SCIO briefing about policies and measures on stabilizing employment, ensuring stable growth and promoting high-quality development

Market News International:

I have two questions. Firstly, recently, there has been turbulence in the U.S. treasury and U.S. dollar exchange rate markets. Could the PBC comment on how this might impact the Chinese market? Is there concern that a decline in U.S. treasuries could affect the return on China's U.S. dollar assets? And how does the PBC view the performance of the yuan exchange rate this year? And the second question is, China's Q1 GDP grew by 5.4%. Given current economic trends and the outlook for trade tension with the U.S., are authorities confident that the already announced policy plan is sufficient to reach the around 5% GDP growth target for this year? Or will more additional measures be needed? Thank you.

Zou Lan:

Thanks for your questions. I will address the first one. Recently, the U.S. announced significant tariff increases on multiple economies. This action seriously infringes on the legitimate rights and interests of various countries, disrupts the rules-based multilateral governance system, impacts the global economic order, and undermines the long-term stable growth of the global economy. At the same time, this has triggered severe fluctuations in global financial markets and heightened investors' risk aversion towards dollar assets. It has significantly lowered the dollar index, increased US treasury yields, intensified volatility in the US stock market, and led to a reallocation of global asset portfolios across regions. China's economy had a strong start this year, continuing its trend of recovery and improvement. The financial system remains stable, the financial market has shown strong resilience and smooth operation, whilst the RMB exchange rate against the U.S. dollar is around 7.3 yuan.

We have noticed that there have recently been some fluctuations in the U.S. treasury market. I want to emphasize that China's foreign exchange reserves have prioritized safety, liquidity, and value preservation and appreciation. Investments in the international financial market have been carried out based on market-oriented and professional principles, leading to an effective diversification of the investment portfolio. The impact of changes in a single market or asset on China's foreign exchange reserves is generally limited.

China's solid economic foundation, broadly balanced international payments, and resilient foreign exchange market will continue to provide strong support for maintaining the basic stability of the RMB exchange rate. First, the economic foundation is solid. On April 25, the meeting of the Political Bureau of CPC Central Committee made important arrangements for recent economic work. China's economy will continue to recover and improve, addressing the uncertainty of drastic changes in the external environment, with the certainty of high-quality development. Second, a basic equilibrium in the international balance of payments was maintained. Foreign trade enterprises are actively exploring diversified markets to quickly respond to the varied needs of the global market. We have opened up the financial markets in an orderly manner, continuously improved the facilitation level for cross-border investment and financing, and attracted stable inflows of medium- and long-term capital from abroad. Third, the foreign exchange market is resilient. Market players have become more mature with more rational trading behaviors. The proportion of enterprises using foreign exchange derivatives for hedging and the share of RMB cross-border receipts and payments are steadily increasing, allowing for better management of external shocks. Fourth, the volume of China's foreign exchange reserves remained basically stable. In recent months, the balance of foreign exchange reserves has remained stable at over $3.2 trillion.

In the next stage, the People's Bank of China will continue to implement a moderately accommodative monetary policy and increase support for the real economy. Meanwhile, we will adhere to a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies for adjustments. We will emphasize the decisive role of the market in exchange rate formation, enhance the resilience of the foreign exchange market, stabilize market expectations, and strengthen market oversight. We are committed to rectifying procyclical market behaviors and addressing activities that disrupt market order. Furthermore, we will take resolute measures to prevent the risk of exchange rate overshooting and maintain the fundamental stability of the RMB exchange rate at a reasonable and equilibrium level. Thank you.

Zhao Chenxin:

Thank you for the questions. Following Vice Governor Zou's answer, I will focus on the second question. You just mentioned the economic situation in the first quarter. China's economic performance is very impressive in Q1, demonstrating both substantive depth and distinctive characteristics.

First, these achievements fully demonstrate the strong resilience and vitality of China's economic development. Since late last year, particularly since the beginning of this year, a certain country has moved against the tide of history, recklessly wielding tariffs as weapons, seriously violating the legitimate rights and interests of China and other countries, severely undermining the multilateral trading system, and gravely disrupting the global economic order. Amid such a chaotic and complex external environment where anxiety and uncertainty prevail among various countries and the global economy has been deeply affected, China's economy grew 5.4% year on year in the first quarter, picking up by 0.4 percentage point from last year's full-year growth rate and demonstrating positive momentum. Moreover, this achievement came against the high comparison base of 5.3% growth in the first quarter of last year, fully demonstrating the strong resilience and vitality of China's economy. We have all just personally experienced this process and have a deep understanding about it. For example, we have seen exports defying downward pressure to achieve a growth of 6.9%, groundbreaking innovations in large models attracting global attention, and rapid growth in domestic tourist trips and consumer spending during the Spring Festival and Qingming Festival holidays. Chinese-made smart panoramic cameras, as well as "China-chic" products and related derivatives, are popular at home and abroad. Recent news reports have shown that in some foreign stores, there have even been 100-meter-long queues at 3 a.m. to purchase these goods. When we speak of China's economy having strong resilience and vitality, and of continuously rising social confidence, these are conclusions firmly grounded in facts. The examples I just mentioned are vivid proof of this.

Second, these achievements fully demonstrate that high-quality development is advancing steadily and solidly. China's economy has not only achieved impressive growth, but has also continuously made new progress and breakthroughs in innovative, coordinated, green, open and shared development. In terms of innovative development, the output of servers, new energy vehicles, and 3D printing equipment increased by 66.3%, 45.4% and 44.9% year on year, respectively. The accelerated application of large AI models in fields such as electronics and automobiles has driven a surge in demand for computing power products and intelligent products. In terms of coordinated development, the implementation of major regional strategies and regional coordinated development strategies has been intensified, continuously boosting the vitality of regional development. In terms of green development, the average concentration of fine particulate matter (PM2.5) in cities at the prefecture level and above nationwide fell 4.8% year on year, while the proportion of surface water monitoring sections with Class I-III water quality rose to 91%. In terms of open development, China has established comprehensive mutual visa exemption agreements with 27 countries and expanded its unilateral visa-free policy to include 38 countries. Inbound tourism totaled 34.683 million visitor arrivals, up 18.5% year on year. In terms of shared development, rural residents' per capita disposable income increased 6.5% year on year in real terms, 0.9 percentage point above the national average. This series of figures provides concrete evidence of the high-quality development of China's economy.

Third, these achievements fully demonstrate our efforts to strengthen certainty to cope with the uncertainties of the rapidly changing external environment. In terms of domestic demand, the contribution rate of domestic demand to economic growth in the first quarter of this year rose 6.3 percentage points compared to the fourth quarter of last year, more effectively fulfilling its role as the primary driver and stabilizing anchor of economic growth. In terms of external demand, more than 170 countries and regions recorded positive growth in imports from China, strongly supporting the diversification of China's export markets. In terms of people's livelihoods, 3.08 million new urban jobs were created, an increase of 50,000 additional jobs compared to the same period last year, while basic public services continued to improve. In terms of security assurance, the grain sowing area expanded steadily, while energy security was further strengthened. All these achievements have laid a solid foundation for the sustained, steady, and sound development of China's economy, fully demonstrating the inherent resilience of our economic development.

The achievements in the first quarter have laid a solid foundation for economic development throughout the year. Looking ahead, while the foundation for sustained economic recovery and improvement still needs further consolidation and external shocks are having a greater impact, we must also recognize that we have the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core and the institutional advantages of socialism with Chinese characteristics. We have favorable conditions, including deepening reform and opening up, broad market demand, and a solid industrial foundation. We also have stable support from macroeconomic policies, smooth supply-demand circulation, and expanding economic and trade opportunities. Additionally, we have abundant policy reserves and ample policy space. We will accelerate the implementation of measures to stabilize employment and the economy, and promote the rapid introduction and implementation of various policies. We will pay greater attention to improving the efficiency and effectiveness of policy implementation to ensure that policies reach people and enterprises directly. At the same time, we will intensify efforts to promote the implementation of established policies to ensure their effectiveness, including special actions to boost consumption, making good use of the 5 trillion yuan in national-level investment funds this year, and accelerating the establishment of the national venture capital guidance fund, among others. Most of these policies will be implemented in the second quarter, and policy orientation consistency will be continuously strengthened. No matter how the international situation changes, we will stay focused on our development goals, maintain strategic resolve, and concentrate on running our own affairs well. We are fully confident in achieving this year's economic and social development objectives and tasks.

In addition, I would like to add some points to supplement Mr. Zou's remarks. You just mentioned the current China-U.S. trade situation, and I would like to briefly share my views on this. The impact and shock of the so-called "reciprocal tariffs" imposed by the U.S. have global ramifications, with all parties observing, analyzing and responding to the situation. They engage in fabricating groundless accusations, acts of bullying and hegemony, and backtracking on their commitments. This has made the world increasingly see a fundamental truth: the so-called "reciprocal tariffs" seriously violate historical trends and economic principles, severely undermine international trade rules and order, and gravely damage the legitimate rights and interests of countries around the world. This is a typical example of unilateral bullying that harms others as well as themselves. Such conduct lacks popular support and will inevitably end in failure. China is the world's largest developing country and a dignified and responsible major country. Confronted with the unreasonable and abusive use of tariffs, China has resolutely stepped forward to counter hegemony and power politics by implementing a series of rational, proportionate and justified countermeasures. This is not only to safeguard China's own legitimate rights and interests, but also to uphold international fairness and justice, maintain the global free trade system, and defend the normal international economic order. China will stand with the vast majority of countries in the world and stand on the right side of history and the side of human progress. We firmly believe that going against the world and the truth will only lead to self-isolation, while aligning with global trends and justice is the only way to win the future.