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By shifting away from old growth drivers and moving up on the global industrial and value chain, China is seeing increasingly higher growth quality – Wang Jun with China Center for International Economic Exchanges

Beijing: In the first half of 2018, the Chinese economy, faced with extremely complex environment both at home and abroad – especially the impact of China-U.S. trade frictions, sustained the momentum of steady and sound growth with restructuring deepened, drivers of growth replaced and the quality and efficiency improved steadily under the leadership of Xi Jinping.

China’s National Bureau of Statistics (NBS) data shows that Consumption has continued to play a more prominent role in pushing Chinese growth in H1.

The trade frictions unilaterally stirred up by the United States, have not put much pressure on China’s domestic consumer prices, NBS spokesman Mao Shengyong told a press conference Monday.

The trade war would not necessarily have much impact on the capital market and exchange rates – Ma Jun, a member of the monetary policy committee of the People’s Bank of China

According to the preliminary estimates, the gross domestic product (GDP) of China was 41,896.1 billion yuan in the first half year of 2018, a year-on-year increase of 6.8 percent at comparable prices.

Planting Structure was Optimized and Agricultural Production was Sound

With the restructuring of grain planting, the summer grain is expected to have a good harvest. The supply-side structural reform in agriculture deepened and the sown area of cotton and soybean increased. Animal Husbandry was stable. In the first half year, the output of pork, beef, mutton and poultry was 39.95 million tons, a year-on-year growth of 0.9 percent, among which the output of pork was 26.14 million tons, up by 1.4 percent. The number of pigs registered was 409.04 million, a year-on-year decrease of 1.8 percent and that of pigs slaughtered 334.22 million, a year-on-year growth of 1.2 percent.

The Industrial Production was Generally Stable and the Structure Continued to be Optimized

In the first half year, the real growth rate of total value added of the industrial enterprises above the designated size was 6.7 percent year on year, 0.1 percentage point lower than the first quarter. An analysis by types of ownership showed that the value added of the state holding enterprises went up by 7.6 percent year on year; collective enterprises down by 1.9 percent; share-holding enterprises up by 6.7 percent; and enterprises funded by foreign investors or investors from Hong Kong, Macao and Taiwan up by 6.2 percent. In terms of sectors, the value added of the mining grew by 1.6 percent on a year-on-year base, the manufacturing grew by 6.9 percent and the production and supply of electricity, thermal power, gas and water grew by 10.5 percent. The value added of high-tech industry and equipment manufacturing industry grew by 11.6 percent and 9.2 percent year on year respectively, 4.9 percentage points and 5.2 percentage points higher than that of the industrial enterprises above the designated size as a whole. In June, the total value added of the industrial enterprises above the designated size went up by 6.0 percent year on year. In the first five months of 2018, the total profits made by industrial enterprises above the designated size was 2,729.8 billion yuan, up by 16.5 percent year on year. The profit rate from principal businesses of industrial enterprises above the designated size was 6.36 percent, 0.35 percentage point higher than that of the same period last year.

Service Industry Grew Fast and the Emerging Services Witnessed growth with good returns

In the first half year, the Index of Services Production increased by 8.0 percent year on year, 0.1 percentage point lower than the first quarter, maintaining high growth rates. Specifically, information transmission, software and information technology services, rental and business services maintained high growth rates. In June, the Index of Services Production increased by 8.0 percent year on year.

The Growth of Consumer Consumption and Market Sales was Stable and there was rapid Growth of Upgraded Consumer Goods

In the first half year, the national per capita consumption expenditure was 9,609 yuan, a nominal growth of 8.8 percent year on year, 1.2 percentage points higher than that of the first quarter, or a real growth of 6.7 percent after deducting price factors, up by 1.3 percentage points. The nominal growth of per capita consumption expenditure of urban households was 6.8 percent, up by 1.1 percentage points. The nominal growth of per capita consumption expenditure of rural households was 12.2 percent, up by 1.2 percentage points. In the first half year, the total retail sales of consumer goods reached 18,001.8 billion yuan, a year-on-year increase of 9.4 percent, 0.4 percentage point lower than the first quarter. Analyzed by different areas, the retail sales in urban areas reached 15,409.1 billion yuan, up by 9.2 percent, and the retail sales in rural areas stood at 2,592.7 billion yuan, up by 10.5 percent.

The Growth of Investment in Fixed Assets was Stable and Private Investment and Manufacturing Investment Rebound

In the first half year, the investment in fixed assets (excluding rural households) was 29,731.6 billion yuan, a year-on-year growth of 6.0 percent, 1.5 percentage points lower than the first quarter. Specifically, the private investment reached 18,453.9 billion yuan, up by 8.4 percent year on year, 1.2 percentage points higher than the same period of last year. The investment in the primary industry increased by 13.5 percent; the secondary industry was up by 3.8 percent, among which the investment in manufacturing was up by 6.8 percent, achieving growth for the third consecutive month, 3.0 percentage points higher than the first quarter, or 1.3 percentage points higher than the same period of last year; the tertiary industry grew by 6.8 percent, among which the investment in infrastructure was up by 7.3 percent. The investment in high-tech manufacturing industry increased by 13.1 percent, 7.1 percentage points higher than the total investment. The investment in real estate development in the half year was 5,553.1 billion yuan, a year-on-year growth of 9.7 percent. The floor space of commercial buildings sold was 771.43 million square meters, up by 3.3 percent. The sales of commercial buildings totaled 6,694.5 billion yuan, up by 13.2 percent.

The Surplus of Imports and Exports of Goods was Narrowed and the Trade Structure Continued to be Improved

The total value of imports and exports of goods in the first half year was 14,122.7 billion yuan, an increase of 7.9 percent year on year. The total value of exports was 7,512.0 billion yuan, up by 4.9 percent; the total value of imports was 6,610.7 billion yuan, an increase of 11.5 percent. The trade balance was 901.3 billion yuan in surplus, 26.7 percent less than the same period of last year. The trade structure was further improved. The import and export of general trade increased by 12.2 percent, accounting for 59 percent of the total value of the imports and exports, an increase of 2.3 percentage points compared with the same period of last year. The export of mechanical and electronic products increased by 7 percent, accounting for 58.6 percent of the total value of exports. The imports and exports with the top three trade partners continued to grow. Specifically, the imports and exports with European Union, United States and ASEAN went up by 5.3 percent, 5.2 percent and 11 percent respectively, which combined to make up 41 percent of the total value of imports and exports. During the same period, the imports and exports with 16 Central and Eastern European countries increased by 14.7 percent, 6.8 percentage points higher than the growth rate of the total value of imports and exports. In June, the total value of imports and exports was 2,493.6 billion yuan, a year-on-year increase of 4.3 percent. Specifically, the total value of exports was 1,377.7 billion yuan, up by 3.1 percent, and the total value of imports was 1,115.8 billion yuan, up by 6.0 percent. In the first half year, the export delivery value of industrial enterprises above the designated size reached 5,716.2 billion yuan, up by 5.7 percent year on year. In June, the export delivery value of industrial enterprises above the designated size reached 1,054.7 billion yuan, up by 2.8 percent.

The Resident Income Grew Steadily and Employment was Good and Stable

In the first half year, the national per capita disposable income was 14,063 yuan, a nominal growth of 8.7 percent year on year, or a real increase of 6.6 percent after deducting price factors. In terms of permanent residence, the per capita disposable income of urban households was 19,770 yuan, a nominal growth of 7.9 percent year on year, or a real growth of 5.8 percent after deducting price factors. The per capita disposable income of rural households was 7,142 yuan, a nominal growth of 8.8 percent year on year, up by 6.8 percent after deducting price factors. The per capita income of urban households was 2.77 times that of the rural households, 0.02 less than the same period of last year. The median of the national disposal income was 12,186 yuan, a nominal increase of 8.4 percent year on year. In June, the surveyed unemployment rate in urban areas was 4.8 percent, the same as that of last month, or 0.1 percentage point lower than the same month of last year. The urban surveyed unemployment rate in 31 major cities was 4.7 percent, the same as last month and 0.2 percentage point lower than the same period of last year. By the end of the second quarter, the number of rural migrant workers reached 180.22 million, 1.49 million more than the same period of last year, an increase of 0.8 percent. The average monthly income of migrant workers was 3,661 yuan, a year-on-year growth of 7.5 percent.

The Consumer Price Rose Mildly and the Price of Industrial Products Rose Steadily

In the first half year, the consumer price went up by 2.0 percent year on year, 0.1 percentage point lower than the first quarter. Grouped by commodity categories, prices for food, tobacco and alcohol went up by 1.4 percent year on year; clothing up by 1.1 percent; housing up by 2.3 percent; articles and services for daily use up by 1.6 percent; transportation and communication up by 1.2 percent; education, culture and recreation up by 2.1 percent; medical services and health care up by 5.5 percent; other articles and services up by 1.1 percent. In June, the consumer price was up by 1.9 percent year-on-year, 0.1 percentage point higher than May and down by 0.1 percent month on month. In the first half year, the producer prices for industrial products went up by 3.9 percent year on year, 0.2 percentage point higher than the first quarter; the purchasing prices for industrial producers were up by 4.4 percent year on year. In June, the producer prices for industrial products went up by 4.7 percent year on year, 0.6 percentage point higher than last month, and a month-on-month increase of 0.3 percent; the purchasing prices for industrial producers were up by 5.1 percent year on year, or an increase of 0.4 percent month on month.

Economic Restructuring and Upgrading Achieved Notable Results and the Growth of New Driving Forces Accelerated

The economic structure continued to be optimized. An analysis by industrial structures shows that the growth rate of the value added of the tertiary industry was 1.5 percentage points higher than that of the secondary industry in the first half year, accounting for 54.3 percent of the GDP, which was 0.3 percentage point higher than that of the same period last year and 13.9 percentage points higher than that of the secondary industry. Analyzed by demand structures, the final consumption expenditure’s contribution to the economic growth reached 78.5 percent, 47.1 percentage points higher than the total capital formation. New industries and new products grew rapidly. Analyzed by the structure of industrial sectors, in the first half year, the value added of industrial strategic and emerging industry grew by 8.7 percent year on year, 2.0 percentage points higher than that of the industrial enterprises above the designated size. The production of new energy vehicles was up by 88.1 percent year on year, industrial robots up by 23.9 percent and integrated circuits up by 15.0 percent. New Consumption was booming. Analyzed by trade structure, the online retail sales reached 4,081.0 billion yuan in the first half year, a year-on-year growth of 30.1 percent. Specifically, the online retail sales of physical goods were 3,127.7 billion yuan, an increase of 29.8 percent, accounting for 17.4 percent of the total retail sales of consumer goods, up by 3.6 percentage points year on year; the online retail sales of non-physical goods was 953.3 billion yuan, an increase of 30.9 percent. Green development was moving forward steadily. In terms of energy conservation and emission reduction, the energy consumption per unit of GDP was down by 3.2 percent year on year in the first half year.

The Supply-Side Structural Reform was Deepened and the Expectation of the Market was Positive

The work to cut structural overcapacity continued to deepen. In the first half year, the industrial capacity utilization rate nationwide was 76.7 percent, 0.2 percentage point higher than the first quarter, and 0.3 percentage point higher than the same period of last year. The efforts to reduce inventory made remarkable achievement. By the end of June, the floor space of commercial buildings for sale has dropped by 14.7 percent year on year. The Corporate leverage ratio and cost continued to decrease. At the end of May, the asset-liability ratio of the industrial enterprises above the designated size was 56.6 percent, a year-on-year decrease of 0.6 percentage point. For the first five months, the cost for per-hundred-yuan turnover of principal business of the industrial enterprises above the designated size was 84.49 yuan, 0.31 yuan less year on year. The investment in weak areas grew rapidly. In the first half year, the investment in the management of ecological protection and treatment of environment pollution and the investment in agriculture increased by 35.4 percent and 15.4 percent year on year respectively, or 29.4 percentage points and 9.4 percentage points higher than the total investment respectively. The market expectation stayed positive. In June, the PMI Composite Output Index was 54.4 percent, the Manufacturing Purchasing Managers’ Index was 51.5 percent and the Business Activity Index for Non-Manufacturing Industries was 55.0 percent, continuing to perform within the expansion range.

The Chinese economy in the first half year maintained the momentum of steady and sound development with increased favorable conditions to support the economy toward high quality development, laying a sound foundation for achieving main social and economic development goals of the year. However, with external uncertainties increasing, the economic restructuring remained in a phase of overcoming difficulties.