SCIO briefing on China's financial statistics in H1 2023
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E-mail China.org.cn, July 28, 2023
Asahi Shimbun:
China's economy has continued to recover since the beginning of this year, yet experts have pointed out the recovery has been slower than anticipated. How does the PBC perceive the speed of recovery for the second half of this year? What financial measures should be introduced during this period?
Thank you for your questions. Currently, the macroeconomic data is experiencing a slowdown, which has sparked heated discussion. Indeed, we should not evade questions that truly exist. At the same time, we also believe that analyzing the macroeconomy requires not only a question-oriented approach, but also a systemic mindset, and we need to give attention to the positive side. For example, financial data has seen a significant rebound with multiple highlights, and the overall macroeconomic performance has also achieved an upturn. First, the financial sector continues to serve as a crucial contributor to infrastructure project investment. At the end of June, medium- and long-term lending to the infrastructure sector increased 15.8% year on year, which has effectively facilitated the construction of major projects. Over 70% of the 739.9 billion-yuan policy-backed and developmental financial instruments have been allocated. The purchasing managers' index (PMI) for the construction sector remained high in June, at over 55%. Second, residents' loans experienced reasonable growth with a steady decline in costs, which has contributed to a steady recovery in consumption. In the first half of this year, short-term personal loans grew by 300.9 billion yuan, a year on year increase of 401.9 billion yuan. The mortgage rates for personal housing loans was 4.11% in June, a decrease of 0.51 percentage point year on year. The demand for big-ticket consumer goods continues to be unleashed. Online consumption saw rapid growth, and the consumption of services keeps picking up. Since July, the passenger flow by railway and air amid the summer travel rush increased significantly compared with the same period of 2019. Third, targeted support for key areas, such as private MSEs and the manufacturing sector, has been strengthened, while both the overall export and private enterprises have stayed resilient. At the end of June, the balance of inclusive loans granted to MSEs increased by 26.1% year on year. The balance of medium and long-term loans allocated to the manufacturing industry surged 40.3% compared with the previous year. As the momentum of the global economic recovery wanes and the global trade volume registers negative growth, many countries are seeing a decline in exports, with some experiencing a drastic drop. Despite the situation, China's dollar-denominated exports of goods still achieved positive growth in the first half of this year. Notably, the exports of private business brands increased by 11.5%.
The fundamentals driving China's long-term growth remain robust, and we should have unwavering confidence in achieving high-quality development. The challenges confronting the current economy are normal phenomena in the post-pandemic recovery process. Globally, both consumption and economic recovery are expected to be gradual, with a general belief that it takes about a year for normality to be restored. Meanwhile, in China, the stable transition from the pandemic has spanned approximately six months, with positive trends already evident in economic cycles, residents' incomes, and consumer spending. While the global political and economic situation remains complex, China remains robust domestic development potential. Additionally, overall market expectations remain steady, effectively navigating external environmental shifts. From a long-term perspective, the economy is increasingly leaning towards high-quality development. The impetus from technological innovation continues to strengthen, green transformation progresses steadily, the consumer market gradually heats up and upgrades, and the momentum for high-quality development keeps accumulating. This presents a good opportunity for structural adjustments in the economy.
Against the backdrop of high external economic inflation, prices in China have remained relatively stable. Over the recent months, we have noticed a downward trend in prices, although deflation has not occurred. The year-on-year increase in the Consumer Price Index (CPI) has shown fluctuations and is projected to continue its decrease into July. This is primarily attributable to temporary factors such as lag in demand recovery and base effects. Our macroeconomic environment is witnessing a steady recovery, with M2 experiencing sustained growth, setting it apart from typical deflationary periods in history. Therefore, it can be affirmed that deflation is not currently taking place, and there is no risk of deflation in the second half of the year. Our monetary conditions are reasonable and moderate, and residents' expectations remain steady. As policy measures continue to yield results, the gap between supply and demand will narrow further, and the CPI is projected to ascend gradually after August. The overall trend of the CPI for the entire year is expected to follow a U-shaped pattern. Prices are likely to decline initially and then rise throughout the year, approaching 1% by the end of the year.
In accordance with the arrangements of the CPC Central Committee and the State Council to intensify macroeconomic policy regulation, stimulate effective demand, and enhance policy reserves, a prudent monetary policy will persist in being precise and potent. There remains ample policy space to address unexpected challenges and changes. Concerning overall quantity, we will reasonably manage the pace and intensity in response to changing circumstances, bolster countercyclical adjustments, and create a favorable monetary and financial environment for continuous economic recovery and improvement. Regarding prices, we will strive for steadily decreasing financing costs for the real economy, effectively supporting the expansion of potential demand. Structurally, our focus will be on key areas, adopting a reasonable and moderate approach, and discerning the appropriate timing for advancement or withdrawal. Financial support for key sectors such as small- and micro-sized private enterprises, green innovation, and others will continue to grow. The 16 supportive measures intended to ensure the steady development of the real estate sector have been definitively extended. Previously introduced policy measures are starting to take effect, and we need to exhibit patience and confidence in achieving sustained and stable economic growth. Thank you.
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