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Reuters:

To what extent had the capital formation contributed to economic growth in the first quarter? While consumption contributed 77.2 percent of economic growth, some economists still hold that the country's economy is still driven by infrastructure investment and the property market. How do you respond to this? Thank you.

Mao Shengyong:

What are the main factors driving economic growth? This is still the focus of public attention.

We may analyze it from the perspective of industrial structure. First, given the rapid industrial expansion, many people may think that industry might be the main driving force for economic growth. Then in this logic, can we say that traditional industry could also be a major driving force of economic growth if it profits well? Looking into the industrial structure, the tertiary sector actually contributed 61.7 percent to economic growth. Therefore, it should be the biggest driver for economic expansion.

Secondly, as we look into different fields of industry, the traditional sector is also growing but with a modest pace. For instance, the growth rate of the mining industry is still negative, but the drop is narrowing compared to the same period last year. Other traditional sectors are growing at a modest pace but quicker than that of the previous year. Advanced manufacturing sectors are better performers, which are exemplified by a 13.4 percent and 12 percent expansion in the high tech industry and equipment manufacturing industry respectively. Specifically speaking, therefore, advanced manufacturing sectors are growing faster while traditional sectors are keeping stable growth.

Thirdly, traditional sectors are also undergoing a major facelift. Pushed by the supply-side reforms in recent years, some traditional sectors like steel, non-ferrous metals and sheet glass have had its outdated facilities shut down and witnessed improved technology, quality, craftsmanship and competitiveness. From this perspective, different industries are developing toward medium and higher ends.

If we look at the picture from the demand side, consumption is still the largest contributor for growth. It contributed 77.2 percent to economic growth in Q1, up by 2.2 percentage points year-on-year. At the same time, capital's contribution is markedly declining to 18.6 percent. Therefore, capital is by no means the major factor driving economic rebound. The general picture is that consumption as well as the service sector constitutes a major part of economic growth. Thank you.

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