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Shanghai’s economic performance in 2016

Feb 20, 2017

'The Shanghai government’s information office held a press conference on January 22 on the city’s economic performance in 2016.

Tang Huihao, chief economist, Shanghai Statistics Bureau

The Paper: In the second half of last year, the exchange rate between the RMB and the US dollar kept declining. What impact has it had on Shanghai’s imports and exports?

Tang Huihao: It’s true that the exchange rate fluctuation had an impact on Shanghai’s imports and exports. Apart from the exchange rate, the rise in raw material prices and labor costs should also be considered. Meanwhile, the exchange rate between the US dollar and some other currencies also appreciated, which to some extent hedged the influence of the RMB’s depreciation to the US dollar. Shanghai’s imports and exports are shifting from the original “large volume import and export” to the current “high quality import and export” model. Shanghai now pays more attention to the import and export of high-quality products and services. Considering the factors from all aspects, the impact of the RMB’s depreciation to the US dollar on Shanghai’s imports and exports has been limited. Thank you.

Jiefang Daily: I have two questions. In 2016 the gross domestic product of Shanghai rose by 6.8 percent, which is higher than the national average. What areas could be the new growth points in the short and middle term? Another question is about financial statistics. The growth rate of the financial industry dropped significantly in 2016 from 2015, what are the main reasons? Does it mean the riskier areas of the financial industry have been controlled well?

Tang Huihao: First of all the 6.8 percent increase in Shanghai’s GDP fell within the target range of 6.5 percent and 7.0 percent set at the beginning of 2016. Overall the economic development in Shanghai was stable and healthy in 2016. I suggest you to see the GDP from three aspects:

1. The influence of external development environment. As we all know, the economic recovery in the global market was very weak, so was international trade. The economic pace in China was also slow due to structural contradictions and risks. Both had an impact on Shanghai’s economy. Comparing Shanghai with similar economic centers in the global perspective, the 6.8 percent rise in GDP is very high, something which is not easy to achieve.

2. The development of Shanghai on its own. Shanghai is currently at the key stage of transformation of industries, thus the pressure on the economy is relatively big. From statistics we can see that the GDP figure in 2016 was 0.1 percentage point lower than 2015. But compared with the previous two years, we can see the drop has narrowed and the pace of economic development has steadied gradually.

3. The change in some industries, including the financial industry, you just mentioned, and the real estate sector. In 2016 the added value of the financial industry rose 12.8 percent, which was 9.8 percentage points lower than 2015, and its contribution to Shanghai’s economy dropped 13.8 percentage points from 2015. The added value of the real estate industry rose by 4.5 percent, or 4.5 percentage points lower than 2015, and its contribution to the local economy fell 2.2 percentage points from 2015. These are normal for a city in industry transformation. The stable development of the financial industry on the basis of high value in 2015 was actually healthy. Under the regulatory policies on the real estate industry, the development of the sector returned to a stable and rational course, which is beneficial for its long-term, sustainable development.

As for the financial industry you mentioned, I can provide some extra statistics. In 2016 the added value of the industry in 2016 was 12.8 percent higher than 2015, and it was 3.3 percentage points higher than the service industry on average.

First of all, credits and loans were stable, the balance of local and foreign currency at the end of the year rose 6.5 percent from the end of 2015, and the loan balance jumped 12.4 percent for domestic and foreign financial institutions at the same time.

Second, the insurance sector performed well with a premium income of 152.926 billion yuan, soaring 35.9 percent over 2015. The insurance sector performed its function of ensuring people’s livelihood on critical illness insurance, buying commercial insurance with the balance from individual medical insurance accounts, long-term care insurance and housing reverse-mortgage for seniors.

Third, stock prices returned to a normal level. In 2016 the Shanghai Composite Index was in a narrow range and the trade volume returned to its normal level. In 2016 the trade volume of the Shanghai Composite reached 49.79 trillion yuan, dropping 62.4 percent from 2015.

Fourth, the scale of other financial markets kept expanding. Trade volumes at the futures exchange, the interbank market and the Shanghai Gold Exchange rose quickly by 33.7, 36.3 and 61.7 percent, respectively.

Xinmin Evening News: What are the characteristics of the consumption price in Shanghai in 2016? It has been higher than the national average for years. Could you please analyze it for us and tell us the likely trend in 2017?

Tang Huihao: In 2016, the CPI rose 3.2 percent, 0.8 percentage points higher over 2015 due to the rise in agriculture, real estate, medical and labor costs. There are some characteristics for the CPI:

First, service prices rose higher than those of commodities. In 2016, service prices rose 4.5 percent, 1.3 percentage points higher than 2015. The steady rise in rental prices, medical service reforms and the high level of labor costs are the three main factors for the accelerated rise in service prices. Commodity prices were on an upward zone as they rose 2.2 percent, 0.2 percentage points higher than 2015.

Second, among the eight categories of consumption prices, seven were up. Let’s look at the details, the price of medicare rose 9.0 percent, the highest among all the eight categories, pulling up 0.6 percentage points for the overall index. It was followed by housing, food, tobacco and wine prices. The housing price rose by 5.1 percent and the food, tobacco and wine prices edged up 3.7 percent, pulling up 1.4 percentage points and 1.0 percentage point for the overall index, respectively. The above three categories accounted for 93.8 percent of the overall index, and are the main factors for the rise in CPI.

Just now you mentioned that the rise in CPI is higher than the national average. It has been higher than the national average for 36 months since January 2014. In 2016, the CPI national figure was 2.0 percent, while in Shanghai the CPI stayed over 3.0 percent for 10 consecutive months, and it ranked first among all provinces, prefectures, municipalities and 36 large and medium sized cities.

The main reason for the difference in the CPI between Shanghai and the national average is in the service area. In 2016 the national CPI and of Shanghai rose 1.9 percent and 2.2 percent, respectively. However, service prices increased by 2.2 percent and 4.5 percent, respectively. Of the eight categories, medicare, healthcare and housing were the main factors for the difference due to the rapid rise in medical service and home rental prices. In 2016 the medicare price jumped 9.0 percent, 5.2 percentage points higher than the national level; the housing price rose 5.1 percent, 3.5 percentage points higher than the national figure.

As for the CPI in 2017, we believe that as prices of staple commodities continue to edge up, the basic fluctuating trend remains, and the policies of adjusting medical service prices continue to influence the CPI, it still face upward pressure. However, as the supply of agricultural products remains stable and China’s monetary policy stays consistent, a big increase in Shanghai’s CPI is very unlikely. Thank you! Fiscal revenue of Shanghai in the first half of last year surpassed 30 percent with a yearly growth of 16 percent. Could you please analyze the growth and give us some details on fiscal expenditure?

Tang Huihao: The general budget revenue of the city increased 16.1 percent to 640.6 billion yuan last year. It grew relatively fast as a result of industrial structure optimization and good economic operation. Firstly, the tertiary industry plays an important role in improving the fiscal revenue. Last year, the revenue of the tertiary industry accounted for 81.3 percent of the city’s general budget revenue. Revenue of finance, real estate and business services grew 8, 40.3 and 31.2 percent, respectively, accounting for 70.7 percent of the added fiscal revenue. Secondly, Shanghai is one of the earliest cities to promote innovation and economic transition, which leads to improvements in economic stability and efficiency.

Last year, the city’s general budget expenditure reached 692 billion yuan, up 11.7 percent year-on-year. The city has done a good job in improving people’s livelihood last year. Expenditure on social insurance and employment jumped 82 percent. Expenditure on public security increased 22.3 percent. Expenditure on health service and family planning grew 21.8 percent.

Wenhui Daily: Shanghai issued some macro-control policies on the real estate market last year, what changes have they brought to the market? Can you predict the trend for this year? And the second, the percentage of the tertiary industry has surpassed 70 for the first time, growing faster than the secondary industry. Are there any underlying risks in the proportional changes?

Tang Huihao: Last year, macro-control policies were issued to curb unreasonable fluctuations in the brisk real estate market of the city. Property transactions declined after the “9 Measures” were issued at the end of March. At the beginning of November, the “6 Measures” and “1128 Policy” further cooled down the real estate market.

Housing prices in the city naturally fell after the “9 Measures” and “6 Measures” were issued. The new regulation policy on the real estate sector has had positive effects on the healthy and steady development of the market.

The real estate market last year showed the following characteristics:

Firstly, growth of real estate investment slowed down last year. Investment in the real estate sector rose 6.9 percent. The growth speed was 1.3 percent slower than that of the year earlier and 1.8 percent slower than the first half of last year. Investment in residential houses, office buildings and commercial houses increased 8.4, 6.3 and 11.1 percent, respectively.

Secondly, floor area of sold commodity houses grew slower. Sold space of new commercial houses grew 11.3 percent last year. The growth dropped 5.3 percent from the year earlier and 18 percent lower than the highest point last year.

Thirdly, real estate prices rose at first and then fell last year. Prices of new commercial houses and pre-owned homes rose 32.8 and 30 percent, respectively, from the year earlier. The total monthly increase was 31.7 and 32.8 percent, respectively. Real estate prices surged in August and September and fell in the second half of October. New commercial house prices in November and December fell 0.1 and 0.2 percent, respectively, from a month earlier.

This year, the city will strictly enforce the real estate macro-control policy on the principle of “Houses are built to be inhabited, not for speculation” to ensure healthy development of the real estate sector.

As for the second question why the proportion between the secondary and tertiary industries has changed, my answer is that the latter grew faster, which led to the increase in its percentage of the whole industry. Last year, the added value of the secondary industry grew 1.2 percent while the tertiary industry rose 9.5 percent. Now, Shanghai is promoting structural reforms of the supply front, and also the development of the free trade pilot zone and science innovation centers. I believe that the secondary industry, especially the advanced manufacturing industry, will be further strengthened in the future. Last year, industrial investment saw an obvious increase of 2.3 percent, revealing the city’s intensified attention on the industry.

Shanghai Securities News: According to statistics, the strategic emerging manufacturing industry has been developing fast, could you please analyze the reasons and also predict the development for this year? Thank you.

Tang Huihao: Last year, the development of strategic emerging industries led the whole industry. The strategic emerging manufacturing industry began to rebound in March. Total output value of strategic emerging industries hit 830.8 billion yuan, up 1.5 percent year-on year. The growth speed was 0.7 percent points higher than that of above-scale industry output value. Last year, the strategic emerging manufacturing industry accounted for 26.7 percent of above-scale industrial output value, up 0.7 percent from a year earlier.

First, the country’s subsidiary policies and the city’s free license plate policy for new-energy vehicles boosted both the production and sales of new-energy vehicles with output value increasing 23.4 percent to 13.2 billion yuan.

Second, after subsidies for users of distributed and integrated power stations, the total output value of the new-energy industry grew 0.7 percent from the year earlier to 44.3 billion yuan.

Third, bio-medicine, new-generation information technology, energy-saving and environment-friendly manufacturing industries grew 5.9, 5.7 and 0.3 percent, respectively.

With the construction of scientific innovation centers and increasing investment in emerging industries, I am optimistic about the future development of the strategic emerging industry in the city.