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What’s The State of China’s Economic Recovery?

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What is the state of China’s economic recovery post-pandemic? Do the economic numbers reflect the challenges and opportunities on the ground? In this episode of Reality Check with Wang Guan, media anchor Wang Guan breaks down some key economic data, and discusses the prospects of the world’s second largest economy with World Bank’s China Director Martin Raser and Chief Economist of Asia Pacific at Vanguard Strategy Group Wang Qian.

Official surveys show that 99 percent of China’s large industries and 84 percent of small and medium-sized enterprises had reopened by mid-April. Industrial production, a major gauge of factory activity, grew by 3.9 percent from a year earlier, recovering from a recent drop. That growth rate, by the way, is twice as fast as most economists expected.

Another measure of economic activity is investment. In April, China’s investment in fixed-assets such as machinery and land rose, so did property investment and infrastructure investment, though all are still below pre-pandemic levels. There is a slower recovery on the demand side.

In April, retail sales, a gauge of consumer spending, fell by 7.5 percent year on year. Overseas demand has also been weak as many countries are still battling the coronavirus.

In other words, Chinese factories are churning out clothes, toys and electronics faster than consumers in China or overseas want to buy them. Given the uncertainties abroad, many are looking to China’s parliamentary “Two Sessions” to provide more fiscal measures to stimulate domestic consumption.

Another concern is jobs. The official urban unemployment number in April is six percent, slightly higher than 5.9 percent in March. But as you will soon hear from economists, this number may not include everyone who’s out of work.

A silver lining of this pandemic is the expansion of China’s digital economy, with online sales, teleconferencing and online entertainment thriving amid social distancing orders.

Before COVID-19, China was already a digital leader – accounting for 45 percent of global e-commerce transactions. After COVID-19, bricks and mortar retail sales plummeted but online sales rose three percent in the first two months of 2020.

Company communication platform DingTalk doubled its monthly active users in a single quarter to 17 million. Leading this wave of digitization are China’s private firms.

At the height of COVID-19, Alipay and WeChat supported the Shanghai government’s “Suishenma” health QR code launch to help contain the spread of the virus.

Now back to the big question, what must China do to sustain its economic recovery? How can it balance reopening the economy and preventing a second wave of the outbreak?

World Bank’s China Director Martin Raser and Chief Economist of Asia Pacific at Vanguard Strategy Group Wang Qian share their views with CGTN.

Wang Guan: How do you look at China’s economic recovery so far? What will its growth look like in 2020?

Wang Qian: I would say, what you gonna see the interesting phenomena is that even though over 90 percent of the factories, shops, restaurants has already been reopened, but they are likely to operate at a much lower level because of the demand shock.To that extent, we are not expecting a very sharp, quick rebound in second quarter. In our forecast, we are looking for the economic growth after the 6.8 percent decline in the first quarter to still record a modest contraction in the second quarter, essentially flat.

And then it will be only in the second half that you start to see more meaningful recovery of the Chinese economy. One, the global economy will recover from the recession and two we will be expecting more stimulus, especially on the fiscal side, to kick in to boost up the domestic demand.

But I think the good news is that China will still be the first one to recover from this whole coronavirus thing relative to the rest of the world.

If you think about the Chinese economy, the composition, it’s less exposed to face to face intensive service sectors compared to developing economies like U.S. or Europe. So manufacturing construction is still a big share of the Chinese economy. So the demand shock actually will affect U.S. or Europe economies much more compared to China.

Relatively speaking, I would say China will get back to the pre-crisis level in terms of economic activity much quicker. So by the end of this year, we should be seeing Chinese economy get back to normal already. Well, if you talk about U.S. or European economies, they are probably only coming back to normal by the end of 2021,

Wang Guan: What further stimulus can be expected from China’s Two Sessions and your opinion on China’s policy priorities right now?

Wang Qian: Before the coronavirus, everybody was talking about five percent to six percent growth target. But I think we probably should have a much lower growth target this year. That would increase the tolerance for slower economic growth because I think the policy here is trying to cushion the downturn instead of over -stimulating the economy.

Because I think the positive experience has already shown that it’s probably too costly to over-stimulate, especially over-reliant on the monetary policy front.

Wang Guan: How important is consumer spending when it comes to the role of consumption in boosting the Chinese economy? Do you think it is becoming even more important as external demand weakens?

Wang Qian: When you look at the U.S. economy, for example, you do see that household, private consumption is about 70 percent of the overall economy. But in China, when we think about the household consumption is actually probably less than 40 percent of the economy.

So I think there is a lot of potential for China to boost up consumption in the long term. And I think this is where we see the future of Chinese economy. You have to rebalance the economy away from exports, away from investment towards domestic consumption.

That’s where I think it’s about the long term goal of growth rebalancing. In the near term, I would say, relatively speaking, consumption is less volatile, is more stable compared to other components of the economy, such as investment or exports.

Wang Guan: China’s March urban unemployment rate is 5.9 percent. How do you interpret this official number? What needs to be done to address the issue of unemployment?

Wang Qian: Actually it is still underestimate the pressure in the labor market. I think one, it failed to capture the migrant worker who lose their job and then they just go back to their home in rural area. And then they dropped out from the employment survey. They are not counted as unemployed anymore.

The second thing is that I think it failed to capture the under employment in many of the business, especially in many of the state-owned enterprises, you saw that people are still employed. They still have their job, but they are not working. So that’s underemployment. That’s not being captured in the 5.9 percent unemployment rate.

So I think in fact, the real pressure in the labor market is much worse than this official number are showing. And it will continue to be under pressure when you think about the export sector. Export sector are facing the pressure from weakening global demand. When you think about the export sector, they are hiring like 60 million people.

I think the one of the silver lining is that a lot of the job loss actually is temporary. It’s temporary because this is coronavirus shock, shops, restaurant, factory, they locked down. And the global recession in our model forecasts will last just for two quarter.

So the jobs will come back.

And then there are also questions about damages done by the coronavirus to global demand, U.S.-China tensions and geopolitical uncertainties. For that, I talked to Martin Raser, Country Director for China at the World Bank.

Martin Raser: I think there’s not much in the short run that China can do about the state of global demand. That depends much more on the actions that other countries take to achieve their containment, and to be able to reopen their economies.

If that happens in the second half of the year, then I think China can look forward to recovery of external demand, which will help its own recovery. But because that’s uncertain, I think China can’t wait for that and needs to do more stimulus at home. That’s what I, or support to the recovery at home.

That’s what I talked about earlier, when I spoke about green investment, when I spoke about more social transfers, particularly to migrant workers to unemployed that you know, are likely to use additional money for consumption because they don’t have a lot of savings. So, that’s on the economic side.

I think on the broader question of how to deal with a hostile environment, I think the answer is more opening-up. The answer is more transparency. You know, invite the world to see that you’ve done nothing wrong. Show them, you know that you’re open for business, you’re open for business on transparent and equal terms that, you know, you care about the rule of law, that you care about foreign investment.

And I think we’ve just seen over the past year a number of initiatives to make it easier for foreign investors to come in that financial sector in a number of other areas. I think that’s the right way to go. You want the impression of the world to be a China that in the face of criticism isn’t defensive and doesn’t close down, but says okay, let’s talk about it.

Sometimes you have good points to make. Sometimes we will disagree with you but at the end of the day, we are interested in, you know, being a business partner and opening our economy in continuing to benefit from the opportunities that we have by trading with each other, by investing.

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China’s New Energy Vehicle Market Embraces Sound Momentum For Development

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“New energy vehicle (NEV) production capacity in April basically reached the level of the same period last year,” said Miao Wei, Chinese Minister of Industry and Information Technology.
Miao made the remarks during an interview after the second plenary meeting of the third session of the 13th National People’s Congress on May 25. The minister also expressed full confidence in the future development of the NEV industry
NEV has always been a hot topic in the “two sessions” every year, as promoting wider use of NEV has been included in the Report on the Work of the Government for three consecutive years.
“The production and sales of both conventional automobiles and NEVs have been severely impacted by the novel coronavirus outbreak,” Miao introduced.
In light of the difficulty, China’s central government has unveiled policies and measures to stimulate the development of the industry. The government has decided to extend subsidies and tax exemptions for NEV purchases, which was due to be removed by the end of this year, by another two years, in a bid to restore NEV production and sales.
Since the beginning of this year, both central and local governments have rolled out a package of policies to support the automobile industry. The development of NEV, in particular, has been supported and encouraged by a series of preferential policies.
An executive meeting of the State Council on March 31 decided to extend subsidies and tax exemptions for NEV purchases to the end of 2022. A few days earlier, NEV charging facilities were included in the country’s “New Infrastructure” projects.
Guangzhou, capital of south China’s Guangdong province, in early March announced that it would grant each individual who buys a new energy vehicle a subsidy of 10,000 yuan ($1,398) from March to December. Besides, Shanghai government is now subsidizing NEV users on charging fees, and has shortened the time for NEV license registration.
These favorable policies resulted in an uptick in NEV sales. More than 100,000 Tesla models were sold across China in March, and the NEV sales of Beijing Electric Vehicle under Chinese automaker BAIC Motor Corp also bounced back to around 6,000 units in the same period. BYD, a leading electric vehicle maker in China, sold more than 20,000 NEVs in the first quarter.
The country would make continuous efforts in the supply, demand, and user sides in the next phase, in a bid to give a further boost to NEV development, according to the minister.
On the supply side, the Ministry of Industry and Information Technology (MIIT) will intensify efforts on the reform of streamlining administration and delegating power, improving regulation, and upgrading services, and liberalize the original equipment manufacturer production of new energy vehicles in an orderly manner. In addition, brand authorization will be piloted for R&D and innovative NEV enterprises.
On the demand side, apart from implementing relevant preferential fiscal and tax policies, the MIIT will also encourage battery swap programs and the use of NEV in the public services, such as law enforcement, logistics, sanitation, and public transport, so as to expand the demand for NEVs.
For NEV users, the MIIT will make greater efforts to construct charging and battery swap facilities and encourage universal standards of charging facilities. Furthermore, the ministry also encourages local governments to introduce preferential parking and travel policies for the use of NEV.
“In a word, we will always pay high attention to the development of NEVs, and work to ensure a better environment for using them, so that more consumers will be willing to choose it,” Miao concluded.

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China Won’t Slacken Efforts on Ecological, Environmental Protection

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More than one million migratory birds have traveled to Beijing this spring, according to data collected by 88 monitoring stations in the capital city, including swans, oriental storks, Baer’s pochards, reed parrotbills and black storks. In particular, a new high of over 1,000 swans were recorded.
“Birds are indicators of the biodiversity, the ecosystem integrity and ecosystem health in a region,” said Gao Wu, a bird expert and associate professor at the Capital Normal University in Beijing, adding that they will not stop in places that are not suitable and safe during migration.
The increasing bird species in Beijing well explains the continuous improvement in Beijing’s ecological environment. According to data released by Beijing Gardening and Greening Bureau, the forest coverage in the city increased by 18,666 hectares last year, and the urban green space by 803 hectares.
Beijing is an epitome of China’s progress in ecological conservation. The country has made key progress in its critical battle against pollution, with further reductions in the discharge of major pollutants and overall improvements in the environment. Seven of nine binding targets in environmental protection set in the 13th Five-Year Plan were met ahead of schedule and were surpassed.
By the end of last year, 74.9 percent of the country’s 1,940 surface water inspection sections were graded in categories I-III, meaning good water quality, an increase of 3.9 percentage points year on year.
“China will not relax its ecological and environmental protection despite new challenges brought by the COVID-19,” said Minister of Ecology and Environment Huang Runqiu on May 25 on the sidelines of the annual session of the national legislature.
In the face of difficulties and challenges, China will not lower its standard on ecological and environmental protection, or loosen environmental supervision and environmental standards for market access, Huang said.
Since May, the ministry has dispatched teams to cities, counties, and enterprises to help local governments identify and resolve prominent ecological and environmental problems and provide technical and policy support, the minister introduced.
Going forward, on the one hand, China would reduce emissions of pollutants at the source, vigorously promote ecological protection and restoration, and boost systematic governance of mountains, forests, farmland, rivers, and lakes.
The minister added that the country would also strengthen supervision over ecological conservation and expand ecological spaces and capacity to safeguard national ecological security.
Meanwhile, China should advance industrial restructuring and transformation in a low-carbon manner, promote green and low-carbon development models and lifestyles, and provide the public with more eco-friendly products, he said.
On the other hand, the country should modernize its environmental governance system, and establish and perfect a sound and comprehensive environmental management system, the minister noted.

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National Security Legislation to Consolidate “One Country, Two Systems” Foundation

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Deputies to the 13th National People’s Congress (NPC) approved the NPC Decision on Establishing and Improving the Legal System and Enforcement Mechanisms for the Hong Kong Special Administrative Region (HKSAR) to Safeguard National Security at the closing meeting of the NPC annual session on May 28.
By plugging the loopholes in the legal system on safeguarding national security in the HKSAR, the NPC Decision can ensure sound and sustained implementation of “one country, two systems”.
The adoption of the Decision reflects central government’s strong willpower and determination in safeguarding national security, as well as maximum sincerity to care for and protect the interests of the HKSAR and the well-being of Hong Kong compatriots. It is of significant and far-reaching influences.
National security is a basic prerequisite for the survival and development of a country, and it is related to the country’s core interests. Since the return of Hong Kong to the motherland, China has been firmly implementing the principles of “one country, two systems,” “the people of Hong Kong governing Hong Kong,” and a high degree of autonomy. The practice of “one country, two systems” has achieved universally recognized success in Hong Kong.
But the practice also encountered new circumstances and problems, and is facing new risks and challenges. The increasingly notable national security risks in the HKSAR have become a prominent problem.
Since the turbulence over proposed anti-extradition bill amendments last June, China has seen increasingly rampant activities by “Hong Kong independence” organizations and radical localists in Hong Kong, escalating violence and terrorist activities as well as excessive foreign meddling in Hong Kong affairs.
All this has gravely challenged the bottom line of the practice of “one country, two systems”, trampled on rule of law, and put national sovereignty, security, and development interests in serious jeopardy. Under such circumstances, China must take effective measures to prevent, stop, and punish the violations in accordance with law.
The rule of law is a basic principle of national governance. Currently, various activities that endanger national security are intensifying in Hong Kong, and an important reason is that there are obvious legal loopholes and lack of enforcement mechanisms in safeguarding national security in Hong Kong.
For example, national security legislation in Hong Kong stipulated by the Article 23 of the HKSAR Basic Law has been stigmatized and demonized and is yet to materialize until now, which marks a severe deficiency of the HKSAR in terms of maintaining national security.
It is urgent to prevent unscrupulous violent criminal acts and stop various internal and external forces from splitting, subverting, infiltrating, and destroying the country. If such activities continue and measures to maintain national security remain incomplete, the interests and well-being of the vast majority of Hong Kong citizens will be kidnapped, and the future of Hong Kong and “one country, two systems” may be ruined.
The central government of a country has the greatest and ultimate responsibility to safeguard the country’s national security. Legislation on national security is undoubtedly within the purview of the central authorities.
Article 23 of the Basic Law of the HKSAR stipulates that the HKSAR shall enact laws on its own to prohibit seven types of acts that endanger national security.
This is a special arrangement under “one country, two systems”, and it does not affect the central government’s continued construction of a legal system and enforcement mechanism to maintain national security and improve relevant legislation and enforcement systems according to actual conditions and needs.
When national security is threatened and seriously damaged in Hong Kong and when the HKSAR government fails to complete its own legislation on national security, the NPC, as the highest organ of state power, is totally entitled and required to make relevant decisions in accordance with the powers granted by the Constitution, and authorize its Standing Committee to punish acts such as splitting the country, subverting state power, and organizing and carrying out terrorist activities, as well as interfering in the affairs of the HKSAR by external forces.
Without a harmonious and stable environment, how can people live in peace and enjoy their work?
The NPC legislation does not target the ordinary Hong Kong residents but a tiny number of people suspected of endangering national security.
The law-based freedom of assembly, freedom of speech and freedom of the press enjoyed by Hong Kong residents will not be disturbed, and their legal rights and freedoms will be better protected in a safe environment of Hong Kong.
As facts have indicated, when a national security loophole is wide open, the entire society will pay a painful price. Only with a solid foundation of national security and a stable overall social situation can the basic rights and freedoms be better protected, deep-rooted contradictions in the economy and people’s livelihood be solved, and the institutional advantages of “one country, two systems” be fully exploited to gain more development room for Hong Kong.
Safeguarding national security is at the core of the “one country, two systems” principle. “One country” is the premise and basis for the implementation of the “two systems” and the “two systems” is subordinated and derived from the “one country” and unified within it.
The most important requirement of “one country” is to safeguard national sovereignty, unity, and territorial integrity. It should be pointed out that the HKSAR still has the constitutional responsibility and legal obligation to maintain national security in accordance with Article 23 of the HKSAR Basic Law, and the special administrative region must complete the national security legislation stipulated in Article 23 of the Basic Law at an earlier date. Any legislation to safeguard national security and its implementation must not conflict with the NPC Decision.
A flourishing country and people living in peace and harmony is the most basic and universal aspiration of the people and safeguarding national security has the deepest and broadest foundation of public opinion.
A prosperous and stable Hong Kong meets the expectations of all parties. We believe that with effectively guaranteed national security, Hong Kong will surely become better, and continue to write a new chapter of economic prosperity and happiness for the citizens and make unique and important contributions to the great rejuvenation of the Chinese nation.

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