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Source of Power behind the GDP Growth of 6.9%

Submit Time:16-08-2017 | Zoom In | Zoom Out

Author:Feng Lei and Fang Jingting | Source:Guangming Daily (July 19, 2017)

Abstract:

“The growth of Chinese economy in the first half of 2017 is better than expected, but some comments state that the economic growth was still driven by investment in infrastructure, what do you think of this view?” To such a question from a journalist, Yan Pengcheng, NDRC press spokesman replied at the regular press conference for set theme held on the 18th that, “We do not support such a conclusion from objective data and the information at our hands!”  

Where does the current motive force for growth come from? 

In the first half of 2017, the main indicators of economic growth, employment, price and international balance of payment of China were better than expected: the economy grew by 6.9%, 7.35 million new jobs have been provided in cities and towns; the import and export volume of cargo was 13.14 trillion Renminbi yuan, a growth of 19.6%, the service import and export continued to grow, and the foreign exchange reserves reached 3.0568 trillion US dollars at the end of June, continuing the growth for 5 consecutive months. Other physical indicators and relevant leading indicators also realized synchronous resonance, the matching between indicators was obviously strengthened, and domestic and overseas institutions and experts adjusted upward the expectation on the economic growth in China one after another.  

What is the source of the motive force for the economic growth in China at present? Yan Pengcheng states that it comes mainly from four aspects:  

First, consumption has become the main impetus to economic growth, and its supporting role to economic growth is further enhancing. The continued policy to expand domestic demand in recent years has gradually demonstrated the effect, the potential consuming power of the residents in China is being released in an orderly way, and the potential of consumption upgrading has kept on enhancing. The situation in the recent three years shows that the contribution of final consumption expenditure to economic growth was respectively 48.8%, 59.7% and 64.6%, respectively 1.9, 18.1 and 22.4 percentage points higher than that from investment. It is also the case in 2017, in the first half of the year, the contribution of consumption to economic growth reached 63.4%, 30.7 percentage points higher than that of investment.  

Second, the leading role of innovation is becoming daily outstanding, and the growth of new drivers is accelerating. In the first half of the year, the added value of the high-tech industry and equipment manufacturing industry grew respectively by 13.1% and 11.5% over the same period last year, at growth rate respectively 6.2 and 4.6 percentage points higher than all industrial enterprises above the designated size. New industries, business forms, patterns and products keep on emerging and thriving, the “Internet Plus” accelerated the merging of online and offline operations, especially, the sharing economy has penetrated extensively, and new service patterns such as cross-border e-commerce, online medical service and sharing bicycles have emerged one after another, and they have all injected powerful force for the sustained and healthy development of economy in China.  

Third, the effect of supply-side structural reform is shown step by step, and the market supply and demand relationship has been obviously improved. A large number of zombie enterprises have withdrawn, giving space to other high quality enterprises in the industry, thus optimizing the resource allocation and productive force layout of the industry and improving the supply and demand structure in the industry, the enterprise operation conditions and market expectations have been obviously improved. In the first half of 2017, the profit of industrial enterprises above designated size grew by 22.7% on a year-on-year basis in the first 5 months, and the growth rate in May was 16.7%, a growth rate 2.7 percentage points higher than that of the previous month. In June, the PMI of the manufacturing industry was 51.7%, 0.5 percentage points higher than that of the previous month; and the business activity index of non-manufacturing industries was 54.9%, rising for two consecutive months.  

Fourth, the development environment for enterprises is being continually optimized, effectively stimulating the vitality of microcosmic entities. The continual deepening of the reforms to streamline administration, delegate powers, and improve regulation and services has effectively stimulated the entrepreneurship and innovation potential and enthusiasm of all types of market players. In the first half of the year, 2.91 million new enterprises were registered in the whole country, 11.1% more than that of the same period last year. The opening degree of the service and manufacturing industries has continued increasing, and the 2017 World Investment Report published by the UN Conference on Trade and Development in June shows that China remains one of the most welcomed investment destinations in the world.  

Is the investment structure being optimized? 

In the first half of the year, the NDRC approved and verified a total of 87 fixed asset investment projects, with total investment of 463.8 billion yuan. By the end of May, the 13 major categories of project packages had accomplished total investment of about 9.7 trillion yuan, and construction had been started for 599 projects in 56 special categories.  

Pushed by a series of measures, the landing of PPP projects in cooperation by government and social capital was accelerated. According to the statistics by relevant market institutions, from January 2014 to June 2017, the publicity in the whole country showed there were 3774 PPP projects awarded to bidders of social capital, with total amount of 5.6 trillion yuan; including included 3205 projects with total amount of 4.6 trillion yuan since 2016.  

On the question how to view the investment growth, Yan Pengcheng stated that the key point was the investment structure, “I’d like to say that today’s investment is the supply tomorrow”. Rational and effective investment is not only one of the motive forces currently boosting economic growth, and more a critical factor to determine the future supply structure and economic structure and to raise the medium and long-term economic development potential.  

In recent years, the investment structure in China has been continually optimized, large amount of investment has been closely linked with strengthening areas of weakness, and made in areas of poverty alleviation, raising the public service capability and level, enhancing innovation capability and supporting enterprises in technical renovation. In the first half of the year, the investment in high-tech manufacturing industry and high-tech service industry respectively increased by 21.5% and 22.3%, and the investment in ecological environmental protection, water conservancy, transportation and education respectively increased by 46%, 17.5%, 14.7% and 17.8%.  

“The economic structure of China is being continually readjusted and optimized, and the growth drivers are being converted in an orderly manner. The Chinese economy has the full capability and conditions to continue the present development trend of stabilizing with good momentum for growth, to maintain medium-to-high speed of growth and achieve medium-to-high level of development.” Yan Pengcheng said in full confidence. 

Why has the non-financial outward direct investment decreased? 

According to statistics, in January ~ June 2017, the domestic investors of China made non-financial direct investment in 3957 overseas enterprises in 145 countries and regions all over the world, with total investment amount of 48.19 billion US dollars, a decrease of 45.8% from that of the same period last year. What are the causes of this decrease? 

Yan Pengcheng replied that there are causes in many aspects. It can be attributed to the factor of high base in the same period last year, the continual improvement of economic development in China and the enhanced confidence of enterprises in domestic investment; it was affected by the increased uncertainties in external environment, and more prudence of enterprises in outward investment, and also related to the more stringent examination of outbound investment by the relevant authorities for authenticity and compliance starting from the end of last year.  

He stated that we support domestic enterprises with capability and ready conditions to carry out true and complying outbound investment activities, and support outbound investment projects with enterprise as the main player, oriented by the market and following commercial principles and international practice. In particular, we support enterprises to invest in and operate projects to pursue the Belt and Road Initiative and for international production capacity cooperation. At the same time, relevant departments will pay continuous attention to non-rational outbound investment tendency in some areas, prevent risks in outbound investment, and suggest relevant enterprises to make prudent decisions, “outbound investment is an important way for Chinese enterprises to participate in the international economic competition and cooperation and merge into the global industrial chain and value chain. We will continually complete the administration system and mechanism for outbound investment, effectively prevent risks in outbound investment while making outbound investment more convenient, and promote the continual and healthy development of outbound investment of China”.  


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