News 1+1 | What trends and signals are conveyed by China's semi annual economic report? Expert Interpretation → Expenditure | Growth | Economy

On July 17th, 2023, the semi annual report of China's economy was released. The gross domestic product (GDP) in the first half of this year was 59303.4 billion yuan, a year-on-year increase of 5.5% at constant prices. How do you view this core data? Besides, what other changes, characteristics, trends, and signals can we observe in this semi annual economic report? More importantly, to stabilize the economy and promote development, what other areas do we need to continue to focus on in the second half of the year? News 1+1 connects macroeconomic economist and President of Shanghai University of Finance and Economics, Liu Yuanchun, to pay close attention to the "semi annual report" of the Chinese economy, trends and signals!

What do you think of the 5.5% year-on-year growth in GDP in the first half of the year?

Macroeconomist and President of Shanghai University of Finance and Economics Liu Yuanchun: ① The 5.5% growth rate is still very high compared to the economic growth rate of major countries in the world.

② Of course, because everyone has been expecting the GDP growth rate to reach around 7% in the second quarter, it is estimated that the GDP in the first half of the year will be 6%. Therefore, there is still a certain gap between the 5.5% growth rate and market expectations.

③ If we average the growth rate of the entire two years this year and last year, we will see that the average growth rate in the first quarter reached 4.7%, while it fell back to 3.4% in the second quarter, which indeed indicates signs of a slowdown. Another important parameter is that although the year-on-year growth in the second quarter was 6.3%, from a month on month perspective, the growth rate has experienced some slowdown. Therefore, the growth rate of 5.5% is currently a relatively good data in the growth of major countries. However, from the comparison between quarters, the first quarter exceeded expectations, while the second quarter was slightly behind expectations, indicating that there is indeed pressure for recovery to slow down.

④ But more importantly, it is 5.5% in the first half of the year, and to achieve this goal of 5% for the whole year, it means that the growth rate in the second half of the year may be at a level of 4.6% to 4.7%. Since the base effect in the first half of the year has basically disappeared, if we want to maintain the growth rates of 4.6% and 4.7% in the second half of the year, we still need to further strengthen our efforts in stabilizing growth.

Contribution rate exceeds 70%!

How has "consumption" been repaired?

Macroeconomist and President of Shanghai University of Finance and Economics Liu Yuanchun: ① In the first half of this year, the contribution rate of final consumer spending to economic growth exceeded 70%, which many people may not feel particularly obvious about. But through another set of data comparison, that is, in the first half of the year, the overall consumption increased by about 8.2% year-on-year, investment increased by 3.8%, and exports increased by 3.7%, everyone can feel the significant fundamental role of consumption in economic growth.

② Does this mean that comprehensive consumption has been upgraded and expanded? I don't think this has been achieved yet. Although the overall travel index and various tourism and catering parameters have been well restored in the first half of this year, which is in line with the characteristics of the post epidemic era led by social restoration, if we look at the overall structure of consumption, we are still in a stage of consumption restoration, and tourism income has not shown a synchronous increase. Compared with the same period in 2019, it is still nearly 20% lower, which also indicates that residents are still relatively cautious in consumption. Especially in the first half of this year, there was a rapid increase in purchases of gold, silver, and jewelry, which means that residents' current balance sheets are still undergoing significant adjustments. If this adjustment is not fully completed and the income of residents at all levels does not rise rapidly, I think there is still a lack of solid foundation to achieve a rapid increase in consumption.

③ However, we also need to see that consumer repair and consumption improvement are still ongoing. As long as there is an increase in consumer policies in the second half of the year, the expected normalization of consumption should be achievable.

Foreign trade is under pressure and moving forward

How to better decompress?

Dong Qian: In the first half of this year, China's total import and export of goods reached 20101.6 billion yuan, a year-on-year increase of 2.1%. However, looking at June alone, it was a year-on-year decrease of 6.0%. What does this mean? What should we do next?

Macroeconomist and President of Shanghai University of Finance and Economics, Liu Yuanchun: ① In the current complex and deteriorating overall international environment, our foreign trade will increasingly bear external pressure. Because the global trade growth rate has declined throughout the year, South Korea, Vietnam, and India have also experienced a negative growth rate of over 10% in foreign trade. Our exports increased by 3.7% in the first half of the year, demonstrating the resilience of our economic development, but it will definitely come under pressure.

② Of course, we have also taken many measures at present, such as the depreciation of the RMB in the first half of the year, and our measures to promote foreign trade are gradually improving. More importantly, in the "new three types" represented by electric passenger cars, lithium batteries, and solar cells, our new foreign trade competitiveness and the improvement of new export industries can greatly alleviate this pressure in the second half of the year.

How to view the issue of unemployment among young people

How to solve the employment problem?

Macroeconomist and President of Shanghai University of Finance and Economics Liu Yuanchun: ① Currently, the high unemployment rate among young people is due to a combination of structural, cyclical, and systemic reasons. Simply using countercyclical policies is not enough to solve the problem of unemployment among young people.

② However, at present, stabilizing growth and protecting the main body to ensure employment is still a very important means.

③ In addition, due to the record high number of college graduates this year and the delay in employment due to the three-year pandemic, we will continue to adopt some structural policy measures to specifically address the issue of unemployment among young people.

④ At present, everyone will see that the overall employment situation is gradually improving, especially with our further support policies, which will also have a further stabilizing effect. The recovery of our service industry will further promote the resolution of employment issues. If we stabilize the real estate industry, especially the construction industry, and provide certain support to the foreign trade industry, I believe that by the autumn of this year, the unemployment rate will significantly decrease.

The national economy recovered and improved in the first half of the year

What are the better expectations for the second half of the year?

Macroeconomist and President of Shanghai University of Finance and Economics Liu Yuanchun: ① The first expectation is that in terms of national policies, a comprehensive and systematic plan will be introduced to address some of the difficulties faced in stabilizing growth, employment, and risk control, in order to hedge against the current cyclical and structural pressures. In addition, targeted policies should be introduced to promote economic recovery, especially in the repair of the three balance sheets.

② We need to continuously upgrade the industrial structure and increase investment in technological innovation, in order to bring fiscal and monetary policies back to the positioning determined at the Central Economic Work Conference at the beginning of the year.