Bloomberg:

You said that consumption contributed to a higher economic growth. What role did investment play? Is the situation sustainable? As to the decline in vehicle sales, if the cut in vehicle purchase subsidy in the second quarter affect the sales, will the Chinese government introduce some measures?

Mao Shengyong:

Thank you for your question. The fundamental role of consumption in producing economic growth has been strengthening in recent years. First, in terms of spending, the contribution of demands is in a state of flux. In the first quarter, the three major forces driving economic growth, namely consumption, investment and external demand performed well, to a greater or lesser degree. Consumption maintained a rapid growth, and investment increased at a higher rate. Foreign trade, in both goods and services, also registered a good performance. However, an increase in the contribution of one force means a decrease in the other two. In the first quarter, consumption made the largest contribution making up 65.1% of economic growth, performing as the dominant driving force. In the first quarter of last year, foreign trade played a negative role in promoting economic growth, with the net exports registering a negative contribution rate. In the first quarter of 2019, China’s surplus in trade in goods went up by 75.2% over that of the same period last year, indicating an increase in the contribution of net exports. Actually, the contribution made by the net exports of goods and services grew to 22.8%. In addition, despite higher growth of investment and rising capital formation, the contribution of gross capital formation stood at 12.1% – 28.3 percentage points lower than that of the same period last year. Although the respective contribution of the three major demands has changed, consumption, the proportion of which was above 60%, was still the largest contributor in absolute terms.

Second, the contribution of consumption has hovered around 60% in recent years, but has exceeded 70% or even approaching 80% in some individual quarters. This is a testament to the strengthening fundamental role of consumption in promoting economic growth.

Meanwhile, we need to be aware that the potential of consumption has yet to be maximized. China's consumption environment needs further improvement. Some incidents in recent years have added a new urgency to strengthen protection of consumers' rights and interests. Besides, consumption upgrades call for more supply of quality products and services. Therefore, there's still much room for China to unleash its consumer market potential.

Regarding your second question, the fall in car sales has drawn great public attention. Recent statistics show that there was a moderate slowdown in car production and sales. Domestically speaking, it resulted from the booming development of the Chinese car industry in the past 10 years. Car production and sales grew very quickly during that period. But the number of car owners among residents has increased continuously until today. This is the basic situation. The production and sales of cars are likely to enter a short period of adjustment. In some major developed countries, car production and sales have slowed down as well. This is my first point of view.

Second, the statistics in March show that although car production has continued to drop, the speed of the decline has slowed down. The value added of the industry actually saw a positive growth. This means that the upgrading of the industry is accelerating. The situation was the same regarding sales. Therefore, after a period of adjustment, the rate of decline of production and sales will decrease further. 

Third, when analyzing China's car market, we should focus on new cars. Approximately 28 million new cars were sold in 2018. However, we should also pay attention to used cars, because that market has been expanding. Last year, nearly 14 million used cars were sold, accounting for half of the number of new cars sold. The growth rate exceeded 10%. In the first quarter, the transaction of used cars increased both in terms of the number of cars sold and in terms of their transaction value. Therefore, we should consider both new cars and used cars when analyzing China's car market. From what we can see, the used car markets in developed countries are all vibrant. Thank you.

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