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CCTV:

From the data just released, the Chinese economy has made a good start in the first quarter, with several indicators showing positive signs -- industrial output and GDP both having surpassed market expectations. What are behind these increases? And what do you think of the overall performance of the Chinese economy in the first quarter? Thank you.

Mao Shengyong:

Thank you. You raised two questions, and I'll first answer the second one and then move on to the first.

The Chinese economy continued stable and sound momentum in the first quarter, the performance exceeding expectations and providing a rosy start to the year. This will lay a sound foundation for meeting the full-year target.

In terms of the four major macroeconomic indicators, the economic growth rate has picked up, prices are generally stable, employment has expanded and international payments have become more balanced.

First, the growth rate of the Chinese economy has picked up. The country's GDP increased 6.9 percent in the first quarter, an increase of 0.2 percentage points from the same period of last year and an increase of 0.1 percentage points from the fourth quarter of 2016. What's most noteworthy is that the value-added industrial output (of designated large enterprises with annual turnover of at least 20 million yuan) expanded 6.8 percent year-on-year in the first quarter, with a gain of one percentage point from the previous year. The value-added industrial output increased by 7.6 percent in March. This is growth after we remove price factors. If we factor in those prices -- which are on the rise currently -- industrial output would have reached double digit growth. Additionally, the service sector's value-added output also increased faster than the first quarter of last year.

Second, prices are generally stable. The CPI in the first quarter increased 1.4 percent year-on-year, while the core CPI (after excluding food and energy) increased 2 percent, showing a moderate increase. The PPI increased 7.4 percent in the first quarter overall, but 7.6 percent in March, registering expanded growth for five consecutive months since returning to positive growth last September. The PPI increased 7.8 percent in February, mainly due to a carry-on effect. The growth rate in March fell slightly compared to February. Judging from both CPI and PPI, we think prices overall are stable.

Third, employment has expanded. A total of 3.34 million new jobs were created in the first quarter, an increase of 160,000 compared to the same period of last year. At the end of March, the surveyed urban unemployment rates nationally and in 31 major cities fell compared from February; especially, the unemployment rate in the 31 major cities stayed below 5 percent. At the end of February, the number of migrant workers increased by 2.7 percent year-on-year. Additionally, market research discloses there were 1.13 vacant positions for every job seeker, slightly higher than the same period of last year. All this points to a sound employment environment.

Fourth, the international balance of payment has improved. Judging from the current account, the surplus of trade in goods topped 450 billion yuan in the first quarter. Taking into account of service trade, the current account is still in the black; judging from the capital account, the capital flow has also shown positive signs as the foreign exchange rate of the yuan and foreign reserves remain generally stable.

Based on the above four major indicators, the Chinese economy is in a stable and sound condition.

Now, turning back to your first question: What are the factors behind the sound performance of the economy? First, secondary industry, especially manufacturing, made a big contribution to the economic growth. As the supply-side structural reform continues to make gains, the supply-demand relationship has improved notably and businesses have increased their confidence. Enterprises have seen fast growth in their profits -- the profit of designated large enterprises with annual turnover of at least 20 million yuan increased 31.5 percent from January to February year-on-year, for example. As enterprises obtained higher profits, they expanded production, which contributed significantly to the overall economic growth. Secondary industry saw its added value rise 6.4 percent year-on-year, an increase of 0.5 percentage points from the same period last year. It contributed 36.1 percent to GDP growth, an increase of 1.1 percentage points year-on-year.

Second, consumption plays more of a basic role in driving economic growth. Firstly, people's income has grown by 7 percent in real terms in Q1, up 0.5 percentage points year-on-year. Income is a key requirement for consumption growth. Secondly, according to statistics, the consumption structure rapidly upgrades as service consumption takes up a larger share in the total mix. Service consumption is growing fast.

Moreover, the upgrading of the consumption structure is also manifested with the quick growth of quality products. Thirdly, mass innovation and entrepreneurship is breeding new consumption models and patterns and thus boosting emerging areas of consumption as well as new growth drivers. With all of the above factors combined, consumption has contributed 77.2 percent to economic growth, up by 2.2 percentage points over the same period last year.

Third, exports' contribution to economic growth has turned positive. The surplus of trade in goods was over 450 billion yuan in Q1, down by 35.5 percent year-on-year. This decline may trigger doubts about the so-called positive contribution of exports to economic growth. Actually, while doing the GDP calculations, we need to make several adjustments in those statistics by using the constant price, i.e. adjusting for import and export prices, to measure the growth rate.

And here, the 35.5 percent decline in the trade surplus is actually indicating the current price. The price index for export and import was 5.4 percent and 14.4 percent in Q1. After adjustment for inflation and taking trade in services into consideration, the surplus of trade in goods and services are actually growing compared to that of the previous year. Net export of trade in goods and services has contributed 4.2 percent to economic growth, compared to a negative 11.5 percent last year. So it is safe to say that exports contribution has turned from negative to positive.

All the above three drivers supported the rapid rebounding of economic growth in the first three months. Thank you.

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