SCIO briefing on China's economic performance in 2017

China Central Television: 

China's economy has registered a stable performance and moved in a positive direction. In which aspect is this trend reflected? How do you see the overall economic performance in 2017?

Ning Jizhe:

The economy has registered a stable performance and moved in a positive direction, which is better than expected. This can be seen in the following four aspects.

First, the economy performed within an appropriate range. Four major macroeconomic indicators remained stable with a good momentum and surpassed expectations. China's GDP in 2017 grew 6.9 percent year-on-year in real terms. More than 13 million new urban jobs were created. The National Bureau of Statistics (NBS) will officially release the surveyed urban unemployment rate later this year. By the end of December, the surveyed urban unemployment rate fell below 5 percent to 4.98 percent. China's CPI rose 1.6 percent year-on-year, also beating the expectation. By the end of 2017, China's foreign exchange reserve approached US$3.1400 trillion. 

Second, major progress was achieved in supply-side structural reform, with the five priority tasks accomplished. We have met the targets of cutting overcapacity set in the 2017 government report, namely reducing steel production capacity by around 50 million metric tons, shutting down at least 150 million metric tons of coal production facilities, and eliminating no less than 50 million kilowatts of coal-fired power generation capacity. 

In terms of deleveraging, at the end of November 2017, the debt-to-asset ratio of nationwide industrial enterprises above the designated size decreased 0.5 percentage point year-on-year. 

In terms of reducing inventory, at the end of 2017, the floor space of commercial buildings for sale was 1.1 trillion square meters less than that at the end of 2016, and 1.3 trillion square meters less than that at the end of 2015. Notable progress was also made in reducing grain inventory. 

In terms of lowering costs, taxes and fees were reduced by an additional 1 trillion yuan in 2017, the same amount as that in 2016. According to our statistics, in the first 11 months of 2017, industrial enterprises above the designated size reduced their costs by 0.28 yuan per 100 yuan of income from their main business operations. 

In terms of strengthening weak areas, investment in agriculture and water conservancy, as well as in ecological protection and pollution treatment, went up by 16.4 percent and 23.9 percent.

Third, efforts were accelerated to replace old growth drivers with new ones. New technologies, industries, forms of business, models, products and growth drivers flourished in 2017. 

New technologies -- a number of significant scientific and technological advances were achieved, including C919 large jetliner, Fuxing bullet train, quantum communications, and deep-water exploration. 

New products -- the production of robots and new energy vehicles, which are in considerable demand, grew by more than 50 percent. 

New industries -- the value added of strategic emerging industries, high-tech industries and equipment manufacturing industry all rose by more than 10 percent. 

New forms of business -- the online retail sales of physical goods went up by 28 percent; the online retail sales of non-physical goods grew even faster; and the growth of express delivery services registered at nearly 30 percent.

New models and new growth drivers -- the sharing economy, digital economy and platform economy have been developing rapidly as new growth drivers. The campaign of entrepreneurship and innovation, as well as the reform to streamline administration, delegate powers and improve regulation and services, have enhanced the motivation of enterprises and other market entities. In 2017, an average of 16,600 enterprises were registered nationwide each day, strongly bolstering employment and innovation.

Fourth, the quality and efficiency of economic growth were improved, as evidenced by the following facts. 

From January to November, the profits made by industrial enterprises above the designated size went up by 21.9 percent year-on-year, and the corporate profit of service enterprises above the designated size increased by 30.4 percent. The growth showed a recovery from the previous year. It should also be attributed to enhanced performance of these enterprises.

Fiscal revenue increased by 8 percent, faster than the goal set at early 2017. 

The quality of economic growth at the micro level, such as the quality of products, services and engineering projects, has been improving.

The quality of economic growth is not only measured by how many jobs and how much income it has created for the people, but also by how the environment has been protected. With the concerted efforts of all parties, PM2.5 density in 338 prefecture-level-and-above cities dropped, and that in Beijing decreased more significantly. In 2017, energy consumption per unit of GDP, an indicator of energy conservation and emission reductions, fell by 3.7 percent, above the target of 3.4 percent. Therefore, the quality and efficiency of economic growth have been improved.

Fifth, with the rapid growth of the Chinese economy, people's livelihoods continued to improve. China's per capita disposable income increased by 7.3 percent in real terms in 2017, exceeding the growth of per capita GDP. There was a very important change in the consumption structure, that is, the Engel coefficient dropped from 30.1 percent in 2016 to 29.3 percent in 2017, reflecting improvements in household consumption. The country funded the rebuilding of 6 million housing units in rundown urban areas, and nearly half of the resettled families received monetary housing compensation rather than housing.

In tourism, outbound visits by the Chinese nationals reached 129 million. In culture, China's culture and related industries grew by 15 percent in terms of business income, with box-office values topping 5 million yuan. In sports, the Fitness-for-All programs covered 50 percent of the total population, with marathon running becoming a popular sports event throughout the country. In education, more than 7.95 million people graduated from college in the country in 2017, and more than 20 percent of the college students all over the world studied in China. As for healthcare, China had the world's largest medical insurance network.

Compared to the previous years, another very important characteristic was that China witnessed an improved economic structure in 2017. In terms of industrial structure, China has moved from an old model of an industry-driven economy to an industry- and service-driven one. In 2017, the value added created by the service sector accounted for 51.6 percent of the country's GDP, contributing 58.8 percent to its economic growth. Hence, the service sector has become the main driving force of economic growth together with the industrial sector, making joint efforts in supporting the development of China's economy.

Sixth, from the perspective of demand structure, China has moved from its old model of an investment-driven economy to an investment- and consumption-driven one. In 2017, the final consumption expenditure contributed 58.8 percent to its economic growth, 26.7 percentage points higher than that of gross capital formation. Hence, consumption and investment have been jointly supporting China's economic development, recording a major change in 2017.

Last year also witnessed another noticeable change, that is, the country's economy has moved from its old model of export-driven growth to an export- and import-driven one. In 2017, China's exports grew by 10.8 percent, and imports by nearly 20 percent. China's development has not only benefited the Chinese people, but is also making greater contributions to the world's economic growth. According to calculations, China's contribution to world economic growth is around 30 percent. In 2017, China's economic aggregate reached 82.7 trillion yuan (US$12 trillion), with an economic increase of over 8 trillion yuan (US$1.2 trillion) in a year, equivalent to the economic aggregate of a country ranking 14th in the world's largest economies in 2016.

Bloomberg:

There were reports the Tianjin Binhai New Area had some inaccuracies in the submission of local GDP data. In addition, Inner Mongolia also provided inaccurate figures in its industry report. I would like to ask if there are any other similar incidents as this. How will China punish these local governments for not accurately reporting economic data? On the issue of local debt, what measures does the Chinese government plan to take? Thank you.

Ning Jizhe:

This issue is not only one of media concern, but also a matter of great concern to the National Bureau of Statistics. In recent years, various regions and departments have done a great deal of work in implementing the "Instructions on Deepening the Reform of Statistical Management System and Improving the Authenticity of Statistical Data" passed by the Leading Group for Deepening Overall Reform of the Central Committee of the CPC and the "Regulations for the Enforcement of Statistical Law" issued by the State Council, with emphasis on improving the quality of statistical data. I should say, the quality of Chinese statistics in general, and that of local statistics, are constantly improving. 

Of course, the specific situations you mentioned are a different issue, which have been reported by the media. China's statistical data and statistical accounting system will not be affected by the existence of some problems in data credibility in a handful of places, or in some enterprises and some institutions. 

During the 1990s, China's accounting system was transformed from the material product system (MPS) to the national account system (NAS) and accounting was done at different levels. In the process of accounting for national data by the National Bureau of Statistics, the industrial survey adopts the direct network reporting system, agricultural surveys use the sample survey, and the service industry surveys have been increasingly using e-government and e-commerce data in recent years. Meanwhile, local governments also account data according to the measures adopted by the national statistical system. 

The addition of local data exceeds the national total, which is the result of the accounting at different levels. However, after years of hard work this gap has narrowed, although there is still a gap. For example, the total local GDP in 2016 was 3.6 trillion yuan higher than the national figure. The Central Committee of the CPC and the State Council have clear minds about the important direction for the accounting system reform: to implement unified accounting of regional GDP, and they have already determined a timetable and the tasks, according to which unified accounting will be implemented by 2019. Therefore, we must redouble our efforts to complete the task of statistical accounting reform on schedule. We think the gap has narrowed in the past one or two years. What you mentioned involve local data in some places, which doesn't affect the credibility of national statistics.

On the other hand, statistics in China are conducted in accordance with laws and regulations. For local governments, enterprises and institutions that are alleged to be providing inaccurate figures, we will find out, verify and solve the problems according to laws and regulations. This also includes revision and publication of data. At the same time, for a handful of local governments, enterprises and institutions that commit fraud and other violations of statistical laws and regulations, no matter whether they drew up false statistics, or concealed data, or refused to report required data, they all must be dealt with according to laws and regulations. You mentioned some specific circumstances, and we are verifying them. The final revision and publication of the data must be conducted in accordance with the laws and regulations related to statistics. Some of the data may relate to finance, such as the local debt issue you just mentioned, and I'd suggest that you seek answers from the Ministry of Finance. Thank you.

Phoenix TV:

I would like to ask a question about the economic situation in 2018. We have noticed that some people think this year may be the beginning of a new cycle for China's economy. Others think it is a crucial period for China's economic restructuring and the economy may face some downward pressure. What are your thoughts on the overall economic situation for 2018?

Ning Jizhe:

This issue has caused heated discussion among Chinese economists in the second half of last year. It should be said that China's economy has maintained the momentum of stable and sound development. China's economy has undergone phased development, structural adjustments and cyclical changes. Therefore, we must make comprehensive judgments both in analyzing the economic situation in the past and in studying the economic situation for 2018. 

In terms of phased development, China's economy has shifted from a period of rapid growth to a period of high-quality development. The entire national economy is very large, so is the total economic output in various regions. And the economic output of several provinces and regions is now comparable with that of G20 countries. Take Guangdong and Jiangsu for example, the total economic output of each province exceeds 8 trillion yuan. We should comply with the requirements for high quality development. In order to push the economy toward high-quality development, the Central Government has also made explicit the promotion of high-quality development as a fundamental requirement in 2018, formulated a series of policies and measures, and specified this year's key tasks.

Let's talk about structural adjustments. In the past few years, historic changes have taken place in China's economic structure. This is true for both the industrial structure, the demand structure and the factors structure. The supply-side structural reforms are also fueling these changes. This year, all localities and departments should further deepen the supply-side structural reforms, adhere to efforts of cutting overcapacity, reducing inventory, deleveraging, lowering costs and strengthening weak areas. In the meantime, we must eliminate ineffective supply, increase effective supply, and reduce production and operation costs. These structural adjustments will continue to exert a positive influence.

Cyclical changes also exist to some extent. The overall situation of the world economy is positive and the three major economies are all growing. Although many uncertainties and instabilities still exist, as long as we seize the opportunity and overcome the challenges, the domestic economy will continue to maintain the momentum of stable and sound development while highly integrated with the world economy. At the same time, there are many favorable opportunities for development in our country. Therefore, the cyclical factors should also be observed in the context of phased development and structural adjustments. This will help us to make better judgments on the economic situation in 2018.

At present, the fundamentals of China's economy are good. Structural adjustment, optimization and upgrading are being carried out at an accelerated pace. The phased changes brought by quality and efficiency improvements will become more obvious.

China National Radio:

Mr. Ning, we noticed the Central Economic Work Conference proposed to accelerate the establishment of an indexing and a statistical system to promote high-quality development. What detailed plans have the statistics authority made? Will such a statistical system contribute to the fourth national economic census and the statistics of the urban unemployment rate?

Ning Jizhe:

This is exactly the main topic for discussion at the National Statistical Work Conference held by the National Bureau of Statistics (NBS) last week. The NBS will promote six systems closely related to statistical work. These are the index, policy, standards, statistical performance, and performance assessment systems, designed to promote high-quality development under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era put forward at the 19th National Congress of the Communist Party of China (CPC) and on the instruction of the Central Economic Work Conference. In the coming years, we will fulfill the following tasks to promote high-quality development.

First, establish and improve an index system endorsed by new development philosophy. Since 2016, the NBS has been working to establish a system to assess the construction of an ecological civilization with the National Development and Reform Commission, the Ministry of Environmental Protection and the Organization Department of the CPC Central Committee under the requirements of the CPC Central Committee and the State Council. We launched an index system for green development, conducted studies and measurements, and released the results for 2016 last December. Apart from green development, we will also study and work out index systems for innovative, coordinated, open and shared development. We have required some regional statistical departments to take one step ahead in this regard, and we will also come up with a preliminary plan for a comprehensive index system endorsed by new development philosophy at the national level based on in-depth study of the realities. 

Second, establish an index system and a research and assessment method to enhance quality and efficiency and promote transformation and upgrading. The NBS has carried out some basic work in the past few years, and will improve the index system in order to pursue high-quality and highly-efficient development. The Central Economic Work Conference also touched upon total factor productivity, which is something to consider in establishing the system and method. 

Third, further improve the statistical monitoring system to collect data reflecting the progress of supply-side structural reform. After the start of the reform a few years ago, we have measured the achievements of the five priority tasks on a monthly, quarterly, semi-annual and annual basis with related indexes, and will further step up the display of the achievements in deepening reform. 

Fourth, provide more data on economic changes in national economic accounting. The Third Plenary Session of the 18th CPC National Congress put forward the requirements for reforming the three major accounting methods. One is the unified accounting of regional GDP; one is national and local balance sheets, which shows the liabilities of local governments as mentioned by the Bloomberg reporter; finally, the natural resources balance sheet. 

Last year, the Central Leading Group for Comprehensively Deepening Reforms and the executive meetings of the State Council both established clear requirements for the reform. Unified accounting of regional GDP will start officially with the fourth economic census in 2019. Despite a tight schedule, this move will help dispel doubts about any inconsistency between the data of China's regional accounting and those of national accounting. The institutional change will be conducive to regional and international comparisons. 

The State Council also specified that, in documents, to start working on 2015 and 2016 national balance sheets, and this is one of our urgent tasks this year. 

The natural resources balance sheet displays the inventory of natural resources as well as profits and losses in green development. The NBS has already conducted pilot programs on this work in eight prefectures, cities and counties, and a number of cities and counties have carried out their own trials in accordance with unified requirements. We will also further promote the pilot programs this year. 

Actually, this is also an international problem. I introduced China's practices at an international conference on statistical work last year, and received wide attention. This issue also relates to the world's efforts towards the 2030 Sustainable Development Goals. 

Thus, the reform is critical to the statistical system for high-quality development.

Fifth, we should improve the unified monitoring index system according to the requirements of securing a decisive victory in building a moderately prosperous society in all respects. The system must stand the test of time, and be acknowledged by the people. We are also working on the statistics and monitoring of the development of industries boon to boosting public happiness, and have established a preliminary monitoring system.

In addition, it is critical to implement the reform to streamline administration and delegate powers and improve regulation and services, so as to improve the business environment. The World Bank has already made a comparison on the assessment of different countries' business environment. According to the requirements of the State Council, the NBS should cooperate with the National Development and Reform Commission and the Ministry of Finance in monitoring, analyzing and evaluating the business environment. The index system should be compatible with international practices and be related to Chinese reality. The central task of the statistics department this year is to implement the basic requirements for new development philosophy and high-quality development, and promote the reform by seeking for progress in stability.

CCTV and CGTN:

The economic performance in 2017 was better than expected. And the economic growth owes much to the contribution of foreign trade - the greatest contribution comparing to those in the past few years. However, as we have noted, imports and exports may encounter severer challenges in 2018, so will that put the economy under greater stress this year? And, if the impact of trade weakens, will the consumption be strong enough to sustain economic development?

Ning Jizhe:

Last year, the contribution rate of net imports and exports in regard to both commodities and services reached 9.1 percent. Even so, domestic demand remained the most powerful engine promoting the economy, contributing 91 percent to the growth. Among internal demand, consumption accounted for 60 percent, while investment also played an important role.

The world economy is indeed facing both challenges and opportunities. The Economic Work Conference of the CPC Central Committee asked for making new ground in pursuing opening up on all fronts. According to the 19th CPC National Congress, China will expand foreign trade , not only in size, but also in terms of quality, efficiency and structural improvements. Last year, exports achieved double-digit growth, which, optimistically, involved structural improvements, such as a surging proportion of electromechanical exports and an increasingly important role for high-tech exports. Therefore, in order to sustain sound trade development, China should continue to improve its trade structure so it can give full play to advantageous sectors while doing business with the rest of the world based on its win-win and mutually-benefited framework. The opening-up policies should not be restricted to commodity trade; instead, it should also work for investments and services. Just now I talked about commodity trade. The service trade in general is still in deficit, but is making big strides. Offshore investments and the use of foreign investments are integral parts of international balance of payment. In a press conference a few days ago, the Ministry of Commerce gave us a panoramic view of openness in full details. With the concerted efforts between trade in commodities and services, the openness can definitely speed up reforms, boost development and drive the China's economy with a stronger engine. They will not only benefit the Chinese people, but also bring mutual benefit and win-win results to the entire world.

Market News International:

We have noticed the recent large appreciation of RMB. The Chinese government once said that the appreciation of RMB was a double-edged sword for the economy. Do you have a new explanation (for the recent appreciation)? As China's economy is transitioning towards relying more on domestic demand, is a stronger RMB an advantage or disadvantage for economic development?

Ning Jizhe:

The basic balance of international payments, while being a trade issue, is more of an issue concerning the balance of the macroeconomy. Last year, the Chinese economy delivered a steady and sound performance and beat expectations, and this can be reflected in part by the balance of international payments. Whether international payments are balanced is an important indicator of a country's macroeconomy. Last year, China's international payments were basically balanced, and this has helped guarantee and promote economic growth. When the international payments are balanced, the RMB's exchange rate remains stable and a stable RMB not only helps trade develop steadily but also helps the macroeconomy achieve steady and sound growth. Maintaining a balance of international payments is an important responsibility of the government departments in charge of the macroeconomy. Our statistical department, as a producer of comprehensive and fundamental data, will closely follow the changes in international payments. In fact, the national economy accounting involves five tables, and the GDP table is only one of them.  The other four are the input-output table, the flows-of-funds table, the balance sheet and the balance of international payments. While the People's Bank of China takes the lead in compiling the balance of international payments, our statistical departments will also pay close attention. I believe that by following the guiding principles of the Central Economic Work Conference and with the efforts of relevant government departments, China can maintain and further improve the balance of international payments in 2018. 

Reuters:

As China may ramp up efforts to deleverage, reduce risks and prevent and control pollution in 2018, will these actions exert influences on the macroeconomy? Last year, capital formation and net exports contributed 32.1% and 9.1% to economic growth respectively, is that right?

Ning Jizhe:

Yes. The contribution of the final consumption expenditure to GDP accounted for 58.8 percent. And gross capital formation contributed 32.1 percent. The net exports of goods and service contributed 9.1 percent. As the statistical department, we will make efforts to provide statistical service for major tasks, such as forestalling and defusing major risks, carrying out targeted poverty alleviation, and preventing and controlling pollution. As for the deleveraging you mentioned, the leverage ratio of the microeconomy has seen a continued improvement for two years. As for the macroeconomy, the ratio of M2 to GDP is stable with a slight decline. The year-on-year growth of GDP is 6.9 percent, a nominal rate of 11 percent if taking the deflator into consideration. The M2 in 2017 grew by 8.2 percent from the previous year. Of course, what we mentioned is only one of the various indicators to measure the leverage ratio of the macroeconomy. In the future, we will continue to thoroughly inspect the leverage ratio of the macroeconomy as well as the microeconomy.

As the statistical department, to support the poverty alleviation department in monitoring the poor population is one of our key tasks. Under the current standards made in 2010, the national population in poverty was reduced by 12.4 million in 2016. And the statistics of 2017, through the sampling survey, will be released by the end of this month. The number of people lifted out poverty is expected to be larger than in 2016.

Last year, China's GDP growth of 6.9 percent was realized under enhancing the prevention and control of pollution. Now we pursue green development, the coordinated development of economic growth and ecological progress. The prevention and control of pollution is in accordance with law, presenting a positive influence on the adjustment of the economic structure and development. The economy has stayed within the proper range, with marked improvement not only in economic growth, but also in the employment rate, income, environment as well as stable consumer prices. That's the original intention for developing the economy.

Hu Kaihong:

Today's press conference is over. Thank you, Mr. Ning and Mr. Xing.

Ning Jizhe:

Thanks for your support. We look forward to the continued cooperation between us in the coming year. Thanks!