China Daily: Could you please analyze for us why economic growth declined in the first quarter, and how do you see the pressure if the economic downturn continues in the next few quarters. Thank you.

Sheng Laiyun: Thank you for your question. I think the reason why economic growth declined in the first quarter is because of the following three aspects:

Firstly, the external environment has remained complex and challenging. This year, the harsh winter that U.S. suffered has dragged down its economic growth. Emerging economies are still encountering downward pressure, affected by some factors. The International Monetary Fund (IMF) has lowered its outlook for 2014 global economic growth by 0.1 percentage points, and its outlook for developing countries by 0.2 percentage points, which means the global economic recovery will be worse than expectations. Inevitably, this kind of external environment has affected China's exports.

Secondly, China is at a complex and crucial economic stage of shifting gears in terms of its economic growth rate, structural adjustment and economic stimulus package. We have to pay a certain price for this, and overcome all the ups and downs. Drivers all know that they have to shift to a lower gear while driving uphill. Although the car has slowed, driving is becoming more stable and powerful.

Thirdly is the result of government's proactive regulation. This year, governments at all levels have strengthened their efforts to phase out backward production capacity, and have controlled environmental pollution. All work comes at a certain price. In some places, they would like to pursue green and sustainable development by slowing down their economic growth, which should be encouraged.

As for how to deal with the decline of economic growth and the pressure that comes from that, I would like to share my opinion with you:

Firstly, economic growth decline is an objective reflection of the Chinese economy moving into a new stage of development transformation after 30 years of nearly double-digit growth. Currently, the external conditions and internal factors for economic development have had some new changes. For example, the relationship between labor supply and demand has changed. The restraint of resources and the environment has increased, which has made Chinese economic growth decline. This is in line with the requirements of the current stage. It's impossible for us to maintain double-digit growth in previous years, and it's an objective reflection of the fact that we are entering a new stage.

Secondly, slowing down growth is beneficial for structural adjustment and economic mode transformation. In particular, it will help allow the market to push the restructuring and upgrading of enterprises.

Thirdly, a growth rate of 7 to 8 percent is not low. According to the current growth rate, the incremental wealth created each year is still expanding. For example, calculated at constant prices, China's increase in GDP in 2013 is equivalent to one year's GDP in the mid -1980s; at current prices, the figure is even bigger and equal to one year's GDP in the mid -1990s. Although growth has slowed, the incremental wealth is still expanding. In the medium and long term, the speed of economic growth can't be deemed low.

If we put aside the speed factor, and look at the changes in China's social and economic structure from a broader perspective, the Chinese economy in fact is now undergoing a comprehensive and profound structural revolution. For example, although the growth rate has declined, urbanization is advancing rapidly, with urbanization rate up by one percentage point per year. Although the industrial growth rate has fallen, the tertiary industry has developed well. Last year, the proportion of the tertiary industry exceeded the secondary industry for the first time. Although the investment growth rate dropped, consumption contributed more to economic growth. Therefore, the Chinese economy is undergoing structural changes.

Although we are not yet able to say that the Chinese economy has transferred from being industry-dominated to service-dominated and from investment-led to consumption-led, the process and changes are accelerating. From this perspective, we should change our way of thinking and look at the undergoing changes in the Chinese economy from a new point of view. We must recognize that the Chinese economy has already entered a new stage of transformation and development, and we need a new kind of thinking, a new perspective from which to look at the current structural adjustment and the new changes in the country.

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