Chairperson Hu Kaihong:

Ladies, gentlemen, friends from the media: Good morning! Welcome to this press conference of the State Council Information Office (SCIO). Today we are very pleased to have Mr. Sheng Laiyun, spokesperson of the National Bureau of Statistics (NBS) and director-general of Comprehensive Statistics of National Economy Office of the NBS, to brief you on China's economy in the first three quarters of 2016 and take your questions. First, let's welcome Mr. Sheng to give a briefing.

Sheng Laiyun:

Thank you. Friends from the media, good morning! Due to the national holiday, our briefing on China's economy in the first three quarters of the year is taking place a few days later than normal. According to tradition, I'd like to brief you on the main indices of the Chinese economy before taking your questions.

China's economy has been generally stable with some progress in the first three quarters of 2016.

Since the beginning of 2016, despite the complicated domestic and international situations, all regions and departments, under the resolute leadership of the CPC Central Committee and the State Council, have seriously implemented the ideas put forward to produce new developments, actively led development of the new normal economy, adhered to the overall tone of developing while maintaining stability, increased general demand by an appropriate degree, steadfastly advanced supply-side structural reform, led to the expected good developments and accelerated the production of new forces for our economy. As a result, we have managed to sustain steady economic development with progress and improvement.

According to preliminary estimates, the gross domestic product (GDP) in the first three quarters totaled 52.99 trillion yuan, a year-on-year increase of 6.7 percent calculated in comparable prices. In the first quarter, the GDP grew by 6.7 percent year-on-year, and the second and third quarters followed the same trend. The added value of the primary industry was 4.06 trillion yuan, up 3.5 percent year-on-year; secondary industry 20.94 trillion yuan (up 6.1 percent); and tertiary industry 27.98 trillion yuan (up 7.6 percent). Third quarter GDP grew by 1.8 percent compared to the previous quarter.

1. The situation of agricultural production was basically stable, with a good prospect inautumn grain output.

The total output of summer grain reached 139.26 million tons, a decrease of 1.62 million tons compared to the previous year or 1.2 percent. This year saw the second highest output in history. Total output of early rice was 32.78 million tons, a drop of 910,000 tons, or 2.7 percent. A good harvest is expected for autumn grain. In the first three quarters, total output of pork, beef, mutton and poultry reached 58.33 million tons, a year-on-year fall of 1.1 percent. The output of pork was 36.9 million tons, down 3.6 percent. The total number of live pigs reached 431.63 million, down 3.4 percent while pigs slaughtered stood at 479.24 million, down 3.7 percent, both year-on-year.

2. Industrial production remained stable with obvious growth and improved profitability.

In the first three quarters, the added value at comparable prices of industrial enterprises above designated size rose 6 percent year-on-year. The growth speed was the same over the first half of this year. An analysis of the different types of enterprises showed the value added growth of State-holding enterprises rose 1 percent, collective enterprises 0.7 percent and share-holding enterprises 6.9 percent. Meanwhile, there was a 4.2 percent growth among enterprises funded by foreign investors or investors from Hong Kong, Macao and Taiwan. The value added growth of the mining industry dropped 0.4 percent year-on-year; manufacturing rose 6.9 percent and production and supply of electricity, heating, gas and water rose 4.3 percent. While the industrial structure continues to be optimized, during the first three quarters, the added value of high-tech industries and equipment manufacturing grew by 10.6 percent and 9.1 percent, respectively, and their growth rates were respectively 4.6 percentage points and 3.1 percentage points faster than that of industrial enterprises with an annual sales revenue of 20 million yuan or more. Their proportion among such industrial enterprises stood at 12.2 percent and 32.6 percent respectively, 0.6 percentage points and 1.2 percentage points higher year-on-year. In the first three quarters, the sales rate for such industrial enterprises reached 97.5 percent. They registered a total export delivery value of 8.595 trillion yuan, down 0.1 percent year on year. In September alone, the added value of such industrial enterprises grew by 6.1 percent year-on-year and 0.47 percent from the previous month.

From January to August, industrial enterprises with an annual sales revenue of 20 million yuan or more generated total revenues of 4.0584 trillion yuan, up 8.4 percent year on year; the figure is 2.2 percent higher than that of the first half of 2016. In August, their total revenue rose 19.5 percent, which is 8.5 percentage points higher than the previous month. For every 100 yuan of revenue from main businesses, the cost was 85.87 yuan, and the profitability rate was 5.66 percent.

3. The growth of fixed-asset investment has become stable, and the floor space for commercial housing on sale fell.

In the first three quarters of 2016, investment in fixed assets (excluding rural households) was 42.69 trillion yuan, year-on-year nominal growth of 8.2 percent, or 9.5 percent adjusted for inflation. The growth speed dropped by 0.8 percentage points over the first half of this year. The growth rates in July, August and September reached 3.9 percent, 8.2 percent and 9 percent respectively. Fixed-asset investment of State-holding enterprises reached 15.16 trillion yuan, an increase of 21.1 percent; private investment reached 26.19 trillion yuan, up 2.5 percent, 0.4 percent higher in September compared to that from January to August and accounting for 61.4 percent of total investment. Investment in the primary industry reached 1.34 trillion yuan, a rise of 21.8 percent year-on-year; secondary industry 16.74 trillion yuan (up 3.3 percent) and tertiary industry 24.6 trillion yuan (up 11.1 percent). The investment for infrastructure was 8.3245 trillion yuan, up 19.4 percent. The amount of in-place investment in fixed assets in the first three quarters was 44.22 trillion yuan, up 5.9 percent. In the period, total planned investment in newly-started projects was 36.76 trillion yuan, a year-on-year increase of 22.6 percent. In September, investment in fixed assets (excluding rural households) went up by 0.52 percent month-on-month.

In the first three quarters, total investment in real estate development was 7.45 trillion yuan, year-on-year nominal growth of 5.8 percent, or 7.1 percent adjusted for inflation. The growth speed dropped by 0.3 percentage points over the first half of this year, but increased by 0.4 percentage points from January to August. Of this total, investment in residential buildings went up by 5.1 percent. The total floor space of houses newly started was 1.23 billion square meters, up 6.8 percent year on year. Specifically, the floor space of new starts in residential buildings rose by 6.7 percent. The floor space of commercial buildings sold reached 1051.85 million square meters, up 26.9 percent year on year. Of this total, that of residential buildings rose 27.1 percent. The sales of commercial buildings were 8.02 trillion yuan, up 41.3 percent year on year. Of this total, that of residential buildings rose 43.2 percent. The land space purchased by real estate development enterprises was 149.17 million square meters, down 6.1 percent year on year. By the end of September, the floor space of commercial buildings for sale reached 696.12 million square meters, down 18.04 million square meters compared to that figure of the end of June. The actual funds for real estate development enterprises in the first three quarters reached 10.47 trillion yuan, up 15.5 percent year on year.

Sheng Laiyun:

4. Market sales continued to grow steadily, and the consumption of upgraded goods grew considerably.

In the first three quarters, total retail sales of consumer goods reached 23.85 trillion yuan, year-on-year nominal growth of 10.4 percent, or 9.8 percent adjusted for inflation. The growth rate increased by 0.1 percentage points over the first half of this year. Specifically, retail sales of units above designated size reached 10.83 trillion yuan, up 7.8 percent. In terms of different areas, urban retail sales totaled 20.49 trillion yuan, up 10.3 percent, and those in rural areas stood at 3.35 trillion yuan, up 10.9 percent. Grouped by consumption patterns, the total income of the catering industry was 2.56 trillion yuan, up 11.0 percent year on year; retail sales of goods reached 21.29 trillion yuan, up 10.3 percent. In particular, retail sales of units above designated size reached 10.18 trillion yuan, up 7.9 percent. The retail sales of communications and household goods increased fairly rapidly, wherein that of communication facilities grew by 12.7 percent, furniture by 13.9 percent, and building and decorative materials 15.4 percent. In September, the total retail sales of consumer goods grew by a nominal 10.7 percent year-on-year (a growth of 9.6 percent adjusted for inflation), or 0.85 percent month-on-month, with the growth rate exceeding that of the previous month by 0.1 percentage point.

In the first three quarters, online retail sales reached 3.47 trillion yuan, up 26.1 percent year-on-year. Specifically, online retail sales of goods grew 25.1 percent to 2.80 trillion yuan, accounting for 11.7 percent of the total retail sales of consumer goods.

5. The range of decline in imports and exports has narrowed and the general trade proportion has increased.

The total value of imports and exports in the first three quarters was 17.53 trillion yuan, a year-on-year decrease of 1.9 percent, the decline narrowing by 1.7 percentage points compared with the first half of this year. The total value of exports was 10.06 trillion yuan, a decline of 1.6 percent, a narrowing of 1.1 percentage points; and that of imports was 7.47 trillion yuan, down 2.3 percent, a narrowing of 2.4 percentage points. The trade surplus was 2.59 trillion yuan. In September, the total value of imports and exports was 2.17 trillion yuan, down 2.4 percent year-on-year. The total value of exports was 1.22 trillion yuan, down 5.6 percent; and that of imports 944.8 billion yuan, up 2.2 percent. The trade structure has become optimized. In the first three quarters, the general trade proportion in the total volume of imports and exports reached 56 percent, up 1.1 percentage points year-on-year. The electromechanical products accounted for 57 percent of total export volume, forming the backbone of exports. Exports from private enterprises stayed top. The value of exports from private enterprises grew up by 2.3 percent, accounting for 46.5 percent of the total value of China's exports. Exports to countries along the "Belt and Road" have increased. During the first three quarters, exports to Pakistan, Russia, Poland, Bangladesh and India increased by 14.9 percent, 14 percent, 11.7 percent, 9.6 percent and 7.8 percent respectively. Imports of some bulk commodities continued to grow. In the first three quarters, China imported 763 million tons of iron ore, 284 million tons of crude oil, 180 million tons of coal and 3.79 million tons of copper, up by 9.1 percent, 14 percent 15.2 percent and 11.8 percent respectively.

6. Consumer prices saw moderate growth, and the producer price of industrial products shows an increase year-on-year from the previous decline.

In the first three quarters, consumer prices went up by 2.0 percent year-on-year, which is 0.1 percentage points lower than the first half of the year. Specifically, prices went up by 2.0 percent in cities and 1.8 percent in rural areas. Grouped by commodity, the prices for food, tobacco, and liquor rose 4.1 percent; clothing 1.5 percent; housing 1.5 percent; household articles and maintenance services 0.5 percent. Meanwhile, the prices for transportation and communication dropped by 1.8 percent; recreation, education, culture articles and services grew by 1.4 percent; health and personal care rose 3.6 percent; other goods and service grew by 2.4 percent. In the food sector, the prices for grain grew 0.5 percent, pork 21.2 percent and fresh vegetables 12.3 percent. In September, consumer prices went up by 1.9 percent year-on-year, or 0.7 percent month-on-month. In the first three quarters, producer prices for industrial products dropped by 2.9 percent year-on-year, and the decline narrowed by 1.0 percentage point compared with the first half of the year. In September, there was an increase of 0.1 percent year-on-year, or 0.5 percent month-on-month. In the first three quarters, purchasing prices for industrial producers fell 3.8 percent year-on-year. In September, the price was down by 0.6 percent year-on-year, or up 0.4 percent month-on-month.

7. Incomes maintained steady growth, and the gap between urban and rural areas keeps narrowing.

In the first three quarters, national per capita disposable income was 17,735 yuan, a nominal growth of 8.4 percent, or a real increase of 6.3 percent after deducting price factors. In terms of permanent residence, the per capita disposable income of urban households was 25,337 yuan, a nominal growth of 7.8 percent, or real growth of 5.7 percent. The per capita disposable income of rural residents was 8,998 yuan, up 8.4 percent in nominal terms, or 6.5 percent in real terms. The per capita income of urban households was 2.82 times that of rural households, a decrease of 0.01 when compared with the same period of the previous year. The median national per capita disposable income was 15,626 yuan, a nominal increase of 8.1 percent. By the end of the third quarter, the number of rural migrant workers stood at 176.49 million, an increase of 950,000 compared to last year, up 0.5 percent. In the third quarter, the average monthly income of migrant workers was 3,232 yuan, up 5.9 percent year-on-year.

8. The supply-side structural reform made headway, and the economic quality and performance have been steadily improved.

Much headway has been made concerning the five major tasks, which are cutting industrial overcapacity, destocking, de-leveraging, lowering costs and improving weak links. In the first three quarters, the output of raw coal dropped by 10.5 percent year-on-year. Industrial enterprises and housing stock showed a steady decline. At the end of August, the finished goods inventory of industrial enterprises above designated size dropped by 1.6 percent year-on-year. The figure dropped for five consecutive months from April. The area of housing 'waiting for sale' kept decreasing for seven consecutive months from March. The debt ratio and cost of industrial enterprises both dropped. At the end of August, the debt ratio of industrial enterprises above designated size was 56.4 percent, down 0.6 percentage points from the same period last year. From January to August, the cost per 100-yuan main business revenue of industrial enterprises above designated size was cut down 0.17 yuan from the same period last year. In the first three quarters, investment in ecology conservation and environmental protection rose by 43.4 percent, water management 20.5 percent, and agriculture, forestry, animal husbandry and fishery 20.1 percent, up respectively 35.2, 12.3 and 11.9 percentage points compared to the growth of total investment.

The industrial structure was upgraded steadily. In the first three quarters, the added value of the tertiary industry was 52.8 percent of the country's GDP, up 1.6 percentage points year-on-year, or 13.3 percentage points higher than that of the secondary industry. The demand structure continued to improve. In the first three quarters, the final consumption expenditure contributed 71.0 percent to the country's GDP, up 13.3 percent points year-on-year. The new economy grew rapidly. In the first three quarters, new strategic industry grew up 10.8 percent over last year. The growth rate was 4.8 percentage points higher than industrial enterprises above the designated size. Saving energy and reducing consumption became more efficient. Energy consumption per unit of GDP dropped by 5.2 percent year-on-year. The consumption proportion of clean energy such as hydropower, wind power, nuclear power and gas reached 19.3 percent, up 1.7 percentage points year-on-year.

While adhering to the policies of appropriately expanding demand and supply-side structural reform, the national economy saw solid development in the first three quarters of 2016. However, we must be aware that China is at a critical stage for economic transformation and upgrading as well as replacing old engines of growth with new ones, and domestic and international uncertainty still exists. For the next step, we must adhere to the concepts of innovation to adapt the economy to the 'new normal' stage, strengthen supply-side structural reform, appropriately expand demand, maintain a proper balance between ensuring steady growth, promoting reform, making structural adjustments, improving living standards, and guarding against risks, and work to reach the growth target for the whole year.

That completes the major economic data for the first three quarters. Now, I'm ready to answer your questions.

Hu Kaihong:

The floor is open. Please identify which media outlet you represent when asking a question.

CCTV：

We see many positive changes in the economic data of the third quarter of this year. Would you please give us a comprehensive evaluation of the economic performance of the third quarter? Could you summarize the performance with a keyword?

Sheng Laiyun:

Thanks for your question. This year, regional governments and departments have fully implemented the decisions and plans of the CPC central leadership and the State of Council, especially enhancing their effort in the third quarter of this year. With regard to the main indicators, economic operation has maintained overall stability while making steady progress in the first three quarters of this year, which is specifically shown in the following aspects:

First, economic operation continues with stability and more positive changes, and the stability has been enhanced. We observe the macro-economy mainly from indicators involving growth, employment, inflation and international balance of payments. These indicators obviously show great stability in economic growth.

a) The economic growth stabilizes. GDP in the third quarter of 2016 registered a year-on-year increase of 6.7 percent, flat with that in the first half of this year. To be specific, more remarkably steady progress is seen in the industrial sector, which grew 6.0 percent year-on-year in H1 and 6.1 percent in Q3 this year. The volume of industrial consumption and output of electricity and freight traffic has seen rapid growth since the beginning of the third quarter of this year. The industrial sector has clearly tended to stabilize.

b) Employment is better than expected. A total of 106.7 million new jobs were created in urban areas in the first three quarters of this year, equivalent to the target set for the whole year of 2016. According to a survey from September 2016, the unemployment rate in the urban areas of 31 big cities was lower than 5 percent for the first time since June 2013.

c) Overall consumer prices grow mildly. Consumer prices in the first three quarters went up 2.0 percent year-on-year, down 0.1 percentage points compared to the first half of the year. The change has mainly been seen in the prices of manufactured goods. The decrease in PPI is narrowing and turned to be positive from negative in September 2016 for the first time, ending continuous decline of 54 months. It means that the supply-demand relationship in the industrial sector has been undergoing substantial changes.

d) Trade in goods has kept its surplus. Despite the deficit in the service trade, the net surplus in goods and service trade in the first three quarters accounts for less than 3 percent of GDP according to preliminary calculation.

As far as the four macro indicators are concerned, it is a good pattern with 6.7 percent growth in GDP, 2 percent increase in CPI and the unemployment rate of around 5 percent. The economy remains steady and the basis for stability has been strengthened.

Second, the supply-side structural reform has made positive progress. a) New achievements have been made in eliminating excess capacity, digesting inventory, deleveraging, reducing costs and improving disadvantages. With regard to cutting excess capacity, the raw coal yield in the first three quarters went down 10.5 percent year-on-year. For inventory digestion, by the end of August 2016, the inventory of finished goods in industrial enterprises above designated size saw a year-on-year decrease for five consecutive months. By the end of September 2016, commercial housing building area on the market dropped for seven consecutive months. In cost reducing, both business costs and the asset-liability ratio are on the decline. As for improving disadvantages, rapid growth has been seen in the investment in environmental protection, agriculture, forestry, water conservancy and infrastructure. b) The industrial structure continues upgrading. The added value of the service industry in the first three quarters accounts for 52.8 percent of GDP, up 1.6 percentage points compared to the same period last year. The industry has sped up transformation into mid- and high-ends. The added value of the high-tech industry and equipment manufacturing industry grew 4.6 and 3.1 percentage points faster than industries above designated size, respectively. Their proportion has gone up 0.6 and 1.2 percentage points, respectively. c) The demand structure keeps upgrading too. The proportion of investments in the high-tech industry and service industry increases, while that of high energy-consuming industry declines. With regard to the contribution of investment, consumption and net export, consumption contributed 71 percent of economic growth, up 13.3 percentage points from the same period of last year. Capital contribution stood at 36.8 percent with a slight decline, while net export contribution registered at negative 7.8 percent. In this pattern, consumption contribution to economic growth kept increasing, which means that the demand structure is going in a good direction.

Third, as for the transformation from old to new drivers, the new economy has maintained rapid growth and new drivers of growth has picked up speed. The new economy, represented by new industries, new technologies, new commercial activities, new patterns, new products and new services, continues to maintain a rapid growth. Daily registered new enterprises average 14,600 this year, a daily increase of roughly 2,000 enterprises from the same period of last year. Strategic emerging industries and high-tech industries remain at a growth rate of over 10 percent. In new commercial activities, online retail sales in the first three quarters rose 26.1 percent. As for new products, the number of new-energy automobiles, for example, increased 83.7 percent in the first three quarters. It shows the new economy and new drivers grow faster during the transformation and upgrading of China's economy.

Fourth, energy efficiency has made prominent progress and economic operation has improved steadily. The energy consumptions per GDP in the first three quarters went down 5.2 percent year-on-year, a continuous decline. The profits of industrial manufacturing enterprises saw a remarkable improvement. The profits of industrial enterprises above designated size rose 8.4 percent during the first eight months of this year and 19.5 percent in August. Hence, the economic operation has gotten better.

Fifth, residents' income has grown steadily and the livelihood of the people continues to improve. The actual growth of residents' income in the first three quarters went up 6.3 percent, which is lower than the 6.7 percent growth of GDP. In fact, the 6.7 percent refers to the total growth rate of GDP. If demographic factors are taken into consideration, the growth of per capita income and per capita GDP is basically synchronized. Residents' expenditure in consumption keeps growing and the upgrading of consumption structure is accelerating. Social security undertakings have been developing steadily. The fiscal expenditure in residents' social security, employment, health care and family planning, and affordable housing construction has grown 14 percent. The livelihood of the people keeps improving.

As far as the five aspects are concerned, economic growth in the first three quarters has maintained overall stability while making steady progress in economic operations, economic structure, growth of new drivers, operation quality and livelihood improvements. I'd like to summarize it with the four keywords: steady, progressing, quality-improving and better-than-expected. Thank you!

Phoenix TV:

We have noticed there's price rise for coal and steel in the third quarter, which made some need-to-be-eliminated enterprises restart their production, but also making it more difficult to reduce the surplus industrial capacity. So, how do you view this repeated cycle, and how would you comment on the achievements of the supply-side structural reform? Thanks!

Sheng Laiyun:

Thank you. In the third quarter, one change in the industrial sector was the big price rise for steel and coal, meaning industrial enterprises achieved better profits. When profits of steel and coal enterprises turn good, it's very seductive for those soon-to-be-eliminated enterprises. In some places, some enterprises feel impelled to restore the production capacity. However, I want to stress several points:

First, supply-side structural reform is a fundamental policy decided by the CPC central committee to cope with the new normal. The direction is totally correct. Since now it has entered the new phase of economic development, featuring new normal status, the Chinese economy faces the significant issues regarding structural upgrade. One of the major issues is that the effective supply of the commodities cannot satisfy the needs of the structural upgrading in consumption. On the one hand, this is due to the surplus industrial capacity of traditional industries; on the other hand, it is because the supply of high-quality products and services cannot satisfy the consumption upgrade. So, the major problem is supply. Through enhancing supply-side structural reform, and through capacity cutting and destocking, eliminating "zombie" enterprises, and transferring good resources to industrial sectors suitable for the consumption upgrade, it will push forward the quality improvement of products and the upgrade of industries. This is one of the major tasks of the supply-side structural reform. The direction is correct, we must insist on continuing.

Second, the effects of supply-side structural reform is proving very effective beyond expectation. The five tasks to address overcapacity, reduce inventory, deleverage, lower costs, and bolster areas of weakness all saw effective achievements. As for cutting capacity, coal production is falling. As for reducing inventory, the manufactured inventory of industrial enterprises and the acreage of commercial residential buildings are falling month by month. As for aspects of deleveraging and lowering costs, the industrial enterprises' asset-liability ratio and costs have been somewhat reduced. Investment in areas of weakness is also continuing at a quicker pace. However, the effects are much wider. I just used the phrase "beyond expectation". Why? There are several good performances: first, the price rise of industrial products provide enterprises with better revenue, this is directly linked to the supply-side structural reform since we are eliminating some capacities that lag behind. This promotes active change in the supply-demand relationship on the supply side. Besides, international commodity prices are also rising, so the steel and coal prices are going up, meaning better profits for industrial enterprises. This is the most direct result of structural reform. Second, due to improvement of industrial profits, the expectation of enterprises also changes. The manufacturing PMI is 50.4 percent in the past two months. The expectations are good, giving confidence for everyone to develop. Third, the five tasks are prompting relevant areas to undertake in-depth reform.

So speaking from those aspects, no matter whether it was for direct results or the overflow positive effects, supply-side structural reform is working. Due to the very positive effects, though some enterprises have possibilities to restore production, we must look at the big picture, insisting pushing on with supply-side structural reform. We must not change the current market environment to let some should-be-eliminated enterprises restore production. We should follow the path already set, unswervingly pushing on the supply-side structural reform.

Tass:

I'd like to ask you to explain, why the statistics of the exploitation industries of petroleum and natural gas are put together; could we have separate statistics from January to September?

Sheng Laiyun:

Our statistics were released covering the large and secondary categories of the national economy, but what you asked is about a sub-class category. If you need detailed statistics, you may contact the information office, and we will provide the relevant statistics.

China Daily:

How did the real estate market in the third quarter contribute to economic growth? It has been widely anticipated that economic growth in the third quarter this year would outperform the second quarter, but the figures show they have drawn even. What're your views on this issue? Thank you.

Sheng Laiyun:

Thanks for your questions. Sales of the real estate market in the third quarter this year performed well. Growth of commercial housing sales remains high when compared to that in the first half of this year, and the sold area of the commercial housing market in the first three quarters increased by 26.9 percent year on year. Sales in the housing market in the first and second quarters of this year also performed well, as growth in the first half of this year was 27.9 percent. But aggregate sales in the third quarter this year fell to a certain extent from the second quarter. The real estate market has contributed a significant part to economic growth this year. Tomorrow, we'll issue a group of indexes considering the added values of different industries. Based on a preliminary calculation, the real estate has contributed around 8 percent to the growth of the gross domestic product (GDP) in the first three quarters this year.

The second question raised was about the growth of GDP. First and foremost, the 6.7 percent of GDP growth in the third quarter this year has been calculated precisely. Based on industrial structures, primary industries in the past three quarters this year grew by 3.5 percent year on year, which was 0.4 percentage points higher compared to that in the first half of the year. The faster growth is basically a result of the fall harvest, when considerable amounts of crops and vegetables are offered to the market. For secondary industries, the added value of the construction industry in the third quarter of this year fell by nearly 1 percentage point from that in the first half of the year. Electric power consumption and generation recovered in the third quarter this year and the performance of second industries drew even to that in the first half of this year. Tertiary industries in the third quarter this year performed well, as the growth rate was 7.6 percent, rebounding from the first half of this year. The growth resulted from rapid developments in retail sales, transportation and the real estate market. Those are the views considering the different categories of industries.

Now let's take a look at the structures of market demands. Growth of retail sales of consumer goods and exports accelerated in the third quarter of this year, while investment growth rates subdued slightly when compared to the first half of this year. Actual consumption growth also fell a bit. The general demand was stable and the 6.7 percent GDP growth is precise, fundamental and true in terms of both the production or demand sides.

Secondly, despite the even draw between the GDP growth in the third quarter and that of the first half this year, there are signs of positive changes in its structure signaled by improvements in growth qualities and efficiencies. I have already mentioned in my answer to the first question that structures have kept upgrading, energy consumption per unit GDP has been lowered and quality of economic operation has been improved.

Thirdly, I have noted the forecast of some institutions as the indexes indicating a positive way for the economy in the third quarter. Why did the GDP still grow in the similar rate? There is something of an intuition regarding the economic operation. The impression caused by present price and constant price are different. The growth of GDP is calculated on the constant price while avoiding the influence of present price and such a calculation method may result in people thinking that the actual growth rate is different from what they have expected based on the market-decided present price. The growth of ex-factory price of industrial products turned positive from negative, resulting in a higher sales revenue and corporate profit. This led people to feel the economy performed better. That is not wrong. But the calculation of GDP should keep away the impact of price factors and concentrate more on actual growth of goods and services.

Moreover, I'd like to remind you of figuring out the changes of economic performance in months of a consecutive period when studying the data. The positive changes in the third quarter mostly took place between Aug. and Sept. when some indexes much improved while in July some growth indexes fell compared to June.

That means you will feel one way when viewing monthly data and another way when viewing quarterly data. Let's take an example. The growth of fixed assets investment in Aug. and Sept. recovered, which convinced people of a general rise of the investment in the sector. Actually the growth from Jan. to Sept. this year increased by 8.2 percent, about 0.1 percentage point higher than that in Jan. to Aug. But at the same time the growth dropped 0.8 percentage points when compared with the first half of this year. Therefore, we adopted the term "moderate and stable growth" to describe the development of fixed assets investment, which is different from "stabilized and improved" in defining the sector's performance in Aug. and Sept. Therefore, the observation of the economic performance should take the changes of present prices and monthly and quarterly data into consideration.

Reuters:

The central government introduced a raft of regulatory measures in the property market recently. I wonder if this will impact the economic growth. What do you think of the recent downward pressure and the depreciation of the RMB? Why is this happening?

Sheng Laiyun:

I'd like to make a few observations about the impact of property market regulation on economic growth.

First of all, it was timely to issue regulatory measures in major cities around the National Day. Why? We all know that housing prices climbed rapidly in August and September, and so introducing control measures was meant to cool the market. It is also positive for curbing excessive investment in the property sector.

Based on the data available from the first half of this month, we can see that the control measures have paid off. The housing sales in first-tier cities and some second-tier cities are falling, and some cities even saw deceases month-on-month. The heat of the property market is cooling and housing prices have begun to stabilize. Thus it is necessary and effective to introduce these control measures.

Second, we shouldn't overestimate the influence of regulatory measures in the property market on the economy. We need to continue to see what happens next. Why? Because the regulatory measures this time focus on first-tier cities and some second-tier cities, or cities that saw a heated property market; namely, they only apply to a few places. Therefore the impact on the entire country and its economy needs to be seen. Moreover, other cities are still continuing previous policies like destocking. In addition, regulatory measures only target investment and speculation; rigid demands and those who seek better housing conditions are still encouraged. Moreover, regulatory measures are intended to prevent a negative impact on the economy brought by big rises and falls in the property market; in other words, the ultimate goal of regulatory measures is to maintain stable economic growth. Overall, regulatory measures in the property market do not have that much influence on the economy as a whole and we need to see where the measures are headed (before jumping to conclusions now).

Regarding the exchange rate, the exchange rate of the RMB did depreciate recently, but this is due to international factors. The expectations of the US dollar rate hike strengthened recently, the world economy is still unstable, and economic recovery is sluggish -- all of these put some pressure on the RMB. But in the medium to long-term, there is no basis for the yuan to see continued depreciation. First of all, China's economic fundamentals are sound, the economy is more stable, the internal structure of the economy is improving, and the quality of economic growth is improving -- all these prop up a stable yuan. In addition, trade in goods sees considerable surplus, and it remains a surplus even when we take out trade in service. We also have a huge foreign exchange reserve, and the internationalization of the RMB will improve the supply and demand of the yuan on the international market. The yuan joined the SDR basket on October 1, which will create demand for the yuan in countries seeking foreign exchange security and stability. Therefore we do not think there is any basis for the yuan to continue depreciating.

Agencia EFE:

As for my question, private investment has been maintained at a lower level when compared with that of the past. Does this trigger your concern?

Sheng Laiyun:

First, as seen from the situation in the first three quarters, private investment has undergone positive changes. The growth rate of private investment for the first three quarters stood at 2.5 percent, 0.4 percentage points higher than that for the period between January and August, while that for September alone was 4.5 percent, 2.2 percentage points higher than the month before. This is a sign that private investment is steadily expanding, and this is a good phenomenon. The market environment has been improving lately, so has corporate profit and the factory price of industrial goods; these improvements have facilitated the rise of private investment in the corporate sector, which is willing to expand its reproduction scale when seeing improving market conditions.

The second factor for the recovery, which is also very important, is that the government has increased its efforts at reform and its support for private investment. Since the beginning of the year, the government has enacted several policies and measures for promoting the healthy development of private investment. In addition, the State Council and other agencies have performed thorough inspections, especially of the sectors that are supposed to streamline administration and decentralizing powers, loosen control and improve services, to remove the limits that undermine the growth of private investment. For example, the government is promoting the PPP [public-private partnership], hoping to attract more private funding for infrastructure projects. These measure have all helped the steady rise of private investment.

Of course, we also realize that the growth of private investment is still lower than that for other sectors. Although climbing back for the past two months, the growth rate for Q3 is a mere 2.5 percent. The main reason for this is that the overall situation, including excessive capacity, has not fully eased despite slight amelioration; in addition, international economic recovery has also been sluggish, noticeably affecting China's exports. China is experiencing a critical period for its economic restructuring. Some enterprises are still hesitating to make the next move, out of concerns for corporate safety. Therefore, we should continue to deepen reform, especially on implementation of policies on private investment, so as to create a favorable environment and conditions for the continuous rise of private investment. Thank you.

Market News International (United States):

The total retail sales of consumer goods in September rose 10.7 percent year on year. You mentioned just now that the CPI in September rose remarkably. So, after deducting CPI factors, what were the total retail sales of consumer goods in September?

Sheng Laiyun:

The total retail sales of consumer goods in September rose 10.7 percent year on year, was one percentage point higher than the previous month, which are fairly high levels of growth. After deducting price factors, its actual year-on-year growth was 9.8 percent, 0.1 percentage point higher than August. Both nominal growth rates and actual growth rates reflect that the total retail sales of consumer goods are growing steadily and with robust momentum. This is an important foundation for a stable economy.

As for the reasons behind the robust growth, the Chinese economy has been stable, which has helped with employment and income growth, so that consumers have reliable expectations. For the past two months, the consumer confidence index has been improving; the figure for recent months stayed at around 105 percent, which was very important.

On the other hand, seen from structural factors, the total retail sales of consumer goods grew faster in this month than August, helped in part by strong growth from the automotive sector. Auto sales from January to September increased by 9.1 percent, 0.5 percentage point faster than during the period between January and August, meaning that auto sales are contributing more to consumption.

What's the reason behind the significant volume growth? As I said in the past, China is experiencing an upgrade in its consumption structure. When basic demands in life are satisfied, people want to live in better houses, eat nicer food and have their own cars, better cars. Therefore, the consumption of automobiles as well as its related products has been continuously rising. Of course, the support of favorable policies is also part of the reason.

Moreover, real estate sales so far this year are also satisfactory. Once you buy a new house, you'll decorate it, buy some home appliances and furniture. Therefore, the growing property market drove up the decoration and appliance sectors.

The upgrade of consumption structure also played a part. For example, the consumption of cultural, educational, senior care and health products has been rising continuously. These factors, when combined, made the total retail sales of consumer goods for the first three quarters of this year as well as that for the recent two months retain a robust momentum. Thank you.

Hu Kaihong:

That is the end of today's press briefing. Thank you, Mr. Sheng and thank you all, friends from the press.

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