Hu Kaigong:

Now let's move on to questions. Please identify your media organization before asking questions.

CCTV:

Mr. Ning has presented in his speech just now that the economy maintained a steady growth in 2018, while we previously heard the central government used expressions like "worrisome developments amid generally steady economic operation" when analyzing the economic situation. Mr. Ning, can you please share with us your views on this expression? What do the "developments" refer to? Where do such worries come from? Which direction is the economy heading? Thank you.

Ning Jizhe:

In 2018, against the backdrop of a complicated international and domestic environment, China's national economy maintained stable and sound development momentum. The main expected goals of economic and social development were achieved, summed up in the following six aspects:

First, the economic operation was kept within a reasonable range, with the macro-control objectives all achieved. The economy maintained medium-to-high-speed growth, with total economic output reaching a new level. GDP grew by 6.6 percent over the previous year, achieving the growth target of around 6.5 percent. The growth rate ranked first among the world's top five economies. China is the largest contributor to world economic growth at nearly 30 percent. In 2018, GDP exceeded 90 trillion yuan, an increase of nearly 8 trillion yuan over the previous year. Converted using an average exchange rate, total economic output reached US$13.6 trillion, second in the world. 

Price increases proved to be lower than expected, with a moderate rise in consumer prices. The CPI rose by 2.1 percent from the previous year, lower than the approximate 3 percent that had been expected. 

Urban employment continued to expand, and new employment increased substantially. In 2018, the number of new urban jobs stood at 13.61 million; the urban surveyed unemployment rate remained at around 5 percent for the whole year and, in fact, was less than 5 percent in the later months of the year, achieving the target of keeping the figure below 5.5 percent that had been proposed in early 2018. Imports and exports maintained stable growth momentum, with a basic balance being achieved in international payments. For the first time, the total volume of imports and exports exceeded 30 trillion yuan, and the scale of trade in goods reached a new high, ranking first in the world. The trade structure continued to be optimized, the proportion of general trade imports and exports increased, the proportion of exports of mechanical and electrical products increased, and the foreign exchange reserves remained above US$3 trillion. The RMB exchange rate was basically stable.

Second, the three tough battles got off to a good start, and identified weak links significantly strengthened. The macro leverage ratio began to stabilize. In 2018, M2 growth was lower than nominal GDP growth. The ratio of M2 to GDP was 202.9 percent, down 3 percentage points from the previous year. At the end of November 2018, the local government debt balance was 18.29 trillion yuan, falling within designated limits approved by the National People's Congress. 

We made notable progress in poverty alleviation. In 2018, the number of rural poor population in the country was reduced by more than 10 million, and 2.8 million people were relocated due to poor local conditions. We estimate about 280 poverty-stricken counties overall will have escaped from poverty. 

We also made positive progress in energy conservation, emission reduction and pollution prevention and control. The energy consumption intensity continued to decline. The energy consumption for every 10,000 yuan of GDP fell by 3.1 percent year-over-year, and the proportion of clean energy consumption increased. 338 major Chinese cities saw 79.3 percent of days with fairly good air quality in 2018, 1.3 percentage points higher than 2017. The density of PM2.5 particulate matter was 39 micrograms per cubic meter last year, a decrease of 9.3 percent.

Third, supply-side structural reform further advanced. The task of reducing excessive capacity was completed ahead of schedule. We have been adhering to the market-oriented and law-based approach to reduce excessive capacity, leading to over fulfillment in the targeted reduction of steel production capacity by more than 30 million metric tons, and the removal of the coal production capacity by more than 150 million metric tons. 

Deleveraging was steadily promoted, and the macro leverage ratio remained stable. The micro leverage ratio, measured by the asset-liability ratio of industrial enterprises above designated size, was down 0.4 percentage point year-over-year at the end of November 2018. 

The drive for destocking proved effective. At the end of 2018, the areas of commercial housing for sale fell by 65.1 million square meters from the end of the previous year. In the past two years, a total of 180 million square meters of commercial housing stock has been cut. 

Cost reduction continued to be effective. Costs in every 100 yuan of income earned from the main business of industrial enterprises above designated size continued to decline. The total scale of national enterprises and individuals' burden reduction exceeded the estimated 1.1 trillion yuan at the beginning of the year, and now it has reached more than 1.3 trillion yuan. 

Much work was also undertaken to bolster weak spots. Investments in eco-environment protection, agriculture and social sectors saw accelerated growth. 

The overall profitability of enterprises was on the rise. From January to November, the total profit of industrial enterprises above designated size increased by 11.8 percent year-over-year.

Fourth, the economic structure is being adjusted and optimized as the new driving force for development becomes stronger. First, the structure of demand was adjusted and optimized, and the proportion between investment and consumption witnessed rational changes. People care about consumption's contribution rate to economic growth, which was 76.2 percent last year, 18.6 percentage points higher than the previous year and 43.8 percentage points higher than the gross capital formation. The internal structure of investment is also being optimized. Private investment and investment in manufacturing both increased rapidly. Second, the industrial structure was continually upgraded, and the service industries assumed the role of “stabilizer.” In terms of gross volume, the tertiary industry accounts for 52.2 percent of GDP. In terms of increment, the tertiary industry's growth is 1.8 percentage points higher than that of the secondary industry. In terms of internal structure, the industries' evolution to medium- and higher-end took speed. The value added of the high-tech industries last year increased 11.7 percent year over year, accounting for 13.9 percent of that of the industrial enterprises above a designated scale. And the share is even higher in some coastal regions. The value added of equipment manufacturing industries was faster than the growth of industries of the enterprises above a designated scale. As for agriculture, the plantation structure was optimized and adjusted, and the output of grains remained generally stable. Third, emerging industries, new products, new commercial activities and new modes continuously grew up. The emerging manufacturing industries of strategic importance and the merging service industries of strategic importance have kept comparatively fast growth. The outputs of new energy vehicles, optical fiber and smart television have increased by a large margin. The online retail sales volume has increased by more than 20 percent. Fourth, important science and technology achievements are available. The Beidou 3 satellite was successfully deployed and came into operation; the first earthquake monitoring satellite was launched; the Hong Kong-Zhuhai-Macao Bridge opened to traffic last year. Science and technology are increasingly fueling development. Earlier this year, the Chang'e 4 probe landed successfully on the far side of the moon. 

Fifth, reform was deepened and opening-up was expanded, injecting new vitality into development. First, in some key fields, reforms were carried out at a deeper level. The reforms -- featuring streamlining governance and delegating power, integrating power delegation and strengthening management, and optimizing services — have yielded obvious effects. According to the World Bank's Doing Business Report 2018, China's ranking has soared 32 places from last year among 190 economies. Second, the number of market subjects increased by a large margin. Last year, the number of newly registered enterprises nationwide was up 10.3 percent year over year, and about 18,400 enterprises were registered each day on average. The National Bureau of Statistics has finished the fourth national economic census, and is now engaged in a household survey. The results of the survey indicate that the number and vitality of legal entities and industrial unity are higher than expected. Third, the finance and taxation system reform unfolded nationwide. The reforms of state-owned enterprises and state-owned assets, price reform, and reform of investment administrative mechanisms were carried forward steadily. The property ownership protection system was constantly improved. The opening-up level was continuously enhanced. The momentum of attracting foreign investment was good. Against the backdrop of the notable decline of global cross-border investment, China used $135 billion last year, up 3 percent year over year. The investment used by manufacturing industries increased by 20 percent, accounting for 30 percent of overall growth. China's foreign investment grew continuously; its economic and trade exchanges with countries along the routes of the Belt and Road were expanded. Its import and export volume with these countries, and its nonfinancial investment in these countries, both grew faster than the overall growth of imports and exports and overall foreign-bound investment.

Sixth, residents' income and spending increased rapidly, and people's livelihood steadily improved. First, residents' income grew on pace with the economy. Last year, national per capita disposable income grew 6.5 percent, higher than the 6.1 percent growth of GDP. Rural residents' income grew faster than that of their urban counterparts. According to the National Bureau of Statistics, the middle-income population in China has exceeded 400 million. Since the 18th National Congress of the Communist Party of China in 2012, the scale of the middle-income group has continuously expanded. Second, residents' spending grew quickly. Last year, the personal expenditure grew 6.2 percent, 0.8 percentage points higher than the previous year. The actual growth of the rural residents' personal consumption was 8.4 percent, faster than that of urban residents. Third, the structure of consumption was constantly upgraded. Last year, the Engel Coefficient of the national residents was 28.4 percent, down 0.9 percentage points from the previous year. The standard of the OECD countries, or developed economies, was below 30 percent. We reached the level in terms of the Engel Coefficient. Service consumption continuously improved as well. Last year, the number of domestic tourists and the revenue from domestic tourism both grew by more than 10 percent, and total box office revenue of the film industry reached 60 billion yuan, up nearly 10 percent.  

At the same time, the economic performance, amid overall stability, presents aspects that arouse people's concern. The major reason firstly stems from the external environment. We are all very concerned about the way the international situation is trending, full of variable and uncertain factors. The past year witnessed ups and downs in the world economy, such as the financial market and prices of large quantities of commodities fluctuating sharply, along with a drastic fall in global investment and the prevalence of global trade protectionism and unilateralism. All these developments in the international situation impacted on China – the second largest economy in the world with its import and export volumes accounting for one-third of total GDP.

Other factors came from internal environment. Structural issues piling up over a long period are still the main aspect of all contradictions in China's development. Currently the economy is in a transition stage, during which the throes of the reform process are unavoidable, with a constantly changing situation. There are inevitably various contradictions, challenges and difficulties in such a transition period. In particular, the economy faces significant downward pressures. It should be noted that the economic growth rate dropped slightly, as was expected, of course.

Overall, in such a complex internal and external environment, it is not easy for the economy to perform within a reasonable range. Achievements have not come easily; hence, we will attach greater importance to the various problems.

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