SCIO briefing on China's economic performance in H1 2021
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E-mail China.org.cn, July 22, 2021
The New York Times:
I have two questions. First, in the past decade, we have never seen such a huge difference between nominal GDP growth and real GDP growth as during this year. What's the reason behind the difference, and does it indicate severe inflation? Second, how can retail sales maintain a relatively high growth when auto sales are so weak? Thank you.
Xu Xianchun:
For your first question, I think it's normal to see an obvious difference between nominal GDP growth and real GDP growth in the first half of this year. As we know, China's PPI registered a high growth, as the index is greatly affected by international bulk commodity prices. Our study suggested that China's PPI is closely related to PPI of OECD countries and international bulk commodity prices. The rise in international bulk commodity prices has pushed up China's PPI. Since the value-added of industry accounts for more than 30% of GDP, the increase in PPI is bound to create a difference between nominal GDP growth and real GDP growth. The CPI grew by only 0.5% in the first half of the year, while the growth of PPI was relatively high. A rise in PPI will drive up the GDP deflator. That's my answer to the first question.
Yao Jingyuan:
Automobiles are not the most important part of China's consumption. From the perspective of the Engel's coefficient, food accounts for 30% of household spending in China. Therefore, food is the most important part of China's consumption, as it constitutes the largest bit of people's basic expenses. Generally, to assess China's overall consumption situation, including the trend of CPI, we need to focus on changes in the food sector.
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