SCIO briefing on China's economic performance in first quarter of 2021

China National Radio (CNR):

We noticed that in the first quarter, the total sales of commercial buildings amounted to 3,837.8 billion yuan, up by 88.5% year on year. When coupled with the data released today regarding housing prices in March across 70 large and medium-sized Chinese cities, the overall year-on-year increase also continued. How do you evaluate the current property market situation? What impacts will this increase have on the national economy?

Liu Aihua:

Thank you for your question. Regardless of whether it is investment in or sales of real estate this year, these indicators have been affected by the base figures of the same period last year, and most of the indicators are currently showing double-digit growth. Since the beginning of this year, various regions and departments have been closely following the new situation and new problems, and further adhered to the principle of "houses are used for living, not for speculation." With the goal of stabilizing land prices, housing prices, and expectations, a series of powerful and effective measures have been introduced in a timely manner. 

For the next step, with the increase in the construction of affordable rental housing, the development of the long-term rental housing market will gradually be standardized. A new supply pattern for the real estate market with multi-subject supply, multi-channel guarantee, and simultaneous rental and sales will then gradually take shape, which is conducive to promoting a steady and healthy development of the real estate market throughout the year. Thank you.

21st Century Business Herald:

The market has become more concerned with increasing commodity prices. What is the future trend for commodity prices? China has proposed enhancing regulation of the raw material market. What methods might be adopted in the future? Thank you.

Liu Aihua:

Thank you for your question. Recently, under the impetus of various factors such as loose global liquidity, a recovery in market demand, and short-term supply shortages, and so on, there has been a surge in international commodity prices. According to the data from relevant international organizations, during the first quarter, average international energy prices rose by 35.3% from the previous quarter, while the average non-energy price rose by 11.8%, reaching a relatively high level in recent years.

If we look at the recent price changes, we can see that the prices of some raw materials are growing. PPI grew by 0.3%, 1.7%, and 4.4% year-on-year in January, February, and March, respectively, reversing the previous downward trend lasted for nearly one and a half years. A 4.4% year-on-year increase in March was mainly driven by sectors related to oil and metal, with average prices in the oil and metal-related sectors growing by 11.1% and 17.6% year on year respectively. Generally speaking, the structural increase in PPI is mainly driven by the growing prices of means of production, as their average price went up by 5.8% year on year in March. The price for the means of subsistence in March was stable, up 0.1% year-on-year.

As China integrates deeper into the global economy, the price increase of international commodities may have an impact on the prices of some domestic sectors via trade and investment channels. However, judging from the structural features of the current PPI increase, the impact will mainly affect some upstream industries. The influence on downstream industries is yet to be seen. The relationship between supply and demand is the most fundamental element for price changes. Under the current circumstances with the ongoing economic recovery, the quality and capacity of supply are gradually improving, while demand is still recovering. Seen from these aspects, the prices of China's upstream products have no foundation for long-term growth. Thank you.