1% year on year. From the perspective of the types of consumption, revenue from the catering sector reached 2.13 trillion yuan, up 9.4%; retail sales of commodities totaled 17.39 trillion yuan, up 8.3%. Sales of goods representing consumption upgrade grew rapidly, with that of cosmetics companies above designated size growing 13.2% year on year, 4.8 percentage points faster than the total retail sales of consumer goods.

In the first half of this year, China's online retail sales totaled 4.82 trillion yuan, up 17.8% year on year, 2.5 percentage points faster than the first quarter. Of this, online retail sales of physical goods was 3.82 trillion yuan, up 21.6%, accounting for 19.6% of the total retail sales of consumer goods, and 1.4 percentage points higher than that in the first quarter.

Mao Shengyong:

Fifth, investment reported stable growth, with that in high-tech industries growing rapidly.

In the first half of this year, China's fixed asset investment (excluding rural households) totaled 29.91 trillion yuan, up 5.8% year on year, 0.2 percentage point faster than January-May, and 0.5 percentage point lower than that in the first quarter. Of this, the private investment was 18.03 trillion yuan, up 5.7%. In a breakdown by industry, investment in primary industries fell by 0.6%; investment in secondary industries grew by 2.9%, with that in manufacturing up 3.0%; investment in tertiary industries rose by 7.4%, with that in infrastructure up 4.1%.

Investment in the high-tech manufacturing sector grew by 10.4% year on year, 4.6 percentage points faster than the total; that in the high-tech services sector grew by 13.5%, 7.7 percentage points faster than the total. On a month-on-month basis, investment in fixed assets (excluding rural households) increased by 0.44% in June.

Mao Shengyong:

Sixth, the growth rate of imports and exports increased slightly, and the trade structure continued to improve.

In the first half of this year, the import and export value totaled 14.67 trillion yuan, up 3.9% year on year, 0.2 percentage point faster than the first quarter. Of this, the export value was 7.95 trillion yuan, up 6.1%; the import value totaled 6.72 trillion yuan, up 1.4%. The trade surplus was 1.24 trillion yuan, up 41.6% year on year.

The country further improved the mode and structure of trade. The import and export value of general trade increased by 5.5%, accounting for 59.9% of the total import and export value, 0.9 percentage point higher than the same period last year; the export value of mechanical and electrical products increased by 5.3%, accounting for 58.2% of the total export volume. The import and export value of private companies increased by 11.0%, accounting for 41.7% of the total import and export value, 2.7 percentage points higher than the same period last year.

In June, the import and export value totaled 2.56 trillion yuan, up 3.2% year on year. Of this, the export value totaled 1.45 trillion yuan, up 6.1%; the import value totaled 1.11 trillion yuan, down 0.4%.

In the first half of this year, the delivery value of exports of companies above designated size reached 5.84 trillion yuan, up 4.2% year on year. In June, the figure reached 1.06 trillion yuan, up 1.9%, 1.2 percentage points faster than that registered in May.

Mao Shengyong:

Seventh, consumer prices rose moderately, and producer prices remained basically stable.

In the first half of this year, China's consumer prices rose 2.2% year on year, 0.4 percentage point higher than that in the first quarter. Of this, consumer prices in both urban and rural areas rose by 2.2%. By category, the prices of food, tobacco and alcohol rose 3.9% year on year, the prices of clothing rose 1.8%, housing prices increased 2.0%, the prices of daily necessities and services rose 1.1%, the prices of transportation and communications fell 1.0%, the prices of education, culture and entertainment rose 2.5%, the prices of medical care increased 2.6%, and those of other goods and services rose 2.2%. Among food, tobacco and alcohol prices, grain prices rose 0.5%, pork prices increased 7.7% and the prices of fresh vegetables rose 9.2%. The core CPI excluding food and energy prices rose 1.8% year on year, 0.1 percentage point lower than the first quarter. In June, the consumer prices rose 2.7% year on year, unchanged from the previous month, down 0.1% month on month.

In the first half of this year, producer prices rose 0.3% year on year, 0.1 percentage point higher than that in the first quarter. In June, producer prices remained flat year on year and down 0.3% month on month. In the first half of this year, the purchasing prices of producers rose 0.1% year on year, the same as that in the first quarter. In June, the purchasing prices of producers fell by 0.3% year on year and 0.1% month on month.

Mao Shengyong:

The employment situation generally remained stable, and the total number of rural workers working outside their hometowns continued to increase.

In the first half of the year, 7.37 million new urban jobs were created across the country, meeting 67% of the annual employment target. The surveyed urban unemployment rate was 5.1% in June, up 0.1 percentage points from May. The urban unemployment rate among the people aged between 25-59 was 4.6%, 0.5 percentage points lower than the overall national urban figure. The jobless rate in 31 major cities and towns was 5.0%, the same as May. In June, the average weekly working hours of employees in enterprises nationwide was calculated at 45.7 hours. By the end of the second quarter, the number of rural laborers forming the migrant workforce operating outside their hometowns reached 182.48 million. This was an increase of 2.26 million or 1.3% year-over-year. The gain in the second quarter was 0.1 percentage points higher than the first quarter.

Mao Shengyong:

The growth rate of residents' income exceeded that of national economy, and the income gap between urban and rural residents further narrowed.

In the first half of the year, national per capita disposable income was 15,294 yuan, a nominal gain of 8.8% year-over-year, with a 0.1 percentage points increase in the pace between the first and second quarters. With actual growth of 6.5% after adjusting for inflation, the figure was 0.2 percentage points higher than the national economic growth rate. Classified according to residents' permanent residence locations, urban residents' per capita disposable income was 21,342 yuan (actual growth 5.7%). Rural residents' per capita disposable income was 7,778 yuan (actual growth 6.6%). The per capita disposable income ratio between urban and rural residents stood at 2.74, down 0.03 year-over-year. The median per capita disposable income of national residents was 13,281 yuan, a nominal gain of 9.0% year-over-year.

Mao Shengyong:

Supply-side structural reform further deepened, and the economic structure has seen continuous progress in optimization.

We have consolidated the results achieved in the priority tasks of cutting overcapacity, reducing excess inventory, deleveraging, lowering costs and strengthening identified areas of weakness. In the second quarter, the national industrial capacity utilization rate was 76.4%, or 0.5 percentage points higher than the first quarter, and one percentage point higher than the average achieved since 2013. Among the figures, the industrial capacity utilization rates of the non-metallic mineral products industry, the ferrous metal smelting and rolling industry, and the non-ferrous metal smelting and rolling industry increased by 3.4, 1.7 and 1.7 percentage points respectively from the first quarter. By the end of June, the total floor space of commercial buildings for sale stood at 501.62 million square meters, which was 7.66 million square meters less than the figure at the end of May, and 8.9% lower year-over-year. By the end of May, the asset-liability ratio of industrial enterprises above designated size was 56.8%, down 0.6 percentage points year-over-year. In the first half of the year, investments in deprived areas of ecological preservation and environmental treatment as well as education grew respectively by 48.0% and 18.9% year-over-year (respectively 42.2, and 13.1 percentage points faster than the average growth of investments in all fields).

We continue the critical battles against major risks, poverty, and pollution. By the end of May, total local government debt stood at 19.8953 trillion yuan, which was within the limits approved by the National People's Congress. Targeted poverty alleviation made strong progress. The per capita disposable income of rural residents in poverty-stricken areas maintained comparatively rapid growth. Marked achievements were recorded in pollution prevention. Preliminary assessments indicate that, in the first half of the year, the share of clean energy consumption involving natural gas, hydropower, nuclear power and wind power in total energy consumption increased by 1.6 percentage points over the same period of last year, and energy consumption per unit of GDP dropped 2.7 percent year-over-year.

We have continuously optimized the economic structure. In the first half of the year. The tertiary industry's added value accounted for 54.9% of GDP, up 0.5 percentage points year-over-year, and 15.0 percentage points higher than the figure for secondary industry. The tertiary industry's contribution rate to GDP growth was 60.3%, or 23.2 percentage points higher than that of the secondary industry. Among industries above designated size, the strategic emerging industry and the high-tech industry maintained rapid growth. The contribution rate of final consumption expenditure to economic growth was 60.1%. Among the final consumption spending of all residents, service consumption accounted for 49.4%, up 0.6 percentage points year-over-year. We have steadily promoted a series of major regional development strategies, including the coordinated development of the Beijing-Tianjin-Hebei Region and the integrated development of the Yangtze Economic Belt, the Guangdong-Hong Kong-Macao Greater Bay Area, and the Yangtze River Delta. A new pattern of overall development across the country is taking shape.

Mao Shengyong:

In general, the national economy operated within a reasonable range in the first half of the year, having achieved generally stable growth while making further progress. However, we must also note that the current domestic and international economic situation remains complicated and severe. Global economic growth has slowed down, external instability and uncertainties have increased, and the problem of domestic development imbalance is still outstanding, while the economy faces new downward pressures.

In the next stage, we need to take Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as the guide, seriously implement the decision-making arrangements and deployments of the Central Committee of the Communist Party of China and the State Council, adhere to the general approach of steady progress, and maintain supply-side structural reform as the principal direction, while promoting high-quality development, deepening reform and opening up, optimizing the business environment, promoting independent innovation in key areas, so as to fully mobilize the enthusiasm of all parties. We also need to pay close attention to the implementation of the policies to stabilize employment, finance, investment, foreign trade, foreign investment, and expectations so as to ensure a steady and healthy economic development. Thank you.

Shou Xiaoli:

Thank you, Mr. Mao. Now, we will open the floor for media questions. Please tell us the name of your news organization before asking questions.

CCTV:

Since the beginning of this year, the economy has been under pressure and the downward pressure has increased. Based on the statistics you have just released, how would you evaluate China's economic development in the first half of the year? Thank you.

Mao Shengyong:

Thank you for your question. In the first half of this year, faced with a complicated situation at home and abroad, the economic growth maintained general stability and registered good progress. The main macroeconomic indicators are operating in a reasonable range and the economic structure is being optimized. The general characteristics are as follows:

First, the three main industrial sectors continued to develop. Agricultural production is relatively good, and there has been a bumper harvest of summer grain. The total output of summer grain this year increased by 2.1%, matching the record production achieved in 2017. Industrial growth was basically stable. In the first half of the year, the added value of industrial enterprises above designated size increased by 6%. In June, the gain was 6.3%, 1.3 percentage points faster than in May. The service industry continued to maintain rapid growth. In the first half of the year, the added value of the service industry increased by 7%. The service industry production index in June was 0.1 percentage points higher than that of May.

Second, the "Troika" is running smoothly. Consumption growth has generally accelerated. In terms of total retail sales of consumer goods, the six-month increase was 8.4%, showing a slightly faster rate compared to the first quarter. In particular, the total retail sales of consumer goods in June increased by 9.8%, 1.2 percentage points faster than the previous month. Investment growth is stabilizing. In the first half of the year, fixed assets investment increased by 5.8%, 0.2 percentage points higher than that in January-May. The import and export situation was better than expected. The total import and export volume of goods increased by 3.9% in the first half of the year, slightly faster than in the first quarter. June saw a further improvement over the May performance.

Mao Shengyong:

Third, the three major economic indicators are fared well. Employment was generally stable with 7.37 million new jobs created in urban areas in the first half of the year, meeting 67% of the 2019 target. The survey-based urban unemployment rate was held at around 5% in June; Market prices were also generally stable as the CPI grew by 2.2% year-on-year in the first half of the year, and the core CPI (excluding food and energy) rose 1.8%. That means consumer prices have only seen moderate growth; the PPI saw slight growth of around 0.3% year-on-year in the first half of the year.

At the same time, incomes have grown in tandem with economic development. Per capita disposable income rose 6.5%, which was 0.2 percentage points higher than the overall economic growth rate. One thing worth noting is that the disposable income of rural residents had grown faster than that of urban residents, and this is helping further bridge the urban-rural income gap.

Fourth, the industrial structure, the demand structure and the foreign trade structure all continued to be optimized. In regard to the industrial structure, agriculture consolidated its primary sector status, while the product mix continues to be further optimized. In the first half of the year, there was an increase in the planting area for soybeans and other cash crops.

Transformation of the secondary sector also continued to gather pace. For example, the value added component of high-tech manufacturing rose 9%, or three percentage points faster than that of industrial enterprises above designated size, and its proportion of the total value added of industrial enterprises above the designated size rose 0.8 percentage points year-on-year.

The tertiary sector continues to increase its contribution to economic growth. Proportionally, the value added of tertiary sector contributed an additional 0.5 percentage points to total GDP compared to last year. Thus, we continue to see a strong momentum in the development of a modern service industry.

In terms of the demand structure, consumption is consolidating its primary role in promoting economic growth. In the first half-year, an increase of consumption contributed 60.1% of GDP growth; the investment structure is also being optimized with expenditure on social development, high-tech industries and the manufacturing transformation being maintained at over 10% of the total investment mix.

The foreign trade structure has also improved. The proportion of general trade continues to rise year-on-year.

So, these are how major macroeconomic indicators performed in the first half of this year. Thank you.

Reuters:

In the first half of the year, China pursued intensified fiscal policies, like the tax cut of two trillion yuan and the issuance of special bonds worth 2.15 trillion yuan. However, some people don't think these policies have yielded obvious results in terms of data. How will you comment on that? And against the backdrop of the trade tension, is there any new policy in the second half of year to guarantee this year's growth target? Moreover, could you tell us the contribution of gross capital formation and the net exports of goods and services to GDP growth? Thank you.

Mao Shengyong:

In the first half of this year, the contribution made to GDP growth by consumption, gross capital formation and the net exports of goods and services were respectively 60.1%, 19.2% and 20.7%.

In regard to the counter-cyclical adjustments, there is both a proactive fiscal policy and a prudent monetary policy. Since the end of last year, in order to cope with the external uncertainties and downward pressure on the Chinese economy, a series of policies have been released and vigorously implemented. For example, we have pursued a proactive fiscal policy with greater intensity and enhanced its performance, adopted a prudent monetary policy that retained an appropriate degree of flexibility and pursued a proactive employment policy with full force. With regard to fiscal policies, we have increased expenditures including raising intensity and pace of special bonds issuance as well as increasing their amounts. Moreover, more efforts have been made to cut taxes and fees. These policies have been starting to pay off since April and May. Our survey shows that enterprises have benefited from cutting taxes and fees. The statistics also show that the growth of investment in infrastructure accelerated during the Jan-June period, and the growth of investment in the manufacturing sector also rebounded in the last two months. All these indicate that the relevant policies have produced results and we expect them to continue to pay off in the second half of the year.

However, it is worth noting that investments in some sectors, including manufacturing and infrastructure, are still at a low level. We will, with more policies being implemented, continue to deepen reforms, improve the business environment and further invigorate market entities. We expect a better economic performance in the second half of the year. Thank you.

Economic Daily:

Since the growth rate of the Chinese economy fell in the first half of this year, will it continue to drop in the third quarter？Is there any pressure to achieve the anticipated economic growth ranging between 6% to 6.5% this year? Are there any difficulties in reaching the targeted range? Thank you.

Mao Shengyong:

Thank you for your questions. The national economy achieved a growth rate of 6.3% during the first half of this year, which is a relatively good performance. I interpret the key part of your question as how to view the growth rate, and from my perspective, these are the key elements.

First, the rate of 6.3% represents a moderate and stable level. How can we substantiate that belief? During the first quarter of this year, the economy rose by 6.4%, which was only 0.1 percentage point higher than what was finally achieved during the first six months. Furthermore, if we take into consideration the various indices, including employment, prices, incomes and endeavors to ensure a quality ecological environment, the economy is running within an appropriate range.

Second, a rate of 6.3% isn’t slow by any means. During the first quarter, the economic growth rate of 6.4% was certainly the best achieved right across the globe. Even though not all countries have yet released their economic growth figures for the first half of this year, it is probable that there was a general trend of global economic slowdown. Therefore, a growth rate of 6.3% achieved over the six months still ranks high.

Third, this rate of 6.3% indicates quality growth. While considering the economic performance we have achieved, we also need to be concerned about a number of important factors, such as relatively stable employment, increases in consumer prices that were moderate and, indeed, close to zero compared to fast-growing household incomes, and the decline of 2.7% in energy consumption per 10,000 yuan of GDP. Hence, such a growth rate means sustainable development with high quality.

Fourth, that growth rate of 6.3% wasn’t easily achieved. We all know that, since last year and continuing into the first half of this year, global economic growth and trade expansion have been slowing. In addition, the domestic economy, affected by underlying structural problems extending over quite a period of time, has been running under certain downward pressures. In such a context, the national economy has been growing steadily due to innovation-driven reforms, new macro-economic approaches, an improved business-friendly environment, reductions in taxes and administrative fees and the revived vitality of many market entities, rather than under some overwhelmingly strong stimulus plans.

Fifth, the growth rate of 6.3% is immensely sustainable. Achieving that during the first half of this year provides a solid foundation for an annual growth rate expected to range between 6.0% to 6.5%. Looking at the second half of this year, the external environment will probably remain complicated, and there are still downward domestic pressures to be handled. Despite that, the economic performance will still sustain stable momentum and the economic policies, with an increasingly competitive domestic market, still have a great number of options available. All in all, the various factors combined can ensure that the major goal for this year’s economic development can be achieved. Thank you.

Bloomberg:

My first question is on industrial production. If you look at the export data for June, there was a shrink of 1.3%, but industrial production is up 6.3% in the same period. There has been a substantial divergence between exports and industrial production over the course of the whole year. And especially if you look at the PMI numbers. New export orders are down about 46%, and the overall PMI numbers are also below 50%. How do you explain the divergence between exports, the PMI and industrial production data which seemed very stable? The second question is how much of the contribution of net exports is due to the fall in imports? Imports have fallen and exports have also fallen. But imports have fallen a lot more, which will lead to a bigger increase from net exports in the contribution to GDP. So, how much is the effect of the contribution of net exports to GDP is due to the decline in imports? Thank you.

Mao Shengyong:

Thank you for your two important questions. The first question is about the relationship between industrial growth, industrial exports and the PMI. In June, the value-added output of industrial enterprises above the designated size increased by 6.3% year-on-year, higher than that of May. The volume of industrial exports was stable in June, with the export delivery value of industrial enterprises above the designated size growing faster than in May. This data is based on the relevant indicators released by the NBS.

From this perspective, industrial growth and exports are generally matched. In June, the manufacturing industry’s PMI remained the same as the previous month, a little lower than the 50% threshold. However, in terms of the scale of enterprises, the index of large enterprises remained basically the same, while that of small and medium-sized enterprises registered a slight rise. Generally speaking, there is no big contradiction between the three indicators. In addition, when analyzing the relationship between indicators, we’d better consider the data of more than a month so that we can have a better grasp of the overall trend.

The second question is about the contribution of net exports, namely net exports of goods and services, to economic growth. The contribution rate was 20.7% in the first half of this year, higher than during the same period last year and the first quarter of this year. This is due to two factors. First, the value of total exports minus the value of total imports of goods and services, namely net exports, or trade surplus in goods, showed considerable expansion compared to the same period last year. At the same time, the trade deficit in services became smaller. Thus, the overall trade surplus in goods and services expanded.

To get an accurate and comprehensive picture of how the three drivers, namely consumption, exports and investment, contribute to economic growth, we have to take account of factors beyond the contribution rate. The first is economic structure, such as the sheer proportion of the three drivers in GDP. The recent years have witnessed a continuous rise in the share of domestic demand, and a fall in that of net exports of goods and services. China’s economic growth relies increasingly on domestic demand, especially consumption.

The second is speed, such as the growth of consumption, investment or gross fixed capital formation and net exports of goods and services. Overall, consumption and investment combined, or domestic demand, outpaced net exports during these years. The third is contribution rate, which reflects how much contribution the three drivers respectively make to economic growth.

In short, in order to reach an accurate conclusion about how the three drivers contribute to economic growth, we need to take into consideration not only their contribution rate, but also their own growth and share in the economy. By doing so, we concluded that China’s economic growth indeed relies increasingly on domestic demand, especially consumption. The central government has instructed that more focus be given to boosting the domestic market. Thank you.

China News Service:

According to a recent NBS report, China's per-capita GDP has surpassed $9,700. This had led some people to believe that China has escaped the middle-income trap. What's your view on this issue? Thank you.

Mao Shengyong:

Thank you for the question. First of all, the NBS is working on a series of reports that shows the achievements of China's economic and social development over the past 70 years. Three of the reports were recently released, and have won positive responses. There are still nearly 20 reports to be released. Please continue to follow us in this regard.

Second, the sum you mentioned in our first report was $9,732 to be accurate, and it was last year's per-capita gross national income (GNI). This index is different from GDP. GDP refers to the total added value produced by the permanent entities in a country or region in a period. It reflects economic growth from the perspective of production. In contrast, GNI was previously known as gross national product (GNP). The name was changed in 1993. It reflects the distribution of income among residents, government and enterprises. In 1993, the United Nations and some other international organizations adopted this name when revising statistics, because they found the name GNP not accurate for the concept. From then on, GNP has been gradually replaced by GNI.

Third, GNI and GDP are also related to each other. For instance, GNI is calculated on the basis of GDP. It is the sum of GDP plus the net income earned by foreign entities. Previous statistics show that there was no big difference between China's GDP and GNI, as the former was just a little higher than the latter. Please note that GNI is also different from resident disposable income, as the former consists of the net incomes of government, enterprises, residents and foreign entities. It is obviously much higher than the latter.

Fourth, you asked a question that many people are also eager to know the answer to. According to the standards of the UN, China is in the upper-middle income group. It must be admitted that after the rapid development over the past 40 years, China's economic situation and international status have improved remarkably, with the Chinese economy ranking second in the world. However, the per-capita income of the country has remained low. Figuring out when China will become a high-income country depends on many factors. Whether a country is a high-income country is decided by the status of other countries. When we will become a high-income country should be decided by our economic growth rate, price level, the development of other countries, as well as the exchange rates of the yuan, U.S. dollar and other currencies. Besides, international organizations may also change the methods of classification. Therefore, instead of discussing whether and when China can be ranked as a high-income country, we'd better focus on promoting economic development, improving people's livelihood and income, upgrading our economy and making it more efficient, so as to strive for high-quality development. Thank you.

21st Century Business Herald:

There may have been some answers already, but I would still like to ask. We have seen that the growth of industrial investment, the service sector and consumption all picked up in June, but the overall economic growth rate in the second quarter went down. What is behind the rebound of the growth rates in June? Will it last? In addition, the urban unemployment rate rose slightly in June. What do you think of the current employment situation? Thank you.

Mao Shengyong:

Thank you. You just asked two questions. The first one is whether the rebound of the growth rates in some indicators in June will last and what will happen in the second half of this year. The second question is about my views on the current employment situation.

As for your first question, we saw some indicators in June indeed picked up compared with those in May, including the industrial growth, as well as the growth of the retail sales of consumer goods and the production index of the service sector. For example, the total retail sales of consumer goods increased 9.8% in June, up 1.2 percentage points from May. The two main reasons are as follows. First, car sales performed better than expected. With the national standards for pollutant discharge of motor vehicles switched from Stage V to VI, promotional efforts were stepped up in June to increase automobile sales, which is a key reason for the better performance. The sales of automobiles by companies above designated size increased over 17%, driving the total retail sales of consumer goods to increase about 1.6 percentage points. Second, online retail sales in June performed relatively good. With promotional activities on June 18, we saw the online sales of cosmetics and household appliances grow at a relatively fast speed. These two factors combined to accelerate the growth of total retail sales in June. The growth of total retail sales of consumer goods had an obvious driving effect on the growth of the production index of the whole service sector, so these two indicators are correlated. As for industrial growth, we can look at the facts that the output and the value added of most industries and products increased in different degrees in June compared with those in May, and that there was also growth in export delivery in June. Thus, the growth figures were well-founded and also related with each other on the whole.

As for the second half of this year, there will be both positive and negative factors. On one hand, there will still be downward pressure for these indicators; on the other, there will be many favorable factors to support their stable performance. For example, the government will constantly stimulate more vitality in the market, and gradually implement a series of counter-cyclical adjustments, including a policy of stabilizing employment, trade, investment, finance, foreign investment and market expectations. These policies will have a more obvious effect on the indicators in the second half of this year, and all the above will be conducive to the stable performance of these indicators in the second half of the year.

The second question is about the unemployment rate. The surveyed unemployment rate in cities and towns increased 0.1 percentage point in June compared with that in May. Overall, the employment situation was still relatively stable, with the surveyed unemployment rate staying around 5%; however, we should notice that there are still some structural problems behind the overall stability that need to be addressed. In particular, with nearly 8.3 million university students graduating this year, there is still an increasing pressure on employment. As the graduation season comes in July and August, there is still some structural pressure on employment. Some traditional industries, including those undergoing structural transformation and overcapacity reduction, may also bring structural pressure on employment. The central government has paid close attention to employment, as it is the foundation of people's livelihood. This year, we have raised the priority of the employment policy to the same level as the proactive fiscal policy and the prudent monetary policy. Moreover, priority has been given to employment as the country takes major actions to keep stability. The government has also introduced many practical measures. On one hand, the employment situation remains stable on the whole; on the other, there are some structural problems and pressures that need our attention. With a series of policies and measures to stabilize and promote employment, we are able to maintain an overall stable employment situation. Thank you.

CNR:

In June, the PPI leveled off compared to the figure for the same period last year and actually fell 0.3% month-on-month. Some industry insiders are concerned about a potential deflation or inflation in the Chinese economy. Do you see the PPI continuing to fall in the second half of the year? Could you please give us your analysis? Thank you.

Mao Shengyong:

Thanks for your question. First, generally speaking, the PPI maintained moderate growth in the first half of this year, or around 0.3% year-on-year. In the next stage, it will be influenced by both the supply-demand situation as well as developments in the international environment, such as fluctuations in commodity prices. In general, I think there are likely to be some slight fluctuations ahead, but we will have to see how it goes.

Second, you talked about inflationary and deflationary risks, which are related to both economic performance and price changes. When we look at the price changes, we must analyze both the PPI and the CPI. If you put the two indicators together for the first half of this year, the CPI rose 2.2% and the PPI 0.3% year-on-year. Thus, you can see that prices were generally experiencing some modest growth while also stabilizing. Despite a slight fall, China’s economic growth, at 6.3% from January-June, still ranked among the top performers when compared to other major economies. Therefore, it is groundless to say that China may face either a deflationary or an inflationary risk. Thank you.

Market News International:

You just said the economic operation in the second half of the year has strong support. There is still a lot of room for policies. Can you give us a more detailed outlook on policy orientation around the real estate industry and infrastructure industry? For example, what change will there be for the state's attitude toward real estate investment, and what direction will the local governments turn to in terms of infrastructure investment? Thank you.

Mao Shengyong:

Thank you for your question. When it comes to investment, we say that it has three major components: first, manufacturing investment, second, infrastructure investment, and third, real estate investment. Real estate investment has maintained relatively rapid growth since last year, with a growth rate of about 10%. It has slightly declined from January to June, at 10.9%. Infrastructure investment growth has accelerated slightly from January to June, faster than that from January to May. Manufacturing investment growth has accelerated slightly in the past two months. All the above are the basic performances of the three major investments in recent months.

Speaking of real estate, from the statistics I just released, including the situation about housing prices released by the National Bureau of Statistics today at 9:30 am, we put together indicators of real estate aspects including housing prices, real estate investment, real estate sales, construction area, land transactions, etc., and examined them comprehensively and found that the current real estate market is still running smoothly. This is the first point. Second, for the next stage, on one hand, urbanization is still advancing, and there are still rigid and improvement demands from buyers. On the other hand, the concept of "houses are for living in, not for speculation" is more and more deeply rooted in the hearts of the people. Then we emphasize "particular policies for particular cities" and stress the main responsibility of the city government. With the two factors combined, stable land prices, stable housing prices and stable expectations can be achieved for the real estate market in the next stage. Under such circumstances, real estate investment will change radically.

From the perspective of infrastructure investment, I personally understand that our policy effects will continue to be exerted, including the strengthened issuance of special bonds. The introduction of some new measures has indeed accelerated the process of approvals for major projects that can complement shortcomings and provide strong stamina. In the next phase, these projects will gradually come to fruition, so infrastructure investment should rebound at a low level as expected. Thank you.

Hong Kong Commercial Broadcasting:

As we can see, the second quarter produced the lowest growth in 27 years. After the trade negotiation between Beijing and Washington resumes, do you think economic growth will continue to fall to a new low or can it recover in the second half of the year? Thanks.

Mao Shengyong:

As I said, China's economic growth reached 6.3 percent in the first half of the year, which does indeed represent a comparative slowdown in contrast with the past. However, if the increasingly harsh and complicated internal and external environments are considered as the backdrop, the speed remains high, particularly compared to other major economies in the world.

So, judging from this angle, we should adopt a broader vision to comprehend the current growth speed. Using a new development concept, we have to look beyond growth speed in dealing with the economy. On the one hand, the economy is operating in a stable manner within a rational range. On the other hand, more energy is being expended on restructuring the economy and upgrading various industries. We cannot compromise our policies just for the sake of maintaining a certain growth speed. So, it is fair to say the current growth involves solidity, quality and sustainability, and is in line with the requirements of the new development concept. Therefore, its gold content is comparatively high. This is the first point.

Secondly, world economic growth, including international trade, has slowed down to some extent. Against this backdrop, in the first half of the year, although China's economic growth slightly decelerated, it still operated in a stable form within a rational range. And this is not so easy to come by.

The indicators of employment, commodity prices, incomes and protection of the ecology and environment all performed well. This indicates that, in order to respond to the changes in the external environment, we need to pay more attention to maintaining strategic concentration, and focusing on managing our own business well. For instance, we should focus more on reform and innovation, and constantly upgrading the wide range of our industries. We should further expand opening-up at a high level. We should take the initiative to lower import tariffs. Last year, the overall tariff level was lowered to 7.5%, and there will be a further cut this year. We need to further optimize the business environment, reduce the negative list, and promote stable development of foreign investment and foreign trade. Thanks.

Now TV (Hong Kong):

The GDP growth rate of the second quarter dropped 0.2 percentage point from the first quarter. How much was this due to the trade war? Will the figure continue to decline in the second half this year for the same reason? Thank you.

Mao Shengyong:

Thank you for the question. The economic growth rate of the first half this year was 6.3%. On a quarterly basis, it dropped slightly by 0.2 percentage point. I have mentioned that the world economy overall has slowed down in terms of development, and our external environment has become more complex. At the same time, we have continued to focus on structural adjustment and upgrading. In this context, when analyzing the overall economic performance, we should see if our economic performance has remained within a reasonable range. Currently, despite a slight slowdown in the growth rate, the major economic indices have all remained in a reasonable range and can meet our expectations.

In the next period, despite possible changes in the external environment, we will focus on our own affairs, striving to keep the economic performance within a reasonable range and striving for high-quality development. Thank you.

Shou Xiaoli:

Thank you, Mr. Mao. Thank you everyone. That ends today’s press conference. See you all next time.

Translated and edited by Li Huiru, Chen Xia, Zhu Bochen, Zhang Jiaqi, Li Jingrong, Zhang Rui, Guo Yiming, Huang Shan, Wu Jin, Zhang Liying, Li Shen, Wang Wei, Yang Xi, Zhou Jing, Zhang Junmian, Jay Birbeck, Geoffrey Murray, Degen Hill, Kenneth Teh Chiu Soong