Reuters:

Some March economic indicators such as foreign trade, credit and commodity prices show weak economic growth and insufficient aggregate demand. What are the reasons for this? And will a slowing global economy and a higher statistical base later in the year jeopardize hitting this year's growth target of around 5%?

Sheng Laiyun:

Thank you for your question. It's a good question. You may have noticed that some economic indicators declined in March compared to January and February. This decline was from a statistical perspective. We conducted a thorough analysis, finding that one very important reason for this is that the comparison base from last year was relatively high, meaning that the actual production level for March was not low. In January and February last year, some regions were still affected by the pandemic, and some companies delayed their production, including exports and order fulfillment, until March. In March and April last year, whether in terms of industry or imports and exports, some major indicators had relatively high base numbers, and some industries saw a rebound in production and sales, resulting in a relatively high comparison base. Due to this relatively high base, the year-on-year growth rate this year declined. As I just mentioned, the monthly production level is not low. Let me give you an example. In terms of the added value of industries above designated size, when converted into added value per working day, March's figures show faster growth compared to January and February. However, in terms of year-on-year growth, there was a 2.5 percentage points decline in March compared to January and February. Some physical quantity indicators, such as industrial electricity consumption, exhibit similar characteristics. The average daily industrial electricity consumption in March was higher than that of January and February, and the same is true of freight volume and loan indicators. As such, when observing changes in China's economy, it is important to look not only at year-on-year growth data but also at month-on-month changes and some absolute quantities. This is especially true when observing short-term economic fluctuations.

Second, we should pay attention to the future trend of the economy, including the trend in the second quarter and whether the 5% target can be achieved for the whole year. Currently, there is an accumulation of positive factors supporting the continued recovery of the Chinese economy. First, as mentioned earlier, external demand is picking up. Although the global economy faces complex situations and great uncertainties this year, some leading indicators show that the global economy is recovering. The global manufacturing PMI in March was 50.6%, marking the third consecutive month of recovery. I also noticed the indicators released by the World Trade Organization (WTO) and the China Council for the Promotion of International Trade (CCPIT) on global freight volume. The WTO predicts that global trade in goods growth may reach 2.6% this year, an improvement from last year's negative growth, which is conducive to supporting export demand. Internally, many economic indicators, including the recently released PMI and other related demand indicators, show that China's economy is recovering. This recovery is especially driven by policy support. Earlier this year, to continue stimulating demand, the central government introduced policies to support equipment upgrades and the trade-in of consumer goods. These policies are the driving force behind the ongoing economic recovery. In addition, based on the prospects for the next stage, the holiday economy will continue to show positive effects. As a result, the economy is expected to maintain its recovery momentum in the future.

Last, I would like to emphasize that when we observe the Chinese economy, in addition to changes in economic aggregate, we should also pay more attention to the improvement of quality and efficiency, especially the effectiveness of China's economic structural adjustment and the progress of high-quality development. Since the 18th CPC National Congress, China's economy has entered a new stage of transformation, upgrading, and high-quality development. Traditional industries have been adjusted, new driving forces have been accelerated, and high-quality development has continued to advance. Even though in the past few years, we have faced a complicated and challenging global landscape and undergone growing pains of domestic structural adjustment and transformation, including adjustments to the real estate sector, China has persisted with economic transformation and upgrading, and high-quality development continues to yield new results. To illustrate this, let me provide some data. In terms of innovation and development, R&D expenditure accounted for 1.91% of GDP in 2012 and 2.64% last year. The urbanization rate has also been increasing steadily, rising from about 53% in 2012 to 66.2% last year, an increase of nearly 1 percentage point annually. Moreover, China's share of the international export market has grown from about 10% in 2012 to around 14% currently. In addition, our economic aggregate and residents' income have more than doubled compared to 2012. This demonstrates that our innovative development, coordinated development, green development, open development, and shared development have continued to make steady progress, and the quality of development has been consistently improving.

Next, China is still in the stage of structural adjustment, transformation, and upgrading. Some companies need to undergo transformation and upgrading, which means they have to endure some growing pains during this process. Due to the adjustment of traditional industries and the cultivation of new driving forces, it is natural for some economic growth fluctuations to occur. However, the quality of development continues to improve, and high-quality development continues to make progress. This is what constitutes the basis for China's economic recovery. Therefore, when we say that the economy is improving, it is not just about a rebound in the growth rate but also an improvement in quality. Only by looking at the Chinese economy in this way can we have a more comprehensive view and enhance our confidence in China's economy. I am fully confident about the Chinese economy's continued improvement and high-quality development. Thank you.