Focus Interview | Half Year Report: China's Economic Recovery and Positive Contribution Rate | Growth | Economy

The Chinese economy has already gone through the first half of 2023. Compared to the ups and downs experienced in the same period last year, what achievements has the Chinese economy made in the first half of this year? On the morning of the 17th, the National Bureau of Statistics released some important economic data, including the growth rate of gross domestic product. What is the trend of China's macroeconomic recovery growth? What are the highlights? What potential still needs to be better explored?

On July 17th, 2023, the semi annual report of China's economy was released. In the first half of this year, China's gross domestic product was 59303.4 billion yuan, a year-on-year increase of 5.5%. From a quarterly perspective, the first quarter saw a year-on-year growth of 4.5%, while the second quarter saw a year-on-year growth of 6.3%.

Fu Linghui, spokesperson for the National Bureau of Statistics and Director of the National Economic Comprehensive Statistics Department of the National Bureau of Statistics: In the first half of this year, with the comprehensive recovery of normal economic and social operations, the overall economic operation showed a trend of recovery and improvement, with major indicators showing some improvement. In the first half of the year, the economy grew by 5.5% year-on-year, significantly accelerating from the 3% growth rate of the entire year last year. In June, the national urban survey unemployment rate was 5.2%, which is close to the pre epidemic urban survey unemployment rate level, and residents' income has also maintained rapid growth. In the first half of this year, the quality of development has significantly improved, manifested in the continued optimization of the economic structure and the steady expansion of new driving forces.

5.5% is the result of the release of various accumulated demands in the early stage, the effective implementation of various policy measures, and the combined effect of factors such as a lower base in the same period last year. In the process of restorative growth, the growth rate of the consumer and service industries rebounded significantly in the first half of this year, becoming a major highlight.

Taking the Dragon Boat Festival holiday as an example, this small and long holiday has made the tourism market as hot as many cities. The average daily passenger flow of a marine park in Shanghai during the Dragon Boat Festival holiday increased by more than 100% year on year, and folk experience projects such as Zongzi, cinnabar lighting, and fan painting are particularly popular.

Take an aurora trip to Mohe, Heilongjiang, enjoy a ten mile long street banquet in Taizhou, Zhejiang, and go to Shennongjia, Hubei to cool off... This year's Dragon Boat Festival holiday, 106 million domestic tourists have traveled nationwide, which has recovered to 112.8% of the same period in 2019 according to comparable standards, becoming the "hottest" Dragon Boat Festival in recent years. Overall, in the first half of this year, the total number of domestic tourists was 2.384 billion, a year-on-year increase of 63.9%, and the domestic tourism revenue increased by 95.9%.

Not only in the tourism market, but also in the first half of this year, the catering industry accelerated its recovery, providing strong support for the recovery and expansion of consumption; The express delivery business volume exceeded 60 billion pieces, more than 5 months ahead of reaching this quantity in 2019. Whether it's fresh lychees, big cherries, or ice cream that needs to be refrigerated, it can be quickly delivered to consumers through new technologies, equipment, and increasingly dense express delivery networks, helping to restore consumption.

In order to better stimulate consumption potential and provide consumers with richer and fresher experiences, various regions have continuously launched new consumption formats, models, and scenarios since the beginning of this year. A leisure space transformed from an old commercial center in Beijing, Jiucheng is now sold as a China-Chic brand, and skateboard parks and sky light basketball courts have also been introduced, attracting many young people.

Guo Liyan, Director of the Comprehensive Situation Research Office of the China Academy of Macroeconomics, said that a package of "combination punches" have been launched from the central to local governments to promote consumption, improving the consumption environment from both supply and demand sides and increasing high-quality consumption supply. A lot of work has been done to expand the release of purchasing indicators for energy-saving vehicles, promote green products, and unify green labeling, which has led to a significant expansion in the consumption of green consumer goods, energy-saving and environmentally friendly low-carbon products, all of which have a direct driving effect on expanding consumption.

In the first half of this year, the total retail sales of consumer goods reached 2275.88 billion yuan, a year-on-year increase of 8.2%.

Fu Linghui: This year, the growth of consumption has significantly increased its impact on the economy. In the first half of the year, the contribution rate of final consumption expenditure to economic growth reached 77.2%, making it the largest driving force among the three major demands. From a structural perspective, it mainly exhibits several characteristics: firstly, the growth rate of service consumption is relatively fast, with consumption of tourism, transportation, accommodation, and catering maintaining a rapid growth; The second aspect is that commodity consumption is also continuing to expand, with sales of upgraded sports and cultural goods, gold, silver, and jewelry maintaining double-digit growth, indicating a sustained trend of consumption upgrading; The third aspect is that the new driving force of consumption is continuously expanding, manifested in the rapid growth of sales of green and intelligent products.

However, there is still a certain imbalance in the current process of consumer recovery, such as the recovery of bulk consumption such as household appliances still lagging behind cluster and contact consumption.

Fu Linghui: In recent years, due to the impact of the epidemic, residents' income has been affected to a certain extent, which has correspondingly affected their consumption of commodities. In the next stage, the key to promoting the expansion of consumption is to do everything possible to increase household income. Secondly, we need to improve the consumption environment, and thirdly, we need to actively cultivate and expand new consumption. For example, the field of new energy vehicles is actively promoting the development of new energy vehicles in rural areas, strengthening the construction of related supporting facilities, and creating favorable conditions for further expanding and forming new consumption growth points.

With the comprehensive restoration of normal economic and social operation, the growth of the service industry has significantly accelerated, becoming a major highlight of economic operation in the first half of the year. In the first half of this year, the added value of the service industry increased by 6.4% year-on-year, contributing 66.1% to economic growth. Among them, the growth rate of contact and cluster service industries such as accommodation and catering, transportation, etc. has rebounded significantly, and the modern service industry has maintained rapid growth. The new driving force for the development of the service industry has also been continuously strengthened.

Fu Linghui: In the first half of the year, the added value of information transmission software and information technology services increased by more than 10% year-on-year. This has enhanced the driving force of modern service industries, and the growth of business services such as tourism and exhibition is also accelerating. New driving forces, especially those represented by technological services, are accelerating their growth.

In industrial production, the performance of equipment manufacturing industry is particularly impressive. In the first half of this year, the added value of the equipment manufacturing industry increased by 6.5% year-on-year, 2.7 percentage points faster than all industries above designated size.

Guo Liyan: Among them, sectors such as automobiles, railways, ships, and general machinery have a significant driving force on industrial added value. The characteristics of this type of equipment manufacturing industry are a relatively long industrial chain, strong upstream and downstream driving and radiation capabilities, which reflects the relatively complete industrial system and strong supporting capabilities of China's manufacturing industry. Especially in recent years, with the increase of industry concentration, the system integration capabilities of major leading enterprises and chain owners have been continuously enhanced, which has helped to enhance the competitiveness of the entire equipment manufacturing industry.

With the continuous promotion of industrial upgrading in our country, the production of new energy, new materials, and high-tech products has also continued to grow rapidly. In the first half of this year, the production of solar cells, new energy vehicles, industrial control computers and systems increased by 54.5%, 35.0%, and 34.1% respectively. Investment in high-tech industries increased by 12.5%, laying a solid foundation for China to build a modern industrial system and promote high-quality development.

The continuous recovery of industrial production has laid the foundation for improving corporate profitability. From January to May this year, the total profit of industrial enterprises above designated size nationwide decreased by 18.8% year-on-year, but the decline continued to narrow.

Guo Liyan: The current improvement in profits of industrial enterprises is due to the transformation and upgrading of traditional industries, as well as the continuous enhancement of new driving forces on new tracks, resulting in operational results. We also need to objectively and dialectically view the current profit situation of industrial enterprises. Currently, some export-oriented labor-intensive industries are facing cost pressures and the external environment is still complex. Next, we need to focus more on stabilizing the production of the entire manufacturing industry, whether it is stimulating high-end momentum or providing relief and assistance to labor-intensive industries in the middle and low end, in order to steadily promote the improvement of industrial enterprise profits.

Since the beginning of this year, the global economic recovery has been weak, and overall external demand has been weak. Faced with the severe external situation, China has successively introduced a series of policies to promote stable scale and optimized structure of foreign trade. In the first half of this year, China's foreign trade import and export increased by 2.1% year-on-year. Although the growth rate slowed down, the scale exceeded 20 trillion yuan for the first time in the same period in history, reaching a new high.

At the same time, China has also become a hot spot for foreign investment. Since the beginning of this year, many high-level executives from multinational corporations such as Tesla, Procter&Gamble, and Siemens have visited China to inspect the market, increase capital and expand production, sending a clear message of optimism about the Chinese economy and continuing to deeply cultivate the Chinese market.

In the first five months of this year, the actual amount of foreign investment used nationwide was 574.81 billion yuan; 18532 new foreign-invested enterprises were established, a year-on-year increase of 38.3%. Against the backdrop of sluggish global economic growth, foreign investment has cast a vote of confidence in the Chinese economy through practical actions.

Guo Liyan: Through research, we have found that there are more new projects landing and more high value-added links entering the Chinese market, including some intelligent and digital emerging products being negotiated for mass production and landing in relevant regions of China. This series indicates that foreign investment is currently more optimistic about the accelerated release of the potential of the Chinese market, and is closely related to the relatively complete industrial system, strong supporting capabilities, and the accelerated transformation and upgrading of the manufacturing industry in recent years in our country.

Overall, since the beginning of this year, under the complex and severe external environment, China's economy has continued to rebound and show tremendous development resilience.

Currently, China is in a critical period of economic recovery and industrial upgrading, but the foundation for recovery is not yet stable. Faced with issues such as insufficient total demand, imbalanced economic recovery, and the need to enhance endogenous momentum, we still need to focus on implementing a combination of policies in the second half of the year. Not long ago, multiple departments spoke out intensively, outlining the policy priorities for stabilizing the economy in the next step from expanding investment, restoring and expanding consumption, and increasing support for technological innovation.

Guo Liyan: Looking ahead to the whole year of this year, I believe that the key to further enhancing endogenous driving force is to place more emphasis on expanding domestic demand, especially promoting consumption recovery, so that a package of macro, medium, and micro regulatory policies can form a "combination punch" and maximize policy effectiveness. At the same time, it is necessary to increase efforts to clean up hidden barriers in the admission and business approval process that have been prominently reflected by enterprises, in order to further unleash the micro kinetic energy and vitality of business entities.

Fu Linghui: In the next stage of promoting sustained economic growth, we must first focus on expanding domestic demand and enhancing endogenous economic momentum. Secondly, we need to accelerate the pace of innovation, promote the transformation of old and new driving forces, and gradually return the economy to high-quality development and achieve new results. Finally, promoting economic development also requires attention to safeguarding people's livelihoods, especially expanding employment and increasing household income to form a virtuous economic cycle. Only in this way can economic development truly shift from high growth in the past to high-quality development.

At the end of the first half of the year, the Chinese economy showed a clear trend of recovery and improvement. The long-term fundamentals have not changed, but in the short term, there are still many risks and challenges to achieve the transition from recovery growth to expansion growth. We need to better leverage policy cooperation, identify pain points, clear bottlenecks, and make greater efforts in transforming modes, adjusting structures, and increasing momentum to continuously promote high-quality development of the Chinese economy.

Editor | Tu Zhijuan and Gao Qi

Camera | Fu Peng

Editing | Zhao Yunlong and Tong Yongjie