SCIO briefing on China's economy in Q1

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Speaker:
Mao Shengyong, director general of the Department of Comprehensive Statistics at the National Bureau of Statistics (NBS) and NBS spokesperson

Chairperson:
Shou Xiaoli, Press Bureau of State Council Information Office

Date:
April 17, 2019

China News Agency:


We have seen that the GDP growth rate in the first quarter of this year remained flat with little fluctuation compared with that in the fourth quarter of last year. Some people questioned the stability of China's economic growth over the years, during which the data of other countries fluctuated. What do you think of it? Thank you.


Mao Shengyong:


We have learned about what you mentioned through various channels, and I would like to respond to it. We know that China's economy has shifted from high speed growth in the past to high-quality development. In this new phase, the economic growth has slowed down from rapid speed in the past to medium-to-high speed growth. However, while the growth rate is decreasing, the economic operation is becoming more stable. In fact, it reflects the change of the economic development phases and not the smoothing out of economic growth fluctuations. The reasons are as follows:


First, in terms of total volume, China's economic aggregate is growing increasingly larger, with total economic output exceeding 90 trillion yuan in 2018. The increasing amount of money means that economic growth may slow down on the one hand, but it also means that economic growth is not prone to rapid fluctuations and will show greater stability. The larger the economic aggregate is, the less likely it is to fluctuate. But as the economic aggregate becomes larger, every percentage point of growth can bring about incremental economic growth.


Second, from the perspective of industrial structure, the proportion of the service industry's value added in GDP has exceeded that of the secondary industry and become the largest industry since 2012. The service industry has maintained rapid growth ever since, and the proportion of its value added in GDP has continued to increase, sustaining an increasing contribution to overall economic growth. In the first quarter of this year, the contribution rate was 61.3%. In terms of the demand structure, the contribution of consumption to economic growth has been constantly consolidated. In the first quarter, the contribution rate of final consumption expenditure was 65.1%. In terms of production and demand, it is the service industry and consumption that contribute to production and demand respectively, and both of them feature fast growth. We know that consumption and the service industry also both have the very important feature of relatively small volatility, allowing these two leading forces to lead to more stable GDP growth.


Third, from the policy point of view, the CPC Central Committee and the State Council have continuously innovated in macroeconomic regulation and control, and on the basis of strengthening the range control, directional regulation, precise regulation, and camera regulation have been continuously strengthened, which have better responded to the downward pressure on the domestic economy. These efforts have kept the economy running smoothly in an appropriate range, which shows the effects of our policies.


Fourth, when developed economies, including the U.S., Japan and European countries release their quarterly GDP growth, sometimes they release annualized rates first, and then year-on-year rates. Annualized rates will amplify seasonality, both positive and negative, thus magnifying the fluctuation of statistics. For example, during the four quarters of 2018, the first quarter ranked the highest at 6.8%, while the last quarter ranked the lowest at 6.4%. The range of annual economic growth is 0.4 percentage point. Whereas the statistics of the U.S. in 2018 are 3.0% and 2.6% respectively, and the corresponding range of growth is also 0.4 percentage point, which also seems to be fairly stable. However, when based on the perspective of annualized rate, in which the highest growth of the U.S. is 4.2% and lowest is 2.2%, the result is a 2-percentage-point range of discrepancy. This explains the reason why sometimes the annualized rate published by developed countries seem to indicate significant fluctuations while China’s numbers show more stability. This is because the statistics published by China refers to the year-on-year growth and those of foreign countries are based on an annualized rate. If we review the year-on-year growth for both, the statistics released by China and foreign countries remain relatively stable.


Over the past years, people may neglect that the National Bureau of Statistics has also released the quarter-over-quarter growth rate apart from year-over-year rates when publishing the quarterly GDP. If you have interest, you can make some derivation based on the quarter-over-quarter speed of growth and see its annualized rate. Based on our rough calculation, we note that if the annualized rate is determined on the basis of the quarter-over-quarter growth rate, its fluctuation rate is higher than the year-over-year growth rate.


Generally, Chinese economic performance is stable now, which is a manifestation of the objective rules of China’s economic development in the current phase, and is also in line with the international rules of development. It also showcases the effect of policy tuning, rather than deliberately concealing economic fluctuations through statistics. 

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