Stable Economic Recovery and New Development Opportunities
The sudden Covid-19 outbreak earlier this year has had an unprecedented impact, bringing a sharp increase in the risks and challenges faced by China. Confronted with this severe and complex situation, under the strong leadership of the CPC Central Committee with Xi Jinping at its core, the whole country has worked together to overcome difficulties by quickly launching an all-out people's war against the epidemic. Every region and sector has conscientiously implemented the decisions of the CPC Central Committee and the State Council to resolutely curb the spread of the disease, promoted the comprehensive resumption of work and production and a return to normalcy in our work and lives, stepped up macro-policy support by means of counter-cyclical adjustments, and struggled against adverse consequences of the pandemic. In so doing, significant results were achieved in overall planning of coronavirus control as well as economic and social development efforts, and the economy has rebounded from the downturn, displaying its characteristic resilience and abundant potential.
Nevertheless, there is growing uncertainty in the international environment, while the foundations of China's recovery have yet to be firmly consolidated. In the second half of this year, we must adhere strictly to our objective of building a moderately prosperous society, steel ourselves for a long-term fight against the virus, stabilize the six fronts (employment, finance, foreign trade, foreign investment, domestic investment, and market expectations), guarantee the six priorities ( job security, basic living needs, interests of market entities, food and energy security, stable industrial and supply chains, and the smooth functioning of grassroots government), and do everything in our power to protect people's livelihoods, assist enterprises, shore up deficiencies, vigorously promote reform, and strive to complete our annual economic and social development targets.
I. Outstanding results in controlling the coronavirus epidemic and developing the economy
The outbreak of Covid-19 in early 2020 severely threatened people's lives and health and had an enormous impact on China's economic operations. In response to the test posed by the epidemic, the CPC Central Committee upheld its view that the people and life itself were of supreme importance, which led it to adopt the most comprehensive, strictest, and most thorough control measures, to issue timely major policies on epidemic control and economic and social development, and to make comprehensive arrangements to stabilize the six fronts and guarantee the six priorities, thus protecting the lives of the people while facilitating stability and a rebound in the economy.
Increased macro-policy mitigation efforts and an economic rebound
All regions and sectors have fully implemented the government's proactive fiscal policy, prudent monetary policy, and policy of prioritizing employment, implemented macro-policies to help businesses through difficulties and stimulate market vitality, and worked hard to stabilize our economic fundamentals, bringing about a stable recovery of the national economy. According to preliminary data, in the first half of the year, China's GDP fell by 1.6% year-on-year, reducing the downward trend by 5.2 percentage points compared to the first quarter. Economic growth switched from negative to positive in the second quarter, highlighting China's economic resilience, considerable room to maneuver, and policy effectiveness. During the quarter, GDP growth went up by 3.2% compared to the same period last year and was up 10 percentage points on the first quarter. Value added of large industrial enterprises increased 4.4%, while value added of the service industry increased 1.9%. In June, value added of large industrial enterprises was up 4.8% compared with the same time last year, marking three consecutive months of growth. The Service Industry Production Index increased by 2.3%, with two months of consecutive growth. Given that China is a large developing country with a population of 1.4 billion, it is commendable that we have been able to bring the virus under control so quickly and effectively, stabilize and restart the economy, and maintain overall social stability.
Striving to stabilize employment and protect livelihoods to keep society stable
Faced with mounting employment pressures, all regions and departments have simultaneously alleviated people's burdens, stabilized jobs and expanded employment, provided employment assistance to key groups, and worked together to support flexible employment. The employment base remains stable, which has given people a real sense of hope. In June, the nationwide surveyed unemployment rate in cities and towns was 5.7%, a decrease of 0.2 percentage points compared to the previous month, having declined for two consecutive months. In the first half of the year, 5.64 million new urban jobs were created, representing 62.7% of the annual target.
Agricultural production has progressed steadily, and this year has seen another bumper harvest of summer grain, with output reaching a record high of 142.8 million metric tons. Pig farming has gradually recovered, and prices have stabilized. In the first half of the year, consumer prices rose by 3.8% year-on- year, 1.1 percentage points lower compared to the first quarter, as prices of most products in the "vegetable basket," a term referring to non-staple food, continued to fall.
The development of key industries has been ensured to keep supplies of coal, electricity, oil and gas stable and secure. In the first six months of the year, output of key resources increased compared to the same period last year, including coal (0.6%), crude oil (1.7%), pig iron (2.2%), steel (2.7%), ten types of non-ferrous metals (2.9%), and natural gas (10.3%).
Protection and relief efforts for people's wellbeing have been increased. The basic pension for retirees was raised, the per capita government subsidy for basic health insurance for non-working residents was raised, and the temporary price subsidy standard was raised in stages. In the first half of the year, national per capita income from social assistance and subsidies increased 13.2% compared to last year, while per capita income from policy-related living subsidies increased 13.1%.
A construction worker works on the Mengzhou Yellow River Bridge, Henan Province, June 20, 2020. China's economic growth turned from negative to positive in the second quarter of this year, demonstrating that the Chinese economy is resilient with ample room to maneuver, and that comprehensive measures have been effective. PHOTO BY XINHUA REPORTER HAO YUAN
Shoring up weaknesses and making solid progress in the "three critical battles"
In response to the difficulties of finding employment and increasing incomes and the rising risk of poverty-stricken areas relapsing into poverty as a result of the epidemic, the government has increased targeted assistance to decisively alleviate and defeat poverty. It has also strengthened efforts to control pollution in its ongoing battle to keep our skies blue, our waters clear, and our land pollution-free, and taken steps to guard against systemic financial risks. In the first half of this year, the government made solid progress in poverty alleviation, essentially resolved issues related to the "three guarantees" (guaranteed compulsory education, basic medical care and safe housing) and drinking water safety, and basically finished its tasks of poverty alleviation through relocation. As of June 30, 22 provinces in the central and western regions had launched 409,000 poverty alleviation projects, with an operating rate of 95.2%, and 28.3 million poor migrant workers from 25 provinces, had been employed elsewhere, exceeding the total number of migrant workers last year.
The ecological environment continues to improve, and people are enjoying more blue skies and clear waters. In the first half of the year, the proportion of days with good air quality in 337 cities at or above the prefecture level increased by 4.9% year-on-year. Of the 1,940 national surface water assessment stations, the proportion of stations reporting good water quality (categories I-III) increased by 5.6%.
Innovative monetary policy tools have been used to direct funds to the real economy, so as to rapidly grow credit and bring overall stability to the financial market. At the end of June, the M2 broad money supply balance increased 11.1% year-on-year, 1 percentage point faster than at the end of March. In June, stock trading volume increased 33.4% year-on-year.
People on an evening stroll take in the enchanting sight of Zhengding Ancient Town lit up with neon lights, June 3, 2020. While implementing regular prevention and control measures, Zhengding County in Hebei Province has allowed vendors operating in tourist areas and on the street side to open up their stalls, in a continued effort to keep the ancient town's nighttime economy thriving. XINHUA / PHOTO BY ZHANG XIAOFENG
Transforming and upgrading the economy and developing new industries and drivers
We have continued to prioritize supply-side structural reform and offered considerable support to enterprises to help them respond to the situation, seek opportunities amid the crisis, respond to the impact of Covid-19, and accelerate the replacement of old growth drivers with new ones. There is an obvious trend toward high-end industries, and in the first half of the year the added value of high-tech manufacturing increased by 4.5% year-on-year, accounting for 14.7% of the added value of large industrial enterprises, an increase of 0.9 percentage points over the same period last year. Emerging industries such as smart manufacturing and new energy have developed. In the first half of this year, the output of service robots, urban rail vehicles, and charging units for cars increased by 20.9%, 13.0%, and 11.9% respectively. Investment in high-tech industries also increased in the first six months of the year by 6.3% year-on-year, and construction started on a number of new infrastructure and new urbanization initiatives and major projects, such as 5G and data centers.
The information economy, network economy, and digital economy are thriving. In the first half of the year, the added value of the information transmission, software, and information technology service industries increased 14.5% year-on-year, and cumulative mobile Internet traffic increased 34.5%. New approaches such as e-commerce through live streams have proved extremely popular as online consumption continues to thrive, and demand has increased rapidly for telecommuting and online education. In the first half of the year, online retail sales of physical goods increased by 14.3% year-on-year, accounting for 25.2% of total retail sales of consumer goods.
Expanding domestic demand and unleashing market potential
We have adhered to the strategy of expanding domestic demand as an important measure to mitigate the effects of Covid-19, promoted consumption incentives and the unleashing of potential, accelerated consumption growth in new areas, and used the key role of investment in stabilizing growth and structural adjustments. In the first six months of this year, total retail sales of consumer goods fell 11.4% year-on-year, reducing the downward trend by 7.6 percentage points compared to the first quarter, with four consecutive months experiencing slower downward trend. Retail sales of sports and entertainment products and communication equipment by enterprises each with an annual revenue over 20 million yuan increased by 6.1% and 5.8%, respectively. In line with the requirement that factors such as land and funding follow specific projects, the contribution of investment to economic growth increased significantly. In the first half of the year, fixed asset investment (excluding that by rural households) fell 3.1% year-on-year, cutting the downward trend by 13 percentage points compared to the first quarter, with four consecutive months of lessening the downward turn. In the second quarter, the role of fixed capital formation in driving economic growth increased significantly. We have made full use of supporting policies, such as export tax rebates, export credit insurance, and export credits to help foreign trade enterprises guarantee orders and the sales, which has resulted in a better-than-expected foreign trade situation. In the first half of the year, the total value of imports and exports (denominated in RMB) fell 3.2% year-on-year, cutting the downward trend by 3.3 percentage points compared with that in the first quarter. In June, the value of exports increased by 4.3% year-on-year, and the value of imports increased by 6.2%. For the first time this year, both imports and exports grew.
Strengthening micro-economic activity and continuously improving market expectations
We have continued our reform to streamline administration and delegate power, improve regulation and upgrade services; improved the business environment; strengthened assistance for companies by issuing 90 targeted and timely policies and measures in eight areas; thoroughly and effectively implemented various policies to support businesses, particularly small and micro businesses and self-employed individuals, so as to help them overcome difficulties. Thanks to the gradual effect of a package of policies, cost pressures of enterprises have eased, their production and operational situations have improved, and market expectations are better overall. In June, growth in profits of large industrial enterprises increased 11.5% year-on-year, with a positive increase for two consecutive months. In June, the Manufacturing Purchasing Managers' Index (PMI) was 50.9%, and the Non-Manufacturing Business Activity Index was 54.4%, with both remaining above their thresholds for four consecutive months.
The international community is optimistic about China's economic development prospects, and foreign investors are confident about investing and operating in China. The International Monetary Fund (IMF) recently predicted that China's economy will grow by 1% this year, making it the only country among the world's major economies to achieve positive growth. In June, China's actual utilization of foreign capital (denominated in RMB) increased 7.1% year-on-year, with positive growth for three consecutive months.
II. Increased international and domestic challenges and new opportunities amid the crisis
It should be soberly noted that China's main economic indicators were in negative territory for the first half of this year, and the losses caused by Covid-19 have not yet been fully recovered. The virus is still spreading rapidly overseas, which means there is greater external instability and uncertainty. Added to this, China is suffering from insufficient domestic demand and difficulties in the real economy. Nevertheless, there are opportunities amid the crisis, and challenges breed motivation. China's economy is stable and improving, and the fundamentals for long-term growth remain. As such, we possess solid foundations and good conditions for promoting economic stability over the long term.
A more complex international environment but with opportunities amid great changes
The coronavirus pandemic is still worsening around the world, while trade protectionism and anti-globalization are on the rise, which mean that the prospects for a global economic recovery remain bleak. The IMF predicts that the global economy will shrink by 4.9% this year, and the WTO expects global merchandise trade to fall around 18.5% in the second quarter of this year. The pandemic has led to international cooperation in the fields of medicine and health, the digital economy, etc., which will accelerate China's development through the new round of scientific, technological, and industrial transformation. Amidst the process of bringing Covid-19 under control, cooperation under the Belt and Road Initiative has made headway, creating new room for China's economic development. In particular, the fact that China is the first country to curb the spread of the coronavirus and the first to stabilize its economy has put us in a position to better use global factors of production and resources and to promote the recovery of the world economy.
Demand and consumption recovery being slower than production and investment but development vitality on the rise
As a result of efforts to control the coronavirus outbreak, demand-side recovery is lagging and household consumption has been slow to recover. In the first half of this year, consumption expenditure per capita fell 9.3% compared to the same period last year. The coronavirus pandemic has led to continued growth in online consumption, accelerating online and offline integration and rise in the sharing economy and the platform economy. In response to deficiencies in public health and emergency equipment reserve exposed by the pandemic, we have accelerated efforts to shore up weaknesses, stepped up the construction of new infrastructure, and further consolidated our development foundations.
Ongoing difficulties for business but greater resilience among market players
In the first six months of this year, business operations improved, but losses caused by the coronavirus were still significant, with many companies experiencing falling profits and small and micro enterprises facing significant production and operational pressures. From January to June, the total profits of large industrial enterprises (referring to those each with an annual revenue over 20 million yuan) fell 12.8%. In June, the PMI for small businesses was 48.9%, which was below the threshold. In response to the difficulties of enterprises, all regions and departments have implemented policies to help enterprises through their difficulties, further streamlined administration and delegated powers, encouraged entrepreneurship and innovation, and protected and energized market entities as much as possible. In addition, companies have accelerated transformation and upgrading and adopted innovative production and marketing methods, thus avoiding large-scale bankruptcies. In the first half of this year, the average number of new companies established daily reached 20,000, demonstrating the strong resilience of market players under different types of ownership.
Greater employment pressure on key groups but jobs created by the economic recovery
Employment is generally stable at present, but migrant workers and college graduates face definite employment pressures, which cannot be ignored as the graduation season arrives. In June, the nationwide surveyed unemployment rate for persons aged 20-24 with a college degree was 19.3%, an increase of 2.1 and 3.9 percentage points compared to the previous month and the same period last year, respectively. In response, we are vigorously implementing an employment priority policy, and as our economic operations stabilize and rebound, demand for employment among enterprises is expected to increase. New employment channels in various localities, innovative methods of revitalizing the job market, independent entrepreneurship, and flexible employment practices are all increasingly important means of boosting employment and play an important role in guaranteeing employment stability.
The goals of poverty alleviation and building a moderately prosperous society within reach
Defeating poverty is a landmark task and a decisive battle in building a moderately prosperous society in all respects. At the end of February 2020, there were still 52 counties and 2,707 villages in China that had not been lifted out of poverty, leaving millions of registered poor people living in extreme poverty. Although this number is not very large nationally speaking, it represents the hardest nut to crack in fighting poverty. Moreover, the coronavirus epidemic presents new challenges to poverty alleviation efforts, so our remaining poverty alleviation tasks are arduous. In general, decisive progress has been made in building a moderately prosperous society in all respects. Presently, all regions and departments are making every effort to launch the final battle against poverty, with the focus on deeply impoverished areas.
III. Strengthening confidence and implementing policies to ensure completion of annual targets
This is the final year for completing the plan to build a moderately prosperous society in all respects as well as the 13th Five-Year Plan period. Overcoming the effects of the coronavirus epidemic and promoting sustained and healthy economic and social development are crucial to their completion.
Countering the pandemic while ensuring development to promote a sustained and stable economic recovery
We need overall planning to put in place long-term measures to control the coronavirus and build on the success we have achieved thus far, as well as to ensure economic and social development. This requires the government to better implement macro-economic policies, adopt more proactive fiscal policies, make its prudent monetary policies more flexible, strengthen policy coordination, pay close attention to the implementation of policies to achieve practical results, and create development synergies.
Stabilizing employment and protecting people's livelihoods
A worker puts in extra hours to fill an order for export at an electronics company in Guanhaiwei Town, Cixi, Zhejiang Province, July 23, 2020. China registered positive growth of both imports and exports for the first time this year in the month of June, with year-on-year growth of 6.2% for imports and 4.3% for exports. PEOPLE'S DAILY / PHOTO BY ZHANG YONGTAO
We must help people in need to overcome difficulties so as to ease their burdens. Employment is vital to people's wellbeing, and creating jobs is a primary task in stabilizing a country's economic fundamentals. We must strengthen the employment-first policy with comprehensive measures, adopt targeted measures to stabilize and expand employment, focus on ensuring employment among key groups, and take a multi-faceted approach to increasing personal income. We must increase investment in compulsory education, basic medical care, housing, safe drinking water, childcare, and eldercare and continue to improve basic public services. We also need to take comprehensive assistance measures such as social insurance, social assistance, and social welfare to ensure that people's basic needs are met.
Achieving progress in the three critical battles and a decisive victory in building a moderately prosperous society
The key to achieving a moderately prosperous society in all respects is shoring up weaknesses. As such, we need to focus on poverty alleviation efforts in deeply impoverished areas including the three regions (the Tibet Autonomous Region, four Tibetan-inhabited provinces, and four prefectures in southern Xinjiang Uyghur Autonomous Region) and three prefectures (Liangshan Yi Autonomous Prefecture in Sichuan Province, Nujiang Lisu Autonomous Prefecture in Yunnan Province, and Linxia Hui Autonomous Prefecture in Gansu Province) and intensify efforts to reduce poverty by developing local industries, increasing employment, and boosting consumption. We will work quickly at these tasks in order to achieve a decisive victory in the battle to build a moderately prosperous society in all respects. We will intensify environmental protection by focusing on controlling sources of pollution, and continue to fight to keep our skies blue, our waters clear, and our land pollution-free. We will take necessary measures to guard against problems arising and stave off systemic financial risks.
Helping businesses overcome difficulties and achieving development to stabilize market entities
Stabilizing China's hundreds of millions of market entities is essential to protect employment and people's livelihoods. Proactive policies, such as tax cuts and cost reductions, are needed to help enterprises, particularly micro, small, and medium-sized businesses and self-employed individuals, overcome difficulties, sustain themselves, and achieve future success. We need to enhance the quality and efficiency of financial services for the real economy and guide the financial system to transfer profits to the real economy. We must support the transformation and development of enterprises and guide and assist the upgrading and transformation of businesses through technological transformation and reorganization. We must also promote entrepreneurship and foster a cordial and clean relationship between government and business.
Making great efforts to promote consumption, expand investment, stabilize foreign investment, and unleash potential demand
We need to seize the advantages of having large domestic demand and a complete industrial chain. We should better utilize both domestic and international markets and resources, avail ourselves of our enormous domestic market, and gradually create a new development paradigm dominated by our domestic market but in which domestic and international markets are mutually reinforcing. We must promote the optimization and upgrading of commodity consumption, encourage expansion and improved quality in service consumption across the board, and accelerate the cultivation of new forms of consumption. Our focus should be on supporting new infrastructure and new urbanization initiatives as well as major projects, expanding applications of 5G, building data centers, and continuing to transform aging urban community facilities. We should strive to promote quality and efficiency in foreign trade, open international freight channels, and cultivate new foreign trade growth points.
Persisting in reform, opening up, and innovation to improve the quality of our development
Promoting the sustained and healthy development of China's economy requires quantitative accumulation and qualitative breakthroughs. Without quantitative growth, economic development lacks a foundation; without qualitative improvement, it is difficult to improve economic and social benefits and efficiency. We must, therefore, continue to carry the reform to a deeper level, expand opening up, and promote innovation to encourage high-quality economic development. We must also utilize the salient and leading role of reforms, accelerate the transformation of our economic growth model and industrial transformation and upgrading, and hasten the cultivation of new drivers of economic growth, in order to encourage rational quantitative growth and steady qualitative improvements in the economy.
Ning Jizhe is Vice Minister, the National Development and Reform Commission, and Commissioner and Secretary of CPC Leadership Group, the National Bureau of Statistics.
(Originally appeared in Qiushi Journal, Chinese edition, No. 15, 2020)