SCIO briefing on China's economy in January and February

The State Council Information Office (SCIO) held a press conference in Beijing on Monday to provide information on China's economic performance in January and February. March 19, 2020

Hu Kaihong:

Thank you, Mr. Mao. We will now take questions. Please identify your news outlet before asking.

China Media Group:  

Major economic indicators point to a decline in January and February. However, the data you just released shows industrial, investment and consumer sectors all plunging beyond expectations. Why did you still say that China's national economy has withstood the shock of the COVID-19 epidemic? Thank you. 

Mao Shengyong: 

Thank you for your question. We just released our economic performance statistics from the January-February period. The actual performance of those indicators may not exactly match market expectations. Since the novel coronavirus outbreak, to protect the lives and health of the people, the Chinese people have made a concerted effort throughout the country to fight the epidemic under the strong leadership of the CPC Central Committee. Right now, epidemic prevention and control efforts have achieved important, hard-won phased results.

The statistics we released show that the epidemic has indeed made a major impact on China's economy. But in-depth analysis shows that the impact of the epidemic on China's economy will largely be short-term and external. It will not change any fundamentals such as the long-term positive trend and strong upward momentum of the Chinese economy. Essentially, the impact of the epidemic on the economy in the short term is generally controllable. The Chinese economy has withstood the shock of the COVID-19 outbreak during the first two months of the year. How can we reach this conclusion? I would like to explain from the following perspectives:

First, the volume of production demand remains huge, and China's advantages as an economy of super-large scale have not changed. In 2019, China's economic aggregate was close to 100 trillion yuan (US$14 trillion), with per capita GDP exceeding US$10,000. Its output of major industrial products has remained top in the world for several consecutive years. These achievements have provided China with strong material guarantees when responding to emergencies. From January to February this year, despite of the severe impact of the epidemic, the scale and volume of major production indicators remained huge. From January to February, the total output value of industrial enterprises above designated size in China reached 11.5 trillion yuan (US$1.6 trillion), total retail sales of consumer goods exceeded 5.2 trillion yuan (US$743 billion), and fixed-asset investments topped 3.3 trillion yuan (US$471 billion). The scale of China's economy has remained impressive. 

Second, as basic industry has managed to provide sufficient supplies, production of anti-epidemic materials has been guaranteed. The strong resilience of the Chinese economy remains unchanged. During the COVID-19 outbreak, productions in important industries vital to national wellbeing and the people's livelihood have never been suspended. Regular production and operations are maintained. Some industries even witnessed remarkable growth. In the first two months of this year, yield of ethylene increased by 5.6%, yields of both crude steel and cast iron increased by 3.1%, and output of 10 non-ferrous metals increased by 2.2%. During the COVID-19 outbreak, demand for epidemic control and prevention products such as masks, protective suits, and ethyl alcohol has soared. Through orderly adjustment, output of these products has increased and relevant production capacity has greatly expanded in a short period of time to satisfy the needs of epidemic prevention and control. Take masks for example: From January to February, statistics from industrial enterprises above designated size show that newly added mask production nearly tripled this year compared to the same period of last year. According to February 29 data from relevant departments, the average daily output of masks reached 116 million, indicating China's powerful supply capacity has adequately supported the supply of medical materials in demand. 

Third, supply of basic commodities and public utilities remains abundant. The overall balance between supply and demand has not changed. During the epidemic, the basic livelihood of China's 1.4 billion population has been effectively guaranteed. Total retail sales of consumer goods maintain relatively stable growth. For example, retail sales of meat, poultry and eggs increased by 37.8%, and retail sales of vegetables increased by 27.1%. Output of frozen meat and instant noodles increased by double digits. During the epidemic, the communications sector including the internet and providers of public utilities such as water and electricity, maintain smooth operations to meet the demand of residents. In general, the supply of goods including basic commodities could meet demand. Prices remain stable, and the country maintains overall economic and social stability. None of these achievements were easily won. 

Fourth, the internet economy is embracing promising development, and its rapid development momentum has not lost any steam. During the COVID-19 outbreak, the internet has played an essential role in coordinating epidemic prevention and control efforts, allocating supplies, delivering consumer goods, facilitating online education and online remote consultation and maintaining cultural and entertainment consumption. The internet-related industries have seen satisfying growth. From the perspective of market sales, from January to February, online retail sales of physical commodities increased by 3% year-on-year, accounting for 21.5% of the total retail sales of consumer goods, five percentage points higher than the same period of last year. Some high-tech products are still growing in such difficult times. The sales of electronic products such as 3D printers and smart watches have increased by more than 100%, and output of monocrystalline silicon and polysilicon has increased by about 45% and 35%, respectively. Despite the short-term impact of the epidemic on the economy, the momentum of accelerated development of new growth drivers has not changed.

Fifth, China's macro-control policy towards hedging economic risk and uncertainty is strong and effective. We are confident the China can achieve its goals for this year. Recently, the central government introduced a series of policies and measures to support epidemic prevention and control and resumption of work and production including supporting enterprises and boosting production. These policies are gradually taking effect. 

The next step of epidemic prevention and control will still be arduous, considering the spread of the coronavirus in some foreign countries has been quite fast. We must continue to consolidate the positive results of epidemic prevention and control and at the same time strengthen international cooperation in fighting the epidemic. In addition, we should push all links in the industrial chains to resume work and production in an orderly manner and accelerate restoration of regular production and life. We must also further strengthen macro policies to hedge the impact of the epidemic as well as external risk and uncertainty. We should promote stable and healthy economic operations and make solid efforts to win the three critical battles of avoiding major risk, performing targeted poverty alleviation and preventing pollution while striving to complete development goals for this year. Thank you. 

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