Press briefing on H1 economic data

China National Radio:

We have noticed from the report and Mr. Sheng's remark that the service sector in the tertiary industry outperformed the secondary industry once again, both in terms of growth and proportion in the entire economy. We'd like to ask whether this momentum is expected to continue?

Also, some analysts have deemed that the service sector will soon account for more than half of China's GDP. What is your opinion about it?

Housing price is likely to confront with some downward pressure in the near future, as it seems that the property price in the first-and-second-tier cities is beginning to decline, which is different from the polarized price trend seen in Q1 of this year. How would you anticipate the trend? Thank you.

Sheng Laiyun:

Thank you. I advise you to be patient and wait two more days, as on July 18, we will release the housing price data for 70 big and middle cities.

Your second question is quite good, and I will focus on it. The service sector is growing at an accelerated speed in the past few years; its growth rate and proportion in the country's GDP have both surpassed those of the manufacturing sector. I regard it a major improvement brought by structural adjustment and a cheerful sign in the country's stabilizing economy. Last year, China's tertiary industry accounted for 46.1 percent of the country's GDP, surpassing that of the secondary industry for the first time. In the first half of this year, the tertiary industry contributed 46.6 percent to GDP, continuing with the momentum of faster growth rate and higher portion than that of the manufacturing sector in the country's overall economy. It signals that the Chinese economy is experiencing a shift from being led by manufacturing to one driven by service, which will have profound and lasting impact on China's economic growth and employment among others.

After comparing with practices in other countries, we have noticed a service-driven economy takes on the following features. First, it will slow down the growth rate of economy because the service sector has a shorter industrial chain than manufacturing, and it involves less investment, has lower productivity than manufacturing in the short term. Hence, the increment from the service sector in short term cannot yet offset the impact brought by the downward pressure facing manufacturing sector, and this may cause the overall economy growth to slow down. Second, it facilitates improving the stability of growth. Service is mainly to meet the domestic demand and is less affected by the fluctuation of exchange rates. Also, as service mostly meets the demand in consumption, which supports the economy, a service-led economy which has low fluctuation. Third, the service sector is a labor intensive one, meaning that it is good at facilitating employment. Fourth, it helps increase income and rationalizes income distribution in society. And finally, boosting consumption facilitates rationalizing the relation between investment and consumption. The service sector mainly intends to meet the demand of consumption, so that a stronger service sector will be conductive to people's propensity to consume.

Looking back at the past two years, we have noticed that slowdown and stability highlighted the Chinese economy. But while stability is seen in investment and consumption, job market has remained stable and turned for the better. We attribute these features to the accelerated development in China's service sector and the fundamental structural adjustment.

We think the tendency is worth attention and we should make the most of the tendency to accelerate the development of production-related service and life-related service, which in turn will propel the transformation of the Chinese economy. Thank you.