The Value of China’s Economic Growth in the First Half of 2019

By: Ning JizheFrom:English Edition of Qiushi Journal July-September 2019|Vol.11,No.3,Issue No.40 | Updated: 2019-Nov-14 14:15
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In the first half of this year, China’s economy grew by 6.3% and continued to operate within a reasonable range. Public wellbeing improved continuously, transformation and upgrading progressed steadily, the stamina of development continued to strengthen, and new progress was made toward high-quality growth, thereby laying sound foundations for meeting this year’s economic and social development targets. The growth rate of 6.3% did not come easily, but was achieved despite decelerating global economic and trade growth and mounting downward pressure on China’s economy. It was a result of our efforts to boost supply-side structural reform, create new methods of macro-control, improve the business environment, slash taxes and fees, and unleash the vitality of market entities. Ranking high among the world’s major economies, this growth rate comes from overall stable employment, basically steady prices, and constantly enhanced economic quality, thus being both sustainable and enduring. Featuring a high level of quality and value, this growth rate shows that China’s economy remains stable overall with a positive trend.

I. Production demand grew steadily, and development became significantly more resilient.

During the first half of this year, in line with the guiding principles of the Central Economic Work Conference and the arrangements of the Report on the Work of the Government, we effectively implemented a proactive fiscal policy, a prudent monetary policy, and an employment-first policy, opened up at a higher level and with greater intensity, took solid steps to slash taxes and fees, and gradually reduced enterprise financing costs. Taking a strong and effective stance against internal and external challenges, China’s economy grew rapidly from a large base figure, and continued to operate within a reasonable range.

1. China’s economic growth ranked among the highest in the world.

For a large economy, its growth rate is closely related to its size – the larger the size and base figure, the more difficult it is to achieve rapid growth. In 2018, China’s GDP exceeded 90 trillion yuan, or US$13.6 trillion as calculated at the yearly average exchange rate, ranking second globally and accounting for nearly 16% of the world economy. Based on the relatively large size of its economy, China’s GDP saw a year-on-year increase of 6.3% in the first half of this year, maintaining a medium-high growth rate. China’s economic growth ranked high among the world’s major economies, which was particularly striking against a backdrop of decelerating global economic growth, growth for which China continued to be an important engine. This growth rate means that China’s economic growth in a single year is equal to the entire economy of a medium-sized developed country. In a complex and daunting international environment and facing considerable downward pressure on the domestic economy, China’s economy has been able to maintain a growth rate of more than 6%, indicating that China has the conditions, ability, and confidence to surmount all risks and challenges and achieve its main goals for economic and social development.

A worker drives a combine harvester through a field to collect wheat in Jiazhai, Chiping County, Shandong Province. China saw outstanding summer grain harvests in the first half of 2019 with a total yield of 141.75 million metric tons, up 2.95 million metric tons from the previous year.

XINHUA / PHOTO BY ZHAO YUGUO

2. Industries continued to develop.

The rural revitalization strategy was fully implemented, agricultural supply-side structural reform was actively advanced, and agricultural production remained favorable with a bumper summer grain harvest. In the first half of this year, the value added of the primary industry saw a year-on-year increase of 3%. The summer grain output was 141.75 million metric tons, an increase of 2.95 million metric tons or 2.1% over last year, equaling the record high of 2017. The output of summer grain per mu (0.067 hectare) was 359 kilograms, a year-on-year increase of 3.5%. We worked hard to slash taxes and fees, intensified financial support for the real economy, and gradually improved the business environment, which effectively eased pressure on industrial production. In the first half of this year, the value added of industrial enterprises, each with an annual income of 20 million yuan or over and hereafter referred as large-scale enterprises, saw a year-on-year increase of 6%; 39 out of 41 major types of industries maintained year-on-year increases in value added; 366 out of 605 major industrial products, or 60.5%, achieved year-on-year increases in output. The service industry continued to grow quickly while transformation and upgrading also accelerated; its value added in the first half of this year saw a year-on-year increase of 7%, which was remarkably faster than that of the manufacturing industry; and its business activity index flourished at above 53%.

3. Consumer demand grew amidst stability.

With a population of nearly 1.4 billion, China is home to the world’s largest middle-income group and boasts a huge market. In addition, we have gradually increased effective supply according to consumer demand in order to create favorable conditions for the expansion of consumer spending. In the first half of this year, total retail sales of consumer goods rose by 8.4% year-on-year, with consumption of services such as education, health, elderly care, sports, and tourism growing strongly. The numbers of tourists and revenue from tourism during the Qingming Festival and May 1st Labor Day holiday periods both maintained double-digit growth. We focused our efforts on economic weaknesses to accelerate the development of major projects, removed invisible barriers to private investment, and promoted transformation and upgrading of the manufacturing industry, thus stabilizing investment growth. In the first half of this year, investment in fixed assets (excluding that of rural households) grew by 5.8% year-on-year, with investment in the manufacturing sector and in infrastructure increasing by 3% and 4.1% respectively. China has upheld multilateralism, resolutely safeguarded free trade, and steadily developed economic and trade relationships with all countries. In the first half of this year, the total import and export of goods increased by 3.9%, with export maintaining the faster growth rate of 6.1%.

II. Transformation and upgrading further progressed, and the economic structure was optimized and adjusted.

As China’s economy shifts to high-quality development, structural optimization and upgrading has become an important aspect of assessing the quality of development. In the first half of this year, China continued to promote transformation in the course of development and pursue development amidst transformation, focused on resolving imbalanced and inadequate development, facilitated optimization and adjustment of the demand structure, strengthened the role of domestic demand as a driver of growth, expedited industrial upgrading, and implemented major regional development strategies. On this basis, we have enhanced coordinated development between urban and rural areas and between different regions, constantly improved the structure of the national economy, and steadily raised the quality of development.

1. Consumer demand drove economic growth in a more coordinated manner.

We have actively encouraged a sound circle between supply and demand to foster a strong domestic market, promoted the renewal and upgrading of major consumer goods, and improved the consumption environment, thus effectively exerting the fundamental role of consumption. In the first half of this year, the contribution of final consumption expenditure growth to economic growth was 60.1%, 40.9 percentage points higher than that of gross capital formation. Meanwhile, the trend toward consumption upgrading is obvious, with higher quality and more efficient products proving popular. Consumption of services continued to expand, accounting for 49.4% of total household final consumption expenditure, a year-on-year increase of 0.6 percentage points. In line with the requirements for consumption upgrading and development, investment in the high-tech industry and the social domain rapidly increased, with investment in the high-tech industry growing by 11.5% year-on-year, 5.7 percentage points higher than total investment growth. Following the accelerated transformation and upgrading of foreign trade, the value added of exports continued to rise. General exports accounted for 58.8% of China’s total exports, a year-on-year increase of 1.8 percentage points, while exports of new-energy vehicles, integrated circuits, and medical instruments grew rapidly.

2. Industrial development moved toward the medium-high end.

The service industry maintained strong momentum, steadily increasing its share in the economy. In the first half of this year, the value added of the tertiary industry accounted for 54.9% of GDP, a year-on-year increase of 0.5 percentage points, and its contribution to economic growth was 60.3%, 23.2 percentage points higher than that of the secondary industry. The modern service industry saw relatively fast development. From January to May, the operating incomes of enterprises in high-tech services and in scientific and technological services increased by 12.3% and 12% respectively year-on-year, faster than that of all large-scale enterprises in service industries by 2.2 and 1.9 percentage points respectively. Industries surged toward the medium-high end, with the quality of their supply improving steadily. In the first half of this year, the value added of the high-tech manufacturing industry grew by 9% year-on-year, accounting for 13.8% of that of large-scale industrial enterprises, constituting a year-on-year increase of 0.8 percentage points. Agricultural restructuring advanced steadily, with an increasing acreage of highly efficient and good quality agricultural products. The intended acreage of soybean production increased by 16.4%, while the acreage of middle- and late-season rice with better quality and higher market prices also increased.

A staff member demonstrates the first model of DJI’s RoboMaster S1 educational robot, which was unveiled in Beijing on June 12, 2019. Steady progress has been made in transformation and upgrading of China’s economy, and industrial development has advanced to the medium-high end.

PHOTO BY XINHUA REPORTER WANG QINGQIN

3. The regional development gap continued to narrow.

We have promoted the orderly advancement of a new type of urbanization, and gradually established mechanisms for planning, implementing, coordinating, and promoting the rural revitalization strategy, while incomes of rural residents have continued to grow at a faster rate than those of urban residents. In the first half of this year, the per capita disposable incomes of rural and urban residents increased by 6.6% and 5.7% respectively in real terms, and the ratio of per capita disposable incomes between the two was 2.74, down 0.03 year-on-year. We made solid progress in major regional strategic tasks such as the coordinated development of the Beijing-Tianjin-Hebei region and development of the Yangtze River Economic Belt, intensified support for the revitalization of the northeastern region, continued to improve the regional development layout, and narrowed the development gap between the central and western regions and the eastern region. In the first half of this year, the value added of large-scale industrial enterprises in the central region grew 8.4% year-on-year, 3.5 percentage points higher than that of the eastern region, while the per capita disposable incomes of residents in the central and western regions increased by 9.3% and 9.1% respectively, higher than that of the eastern region by 0.7 and 0.5 percentage points respectively. Thoroughly implementing major strategies such as the development of the Guangdong-Hong Kong-Macao Greater Bay Area, the integrated development of the Yangtze River Delta, the development of the Xiongan New Area, and the comprehensive deepening of reform and opening up in Hainan Province will bring new opportunities for coordinated regional development.

III. The principle of shared development has taken root in the hearts of the people, while living standards have constantly improved.

In assessing economic development, we should not only look at size and growth rate, but also understand to what extent it gives ordinary people a sense of fulfillment. At the same time as promoting economic development, China has also upheld the principle of people-centered development, which begins with resolving the problems of most dire, direct, and practical concern to the people. We have actively expanded employment and provided employment services, adopted a combination of measures to increase personal incomes, stabilized market prices, and carried out pollution prevention and control, which has all brought more benefits to the people and constantly bolstered their sense of gain, happiness, and security.

1. Employment remained basically stable.

This year, we have persevered in implementing the employment-first policy, and made concrete efforts to boost employment and business startups for key groups such as university graduates, rural migrant workers, and demobilized military personnel. Throughout the process of adjustment and optimization of the industrial structure, we provided stable employment subsidies for enterprises that took effective measures to avoid or minimize layoffs. We also allocated 100 billion yuan from the surplus in unemployment insurance funds to implement a vocational skill building initiative, and carried out large-scale vocational skill training, thereby ensuring overall stability in employment. In the first half of this year, 7.37 million urban jobs were created across the country, already reaching 67% of the annual target. The survey-based urban unemployment rate both nationally and across 31 major cities remained stable at around 5%, lower than the projected target of 5.5%. Employment is the foundation of public wellbeing; stability in employment, personal income, and public morale is conducive to the growth of consumption and the economy, and creates favorable conditions for overall social harmony and stability.

2. Personal incomes grew in tandem with the economy.

Constantly expanding employment, continuously investing in public wellbeing, and implementing special additional deductions for individual income tax have all served to increase personal incomes. In the first half of this year, the national per capita disposable income increased 8.8% year-on-year in nominal terms, or 6.5% in real terms after adjusting for inflation, thus exceeding the GDP growth rate by 0.2 percentage points. We achieved basically simultaneous personal income and GDP growth, providing income security and thus improving people’s lives. Stable employment guaranteed the increase of salary-based personal incomes, and national per capita salary-based incomes saw a year-on-year increase of 8.7% in nominal terms. Positive conditions in agricultural production and large-scale tax and fee cuts provided favorable terms for the growth of net operating incomes of urban and rural residents, leading to a year-on-year increase of 8.9% in national per capita net operating incomes in nominal terms, or a year-on-year increase of 1.9 percentage points. Meanwhile, we continued to see results in poverty alleviation through the development of industry, education, and employment. The per capita disposable incomes of rural residents in areas with a relatively large poor population, such as Tibet, Qinghai, and Guizhou, increased by 12.5%, 10.4%, and 10.3% year-on-year respectively in nominal terms, exceeding the national rural growth rate.

3. Market prices rose moderately.

Market supply was abundant overall, and supply and demand were basically in balance. In the first half of this year, the consumer price index (CPI) rose by 2.2% year-on-year, lower than the projected 3% increase, while core CPI (excluding food and energy prices) rose 1.8%. Market supply of manufactured goods was plentiful, with prices in this category either showing weak growth or in decline. The price of shoes increased by 1.1% year-on-year, while household appliance and vehicle prices decreased by 0.2% and 1.7% respectively. Market supply of services steadily increased, and service consumption rose to meet consumer demand. Service prices increased by 2% year-on-year, while communications services saw a price drop of 1.2%. Food prices increased more rapidly due to the rising prices of fresh fruit and pork, although most foods only saw moderate price increases as supply was adequate. Grain prices rose by 0.5% year-on-year, while the prices of aquatic products decreased by 1.1%.

4. There was continued improvement of the environment.

We launched seven key campaigns in pollution prevention and control, gradually implemented the Three-year Action Plan for Keeping Our Skies Blue, continued to promote enforcement inspection of the Law on the Prevention and Control of Water Pollution, and continued the fight to clean up our soil, so that our people may enjoy blue skies, clear waters, and lush mountains. In the first half of this year, the average proportion of days with good air quality in 337 cities at or above the prefecture level was 80.1%, up 0.4 percentage points year-on-year; PM2.5 concentration was 40 micrograms per cubic meter, down by 2.4%; there were 142 cities that met the required air quality standard, a year-on-year increase of 20; the proportion of the 1,940 surface water body sections under the national monitoring program that met good water quality standards (Grade I-III) was 4.4 percentage points higher year-on-year.

IV. We have intensified reform and opening up, and continued to boost the vitality of development.

To assess economic development, we should not only look at short-term development levels but also at long-term development potential. China boasts rich experience in macro-control and abundant policy space and enjoys great resilience, potential, and room for maneuver in its development. China is, therefore, well equipped to maintain steady, healthy, and sustainable economic development. In recent years, we have continued to bolster reforms to streamline administration, delegate power, improve regulation, and upgrade services, stepped up efforts to create an internationalized business environment that is market- and law-based, more actively expanded opening up, and implemented a management system based on pre-establishment national treatment and a negative list in an orderly manner. By doing so, we have vigorously promoted mass entrepreneurship and innovation, worked faster to foster new growth drivers and replace old growth drivers with new ones, injected strong impetus for sustained and sound economic development, and provided ample support for sustainable economic development. Looking forward, the fundamentals of China’s positive long-term economic prospects will not change.

1. New growth drivers have been accumulated and strengthened.

The negative list for market access was revised and improved, the national administrative service platform went online on a trial operation basis, the business environment was continually enhanced, and new industries as well as new forms and models of business multiplied rapidly. In the first half of this year, the value added of strategic emerging manufacturing industries saw a year-on-year increase of 7.7%, 1.7 percentage points higher than that of large-scale industries. Key projects such as artificial intelligence and big data were advanced in an orderly manner, and commercial use of 5G was officially launched, facilitating the rapid development of new forms of business. National online retail sales of physical goods saw a year-on-year increase of 21.6%, outpacing the growth of total retail sales of consumer goods by 13.2 percentage points. There was a rapid increase in new products to meet market demand, with the production of 3D printers, smart watches, service robots, and new-energy vehicles seeing rapid year-on-year increases of 271.4%, 162.9%, 86.5%, and 34.6% respectively.

2. The dividends of high-level opening up are gradually becoming more evident.

Upholding the principles of mutual consultation, joint development, and shared benefits, we continued to advance the Belt and Road Initiative, successfully held the Second Belt and Road Forum for International Cooperation, expedited infrastructure connectivity and industrial capacity cooperation, and expanded economic and trade engagement with Belt and Road countries. In the first half of this year, the value of imports and exports between China and Belt and Road countries increased by 9.7% year-on-year, 5.8 percentage points faster than the growth of the total value of China’s imports and exports. We promulgated the Foreign Investment Law, introduced a new catalog of industries that encourage foreign investment and two negative lists for foreign investment – one for the whole country and the other for pilot free trade zones – and launched major foreign-funded projects in an orderly manner. Against a backdrop of significantly decreased cross-border investment globally, China’s actual use of foreign capital saw a year-on-year increase of 7.2% in RMB terms, within which the actual use of foreign capital in high-tech industries rose by over 40%.

3. The dynamism of microeconomic entities has been strengthened.

Large-scale tax and fee cuts effectively lightened the burden on enterprises, and significantly enhanced microeconomic entities’ sense of gain and capacity to develop. According to a survey, 52.2% of small-scale industrial enterprises received tax relief in the second quarter, up 3 percentage points over the first quarter, and this proportion increased for six consecutive quarters. Thanks to tax and fee cuts, the operational situation for enterprises showed improvement. By the end of June, the debt-to-asset ratio of large-scale industrial enterprises was 57%, down 0.3 percentage points year-on-year. In the first half of this year, the total profit of large-scale industrial enterprises was down 0.9 percentage points year-on-year from the first quarter. Meanwhile, a continuously improving business environment effectively promoted the growth of microeconomic entities. In the first half of this year, there were 19,000 registrations for new enterprises every day across the nation, which translated into new forces for stabilizing employment, increasing incomes, and promoting growth.

The above facts fully prove that the 6.3% economic growth in the first half of this year was of significant value, demonstrating that China’s economy remains stable overall with a positive trend.

Ning Jizhe is Vice Minister, the National Development and Reform Commission, and Commissioner, the National Bureau of Statistics and Secretary of the Bureau’s CPC Leadership Group.

(Originally appeared in Qiushi Journal, Chinese edition, No. 15, 2019)