SCIO briefing on China's economy in the first three quarters

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Speaker:
Sheng Laiyun, spokesperson of the National Bureau of Statistics (NBS)

Chairperson:
Hu Kaihong, vice director-general of the Press Bureau, State Council Information Office

Date:
Oct 19, 2016

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.

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