China's Economy Is Steadily Recovering and Continuing to Show Resilience
In the first three quarters of 2020, confronted with the immense shock and grave and complex domestic and international conditions brought by the Covid-19 pandemic, the CPC Central Committee with Xi Jinping at its core acted with foresight and exercised overall coordination, putting forward the policy of integrating efforts of epidemic response with economic and social development. Thanks to the hard work of the entire nation, China has achieved major strategic success in containing the epidemic, while its economic development is on a steady path to recovery. In the first three quarters of the year, economic growth went from falling to rising, the supply and demand balance gradually improved, market vitality constantly increased, employment and living standards were supported with strong guarantees, and social stability was maintained. We brought about achievements in development that captured the attention of the world, thus laying solid foundations for reaching the goal of building a moderately prosperous society in all respects.
I. The national economy has gradually recovered, through coordination and correct decision-making.
Faced with the unprecedented challenge posed by the Covid-19 pandemic, the CPC Central Committee led by Xi Jinping made response efforts in coordination with economic and social development, and devoted intense focus to getting work and life back to normal. As a result, despite tremendous challenges, China's economy has achieved a steady and sustained recovery.
The economic outlook has picked up.
Main economic indicators fell precipitously in the first quarter, with GDP registering a year-on-year decrease of 6.8%, fixed asset investment dropping by 16.1%, and total retail sales of consumer goods falling by 19%. Indicators stabilized in the second quarter, with GDP increasing 3.2%, total retail sales of consumer goods falling 3.9%, and fixed asset investment for the first half of the year dropping 3.1% compared to the previous year. In the third quarter, indicators showed steady recovery, with GDP growth of 4.9%, total retail sales of consumer goods increasing by 0.9%, and fixed asset investment for the first three quarters rising by 0.8%.
The Meizhou cross-sea bridge of the Fuzhou-Xiamen high-speed railway under construction, October 20, 2020. In the face of severe challenges this year, China has devoted intense focus to the key strategic objective of expanding domestic demand. Efforts to restructure investment and remedy shortcomings have yielded notable results. PEOPLE'S DAILY / PHOTO BY JIN WEI
The supply-demand balance has improved.
Industry recovered first, while the service sector followed. Growth of the value added of large-scale industries shifted to positive in April, and the Service Industry Production Index showed positive growth in May. Next, investment recovered, while consumption improved afterward. Growth in fixed asset investment went up in April, and total retail sales of consumer goods grew in August. Upstream industries recovered, followed by gradual recovery in downstream industries. Year-on-year growth of the value added of large-scale equipment manufacturing shifted to positive in April, and the value added of consumer goods manufacturing went from falling to rising in September. Lastly, medium and large-sized enterprises bounced back first, while small-sized enterprises recovered gradually. In September, the manufacturing PMI of small enterprises was 50.1%, rising into the expansion range for the first time since June.
Quality and productivity have risen.
With solid progress in resuming work and production, the economy has gradually returned to normal. In the third quarter, the national industrial capacity utilization rate reached 76.7%, 2.3 percentage points higher than in the second quarter, and has now recovered to a high level relative to recent years. Policies designed to help businesses have shown positive results, with the performance of enterprises continuing to improve. In September, large-scale industrial enterprises registered profit growth of 10.1% compared to the previous year, marking the fifth consecutive month of positive growth.
Young people of the Dong ethnic minority promote local specialty agricultural products via live stream at Duoye Plaza, Sanjiang Dong Autonomous County, Guangxi Zhuang Autonomous Region, October 17, 2020, which marked the seventh National Poverty Relief Day. PEOPLE'S DAILY / PHOTO BY WU LIANXUN
China's economic outlook is optimistic.
The world's main economies are in severe recession. The United States, the Eurozone, and Japan saw year-on-year GDP drops of 9%, 14.8%, and 9.9%, respectively, in the second quarter, while UK firm Consensus Forecasts projected third quarter drops of 4.6%, 7.3%, and 6.8%, respectively. The International Monetary Fund recently predicted that the global economy will shrink by 4.4% in 2020. China is leading the world in terms of both pandemic response and economic recovery, which demonstrates that the Chinese economy has the strength to withstand shocks, powerful restorative capacity, and abundant vitality.
II. The four main macroeconomic indicators are showing steady improvement, through precise implementation of macro policies.
This year, China has stepped up overall macro policy planning and cross-cycle design. This has led to the creation of new methods for macro policy implementation, and made fiscal policy more impactful. With an emphasis on real results, monetary policy has become more flexible and appropriate, while through a focus on precision, the policy of prioritizing employment has been bolstered across the board. A whole raft of macroeconomic policies have proven forceful and effective and yielded distinct results, and the four main economic indicators have shown persistent recovery.
Economic growth went from negative to positive.
According to preliminary assessments, China's GDP for the first three quarters was 72.28 trillion yuan, up 0.7% over the same period the previous year, while there was a 1.6% drop for the first half of the year. Growth in all three sectors of the economy turned positive, with the primary sector growing by 2.3%, the secondary sector by 0.9%, and the tertiary sector by 0.4%.
Employment has remained stable on the whole.
In the first three quarters, 8.98 million new urban jobs were added, meaning the goal of adding 9 million jobs over the course of the entire year was essentially complete. In July, August, and September, the national urban surveyed unemployment rate was 5.7%, 5.6%, and 5.4%, respectively, showing a steady drop.
The rise of prices has calmed down.
In the first three quarters, consumer prices rose 3.3% over the same period the previous year, with the rate of increase half a percentage point lower than in the first half of the year. The year-on-year increase in September was 1.7%, 0.7 percentage points less than the previous month.
The balance of payments has improved.
In the first three quarters, China had a surplus of 2.31 trillion yuan for trade in goods. From January to August, the deficit in trade in service was 515.6 billion yuan, representing a reduction of 50.6% compared to the same period the previous year. At the end of September, China's foreign exchange reserves totaled US$ 3.14 trillion, remaining steadily above the US$ 3 trillion benchmark.
III. The three sectors of the economy have fully rebounded, through meticulous arrangements for resuming work and production.
Solid steps were taken to coordinate resuming work and production and meeting production targets throughout entire industrial chains. A total of 90 different policy measures covering eight areas were launched in a prompt, precise, and vigorous manner to help businesses overcome difficulties and achieve development and to enhance basic industrial capacities. As a result, growth in the three economic sectors has started to pick up again.
The agricultural industry is expecting a good harvest.
Increased output was achieved in both summer grain and early rice crops, while autumn grain production also appears positive. Good grain harvest figures are therefore expected for the year as a whole, with hope for output to remain above the 650 million tons mark for the sixth year running. Hog production capacity has continuously recovered, with stocks at the end of the third quarter 9% higher than at the end of the second quarter, and 20.7% higher than the same period last year.
Industry and construction have essentially returned to normal.
In the first three quarters, the value added of large-scale industrial companies (each with an annual revenue more than 20 million yuan) registered year-on-year growth of 1.2%, while the figure had dropped by 1.3% in the first half of the year. The value added of manufacturing grew by 1.7%, while it had dropped by 1.4% in the first half of the year. The value added of the construction industry grew by 2% in the first three quarters compared to the previous year, and fell by 1.9% in the first half of the year. In the third quarter, the value added of large-scale industrial and construction companies grew by 5.8% and 8.1%, respectively, compared to the same period the year before, and in September the value added of large-scale industry grew by 6.9%, exceeding the annual average of the previous year.
The service sector has recovered.
In the first three quarters, the value added of information transmission, software, and IT services grew by 15.9% compared to the same period of the previous year, 1.4 percentage points higher than in the first half of the year. The real estate sector grew by 1.6%, compared to a drop of 0.9% in the first half of the year. The transportation, storage, and postal industry contracted by 2.2%, but this was 3.4 percentage points less than in the first half of the year. The service sector's contribution to economic growth has risen. In the first three quarters, service sector growth contributed to 45.4% of economic growth, 12.8 percentage points higher than in the first half of the year.
IV. Prospects in the three major areas of demand have increasingly improved, through a focus on ensuring smooth economic flows.
China has zeroed in on the key strategic objective of expanding domestic demand, and spurred recovery in this regard. In addition, it has taken the major move of opening up to higher standards, and focused on keeping the fundamentals of trade stable. These efforts have resulted in continuous rebound in the three major areas of demand.
Cumulative growth of fixed-asset investment has shifted to positive.
In the first three quarters, fixed-asset investment grew 0.8% compared to the same period the previous year, registering positive growth for the first time this year. The role of investment in structural adjustment and remedying shortcomings was evident. In the first three quarters, investment in high-tech industry and the social domain was up 9.1% and 9.2%, respectively, compared to the same period last year, with these values 2.8 and 3.9 percentage points higher than they were in the first half of the year.
There has been a turn for the better in sales.
In the first three quarters, total retail sales of consumer goods fell 7.2% compared to the same period the previous year, but the drop was 4.2 percentage points less than in the first half of the year. Sales of communications equipment, sports and entertainment products, and cosmetics by enterprises with an annual revenue in retails over 5 million yuan grew by 7.2%, 6.8%, and 4.5%, respectively, while the trend toward consumption upgrading has been consistently consolidated.
The trade situation has been better than anticipated.
In the first three quarters, the total value of merchandise trade (calculated in RMB) grew by 0.7% compared to the same period the previous year, whereas it fell by 3.2% in the first half of the year. In the third quarter, merchandise trade was up 7.5% year-on-year, with 10.2% growth of exports and 4.3% growth of imports, marking new quarterly highs for both. External demand stabilized thanks to growth in exports of mechanical and electronic products shifting from negative to positive, as well as rapid growth in exports of anti-epidemic supplies. In the first three quarters, exports of mechanical and electronic products registered year-on-year growth of 3.2%, compared to a 2.3% drop in the first half of the year. Meanwhile, exports of seven main types of labor-intensive products including textiles and garments grew by 5.4%, with exports of textiles including masks growing by 37.5%.
An employee works to complete an order of products for export at Kerui Petroleum Equipment Co., Ltd. in the Dongying Hi-tech Zone, Shandong Province, September 16, 2020. Against the backdrop of precipitous drops in international trade and investment, China's total imports and exports of goods registered a year-on-year growth of 7.5% in the third quarter of 2020, with exports growing by 10.2% and imports by 4.3%. PHOTO BY XINHUA REPORTER LIU ZHIFENG
V. Striking results have been achieved in the three critical battles, through vigorous reinforcement of weak links.
China has intensified efforts on key fronts, working hard to soften the impact of the pandemic, fighting determinedly to keep its skies blue, waters clear, and land pollution-free, effectively guarding against major risks and hazards, and moving faster to remedy shortcomings and shore up weaknesses in the push to reach the goal of a moderately prosperous society in all respects.
Major progress has been achieved in the fight against poverty.
Efforts to provide oversight for anti-poverty initiatives in key areas that remain below the poverty line have been intensified, while basic assistance for the poor population has been enhanced. As of the end of September, there were 29.34 million poor migrant laborers from 25 provinces, 7.5% higher than the figure for the previous year. In the first three quarters, per capita disposable income among rural residents in the provinces of Sichuan, Guizhou, and Gansu, which have relatively large poor populations, grew by 8.6%, 8.1%, and 6.7%, respectively, in nominal terms compared to the same period the previous year, higher than the nationwide average.
A technician calibrates robotic equipment on a fully automated assembly line at Zhejiang GMT Automated Systems Co., Ltd., October 12, 2020. Since the CPC 19th National Congress, China has promoted the expansion of mass entrepreneurship and innovation. This has facilitated the effective concentration of resources for innovation, while new growth drivers are exhibiting tremendous vigor and dynamism. PEOPLE'S DAILY / PHOTO BY TAN YUNFENG
The environment has improved significantly.
In the first three quarters, the number of days with good air quality in 337 cities at or above the prefecture level rose by 5.7 percentage points compared to the same period the previous year. Of the 1,940 national surface water assessment stations, the proportion of stations reporting good water quality (categories I-III) increased by 6.2 percentage points.
Financial risks have basically remained manageable.
Between January and August, loan loss provisions of banks increased by 1.4 trillion yuan, boosting capacity to compensate for risks. At the end of September, the ratio of loans overdue by 90 days or more to non-performing loans of commercial banks was 15.1 percentage points lower than the year before. Local government debt stood at 25.58 trillion yuan as of the end of September, which is within the limit approved by the National People's Congress.
VI. New drivers have established a more prominent leading role, through accelerated reform and innovation.
China has focused on continuing reforms to streamline administration and delegate power, improve regulation, and upgrade services, and further encouraged the expansion of mass entrepreneurship and innovation. This has promoted the effective concentration of resources for innovation and stimulated market vitality and social creativity, while new drivers are exhibiting tremendous vigor and dynamism.
New industries and products have shown sound growth.
Industries such as big data, the Internet of Things, cloud computing, and blockchain have grown rapidly. Year-on-year growth of the value added of large-scale high-tech manufacturing in the first three quarters was 1.4 percentage points higher than it was in the first half of the year. Furthermore, between January and August, the operating revenue of large-scale enterprises in strategic emerging service sectors grew by 6% compared to the same period the previous year. Growth of new products is backed by powerful momentum, with new categories of smart products including 3D printing equipment, self-balancing scooters, and service robots maintaining high growth rates of 70% or more.
New forms and models of business have developed vigorously.
Integration of online and offline consumption has accelerated, new models such as online shopping and live-stream marketing have become extremely popular, and new demand for online work, remote consultation, and online education services has rapidly expanded. In the first three quarters, online retail sales of physical goods increased by 15. 3% year-on-year, which is one percentage point higher than in the first half of the year and accounts for 24.3% of total retail sales of consumer goods.
The driving role of new investment and consumption has increased.
New types of infrastructure development including smart cities and the industrial Internet have spread at a faster pace. Between January and August, 388,000 new 5G base stations were built. Meanwhile, health-conscious and environment-friendly consumption has expanded. In September, output of smart watches, new energy vehicles, vehicle charging units, and smart wristbands was up 72.7%, 51.1%, 20.6%, and 18% year-on-year.
VII. Initiatives to "stabilize the six fronts" and "guarantee the six priorities" have proven effective, through all-out efforts to stabilize the fundamentals of the economy.
China has spared no effort to stabilize the six fronts of employment, the financial sector, foreign trade, foreign investment, domestic investment, and market expectations and to guarantee the six priorities of jobs, basic living needs, food and energy security, stable industrial and supply chains, the interests of market players, and the smooth functioning of grassroots government. A whole portfolio of policies has been put together to maintain security and deliver the stability needed to pursue progress, thus laying solid foundations for the economy to continue its steady recovery.
Efforts to stabilize employment and ensure living standards have achieved outstanding results.
The employment-first policy has kept up its momentum, alleviating employment pressure among key groups to a certain extent. By the end of September, three categories of social insurance, namely basic pensions, unemployment insurance, and workplace injury insurance, had reduced or waived enterprise social insurance premiums totaling 910.7 billion yuan. Meanwhile, the nationwide surveyed unemployment rate among persons aged 20-24 with a college degree (most of whom were recent university graduates) was 2.4 percentage points lower in September than the same time last year. At the end of the third quarter, there were 179.52 million rural migrant workers, 2 million more than there were at the end of the second quarter. Basic social assistance has been enhanced, with average old-age pensions and retirement pensions for residents nationwide growing by 8.7% year-on-year in nominal terms, and per capita income from social assistance and subsidies increasing by 12.9%, reflecting relatively rapid growth in both cases.
Efforts to stabilize foreign trade and foreign investment have yielded clear results.
China has pushed forward the development of foreign trade through innovative means, stepped up efforts to attract investment, and bolstered guarantees for investment. As a result, even as trade and investment have plummeted internationally, China has kept the overall performance of foreign trade and foreign investment stable and boosted investment in key areas and weak links. Due to a combination of factors including China taking the lead in resuming work and production and rising demand internationally for anti-epidemic and home office products, China's total import and export volume (calculated in RMB) with its four main trading partners, namely ASEAN, the EU, the US, and Japan, grew by 7.7%, 2.9%, 2%, and 1.4%, respectively, in the first three quarters compared to the same period the previous year. In addition, China's actual foreign investment utilization was 718.8 billion yuan, representing year-on-year growth of 5.2%, with 25.1% growth in September. In the first three quarters, growth of infrastructure investment in China was 0.2% year-on-year, shifting to positive for the first time this year.
Efforts to secure operations of market players have delivered clear effects.
Policies to help businesses overcome difficulties have been vigorously implemented, the business environment has constantly improved, and market entities have built up increased vitality. There were 1.88 trillion yuan in new tax and fee cuts between January and August, effectively alleviating burdens on market players. In the third quarter, large-scale industrial enterprises saw costs for every 100 yuan of operating revenue fall by 0.53 yuan year-on-year. In the first three quarters, the average number of new companies established daily was 22,000, maintaining essentially the same level as last year.
Efforts to ensure food and energy security have laid down strong foundations.
Agricultural production has remained stable overall, and the supply of major agricultural products has increased. In the first three quarters, the value added of agriculture (crop planting) grew by 3.8% year-on-year, with 3.9% growth in the third quarter. The energy supply has grown steadily, with total primary energy output growing by 1.1% year-on-year in the first three quarters according to preliminary calculations.
Efforts to stabilize industrial and supply chains have produced conspicuous results.
Attention has been focused on clearing obstructions and blockages in industrial and supply chains and ensuring the output of products in key industries. As a result, industrial and supply chains have remained stable overall. Of the 41 major industrial categories, 20 achieved year-on-year growth of value added in the first three quarters, 11 more than in the first half of the year. Meanwhile, growth was achieved for 283 of 612 types of industrial products, an increase of 79. In September, the Service Industry Production Index showed positive growth in 6 of the 8 industries from which the index is composed.
Efforts to secure the smooth functioning of grassroots government have been precise and effective.
Transfer payments have been stepped up and innovative mechanisms for the direct provision of government funds have been implemented, keeping fiscal operations stable at the primary level. By the end of September, 1.7 trillion yuan in funding under direct management had been provided, with 1.57 trillion yuan already available for use by organizations in cities and counties, thereby effectively supplementing the financial resources of local governments. In September, revenue in the local general public budget was 9.2% higher than the same time the previous year, marking positive growth for the fourth consecutive month.
Efforts to stabilize the financial sector and expectations have been solid and forceful.
Monetary policy tools have been used in innovative ways, reasonably sufficient liquidity has been maintained, and focus has been put on guiding and stabilizing market expectations, with these efforts consistently showing positive results. In the first three quarters, lending from financial institutions increased by 16.3 trillion yuan, 2.6 trillion more than the same period the previous year. In September, the Manufacturing Purchasing Managers' Index was 51.5% and the Non-Manufacturing Business Activity Index was 55.9%, with both remaining above their thresholds for seven consecutive months.
VIII. Working hard to complete this year's goals and tasks for economic and social development in order to bring the project of building a moderately prosperous society in all respects to a successful conclusion
The year of 2020 marks the period of time in which China will secure decisive victories in building a moderately prosperous society and in the fight against poverty, as well as the final year of the 13th Five-Year Plan period. At this crucial time, it is especially important to keep the economy running soundly in order to lay a good foundation for the 14th Five-Year Plan (2021-2025). We must continue to follow the general principle of pursuing progress while ensuring stability, pursue supply-side structural reform as our main task, stick to the key strategic objective of expanding domestic demand, implement routine epidemic control measures without letting up, boost the intensity of reform and opening up, and step up the pace of innovation and transformation in order to ensure successful completion of our goal to build a moderately prosperous society in all respects.
We must advance epidemic control and economic and social development in a coordinated manner.
It is imperative that we uphold an integrated approach to epidemic control featuring routine measures as well as emergency response to localized outbreaks, and ensure that all tasks related to guarding against inbound cases and a domestic resurgence are effectively performed. By doing so, we will continue to build upon the success we have achieved in containing the virus, and create favorable conditions for a full economic recovery. We must push forward the implementation of tasks to stabilize the six fronts and guarantee the six priorities, accelerate the complete restoration of normalcy in work and life, and spur unimpeded economic flows.
We must ensure the effective implementation of macroeconomic policy.
We must maintain policy stability and consistency, make policies more precise and effective, and exert guidance to keep market expectations and confidence steady. Furthermore, we must strengthen policy coordination on fiscal, monetary, employment, industrial, and regional issues. Taking advantage of the fact that businesses are currently in a key period of recovery and growth, we should speed up the full implementation of policies that have already been launched, and continue to support the real economy, particularly micro, small, and medium-sized businesses and self-employed individuals, in overcoming difficulties and achieving growth.
We must vigorously enhance guarantees for public wellbeing.
With a focus on addressing the concerns of the public, we must step up efforts to guarantee and improve the wellbeing of the people. We must augment employment services and business startup assistance for university graduates, help migrant workers who have returned from cities to hometown rural areas find work in or close to their places of origin, and spur further growth of urban and rural incomes. In addition, we must effectively organize efforts to ensure supply and keep prices stable on the market, and guarantee stable supplies of coal, electricity, oil, and gas.
We must fight determinedly to win the three critical battles.
Targeting deeply impoverished areas including the "three regions" (the Tibet Autonomous Region, Tibetan ethnic areas in Qinghai, Sichuan, Gansu and Yunnan provinces, and the four prefectures of Hotan, Aksu, Kashgar, and Kizilsu in southern Xinjiang) and the "three prefectures" (Liang-shan Yi Autonomous Prefecture in Sichuan, Nujiang Lisu Autonomous Prefecture in Yunnan, and Linxia Hui Autonomous Prefec ture in Gansu) as well as counties that have not yet eliminated poverty, we must persist in our efforts, work hard to ensure that the basic needs of the most vulnerable groups are met, and secure a complete victory in the fight against poverty. Meanwhile, we must advance the fight to prevent and control pollution, and continue to carry out comprehensive initiatives to control air pollution during the fall and winter months in key areas. Finally, we must adopt prudent measures to address existing risks, actively guard against additional risks, and take solid steps to forestall systemic financial risks.
We must focus on high-quality development.
We must strike the right balance between speed, quality, structure, and performance as we continue to pursue transformation of our economic growth model. We must focus on raising the quality and effectiveness of the supply system, actively transform and upgrade traditional industries, cultivate and expand new industries, and build up new drivers and competitive strengths, working hard to achieve reasonable quantitative growth and steady qualitative enhancement.
We must further reform and opening up across the board.
We must continue reforms to streamline administration and delegate power, improve regulation, and upgrade services, improve the business environment, and bolster reforms in key areas. We must remain committed to opening up comprehensively to the outside world, actively respond to complex changes in the international environment, and constantly raise the appeal of our "bringing in" strategy and the competitiveness of our "going out" strategy.
We must build a new development dynamic.
As we put unremitting effort into expanding domestic demand while expanding opening up, we must focus on removing obstructions at every link in the chain, from production, to distribution, to consumption, and unleash the potential of China's vast market. At the same time, we must move faster to set up more independent, complete, and secure industrial chains and supply chains, utilize domestic and international markets and resources more effectively, and promote continued healthy development of the national economy.
Ning Jizhe is Vice Minister of the National Development and Reform Commission and Secretary of the CPC Leadership Group and Commissioner of the National Bureau of Statistics.
(Originally appeared in Qiushi Journal, Chinese edition, No. 21, 2020)