21st Century Business Herald:

Mr. Sheng mentioned just now that the industrial recovery situation was relatively good in the first quarter. Could you please provide an overall evaluation of the recovery of industrial production in the first quarter? And what are the reasons for this, as well as the subsequent trends and prospects? Thank you.

Sheng Laiyun:

Thank you for your question. Industry is indeed a highlight in the recovery and development of the first quarter, with China's value-added industrial output increasing by 6%. This is also a relatively good performance in recent years, with an increase of 3.1 percentage points compared to the first quarter of last year, and an acceleration of 0.8 percentage point compared to the fourth quarter of last year, indicating a positive trend in industrial economic recovery. Why was industrial performance better than expected in the first quarter? What are the reasons? Our analysis covers several factors.

First, business confidence is increasing driven by policy. You are all aware that from last year to this year, and especially this year, all regions and departments released a series of policies and measures to support the development of the real economy. Moreover, all regions have been accelerating the implementation of policies. These policies have had positive effects on enhancing the drive for enterprise production, improving the environment for enterprise development, and boosting confidence in enterprise development. China's official manufacturing PMI, which has just been released, came in at 50.8% in March, up 1.7 percentage points from February. Furthermore, the PMI for large, medium and small enterprises are all above the critical threshold of 50%, which has not been easy. This indicates that confidence among enterprises is increasing.

Second, both domestic and external demand have changed for the better. From the perspective of external demand, as the world economy shows signs of recovery, our exports in the first quarter were better than expected. According to the customs statistics that have just been released, exports increased by 4.9%. We have our own data, called the export delivery value of industrial products. It was -2.2% in the fourth quarter of last year and 0.8% in the first quarter of this year, showing a rebound of 3 percentage points. From the perspective of domestic demand, we are more interested in one data point, which is the value added of the consumer goods manufacturing industry. Because from the perspective of household consumption, the focus is mainly on purchasing processed consumer goods. Last year, the value added of consumer goods manufacturing enterprises was around zero and continued to run at a low level. The value added of consumer goods manufacturing enterprises grew by 4.2% in the first quarter of this year, an increase of more than 4 percentage points. Therefore, we can feel the improvement in both domestic and external demand, supporting industrial economic growth.

Third, the industrial recovery is related to the promotion of some recent policies. The central government introduced a policy to promote large-scale equipment upgrades and the trade-in of consumer goods, which also boosted business confidence to some extent, prompting some enterprises to schedule production in advance. Another reason for the significant rebound is related to the continuous cultivation and driving force of new growth momentum. Among the newly released data, the value added of high-tech manufacturing industry above the designated size increased by 7.5% in the first quarter, 1.4 percentage points higher than the growth rate of industrial enterprises above the designated size. We have calculated that the major high-tech manufacturing industry in the first quarter drove the value-added industrial output by 1.1 percentage points, highlighting the role of new growth momentum and new industries.

Of course, the relatively good industrial growth rate also has a certain relationship with the base from last year. During the first quarter of last year, some regions were still affected by the pandemic and the industrial value-added growth was 2.9%. As such, there is indeed a base effect, but the main reasons are the three factors I just mentioned. Looking ahead, as the several factors supporting the improvement in industrial recovery continue to play a role in the foreseeable future, we predict that the positive trend of industrial economic recovery will continue. Of course, further consolidating the foundation of the recovery requires increasing support for the real economy. Thank you.