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June 28, 2016

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Li pledges support for the real economy

Source: Xinhua | June 28, 2016, Tuesday | Print Edition

PREMIER Li Keqiang said there was no possibility of a hard landing for the Chinese economy when he addressed the Annual Meeting of the New Champions 2016, or Summer Davos, in the northern city of Tianjin yesterday.

“We can deliver the major economic and social development targets set for 2016,” he said at the opening ceremony of the forum for business people and leaders of rapidly emerging economies.

The Chinese economy continued to grow steadily in the second quarter of the year, following a 6.7 percent expansion in the first three months, Li said.

New economic drivers are developing quickly and major economic indicators are stabilizing or improving, he said.

In the first five months, 5.77 million urban jobs were created and May’s unemployment rate in 31 major cities was 5.02 percent. “We are optimistic about the economy now and in the future,” said Li.

The country’s economic fundamentals are unchanged, and the government will keep macro policies constant and stable, he said. “Generally speaking, the economic structure is optimizing. The quality of growth is improving. Momentum is gathering.”

But Li cited weak external demand, sluggish private and manufacturing investment, financial risks and overcapacity as problems.

He vowed to keep pushing supply-side structural reform with a focus on reducing capacity, destocking, deleveraging, and reducing the cost of doing business and fixing shortcomings.

China is trying to wean itself off an over-reliance on natural resources and turn to human resources and innovation to keep the economy growing at a medium-high speed.

The country will continue to promote mass entrepreneurship and the “Internet Plus” initiative to foster new growth engines, Li said. About 40,000 new market entities are being set up every day, he added.

The government will continue to cut excess capacity in the steel and coal sectors in “a market-oriented and lawful” manner, he said, with measures taken to re-employ workers made redundant.

“Overcapacity is a global challenge, and China stands ready to be a responsible country with all these proactive measures,” Li told the World Economic Forum meeting.

The government is reforming its own services to cut red tape and regulate emerging sectors or business models, he said.

Li also promised that China will make fiscal, financial and investment adjustments to support the real economy, deepen reforms in state-owned enterprises and give private firms more access to the market.

In addition, China will further open up the service and manufacturing sectors and create a fairer, more transparent and predictable investment environment for foreign investors.

It will maintain a managed floating foreign exchange mechanism that is market-based and adjusted in reference to a basket of currencies, Li said, adding that economic fundamentals rule out a long-term depreciation of the yuan.

China’s GDP growth slowed to 6.9 percent in 2015 following about three decades of rapid expansion.

The annual target for this year was set between 6.5 percent and 7 percent.

“Growth of 6.5 percent is still very impressive in the current global economic environment,” said Dennis Wijsmuller, chief operating officer of Arqaam Capital, an investment bank in the United Arab Emirates.

He said he was most impressed by the depth and diversity of the Chinese economy in terms of the contribution of local consumption to GDP growth.

The quality of growth is much higher than in the past as China attaches greater importance to environmental protection, coordination and science and technology, said David Wu, Beijing senior partner of consulting firm PricewaterhouseCoopers.

He expected that China’s GDP would double in 10 to 15 years to around US$20 trillion and this would create massive opportunities for domestic and foreign companies.

“We are seeing lots of strong growth and potential in several sectors, which shows that there is reason to be positive,” said Michael Thorneman, managing partner of consulting firm Bain & Company, China.

These include Internet-focused industries, wealth-driven consumption and green technology, he said.

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