Chinese Premier Li Keqiang on Wednesday promised more market-opening reforms and said Beijing can keep slowing growth on track, seeking to reassure jittery global markets about the outlook for the world’s No. 2 economy.
Speaking at a news conference, Li promised to shrink bloated steel and coal industries, make the financial system more market-oriented and reduce the government’s role in business. He expressed confidence that despite such wrenching change, the world’s second-largest economy can achieve its official growth target of 6.5 to 7% and avoid mass job losses, AP reported.
“So long as we stay on the course of reform and opening up, China’s economy will not suffer a ‘hard landing’,” Li said at the event capping the annual meeting of China’s ceremonial legislature.
Chinese leaders have spent the past three weeks making unusually high-profile declarations about economic stability following stock and currency turmoil that dented their reputation for adeptly managing growth. At a February meeting of global finance officials in Shanghai, both US Treasury Secretary Jacob Lew and Christine Lagarde, managing director of the International Monetary Fund, said the reflexively secretive communist government needed to do a better job of explaining policy changes.
Li acknowledged China’s slowing growth and regulatory shortcomings, possibly hoping reassure investors and consumers with a show of candor.
China’s ruling Communist Party is navigating a years’ long shift from a worn-out growth model based on exports and investment to a more sustainable approach driven by domestic consumption.
An unexpectedly sharp downturn over the past two years raised the threat of politically dangerous job losses. Beijing has countered with repeated interest rate cuts and injections of money through higher spending on public works construction—setbacks for its campaign to reduce reliance on investment.
Analysts say the growth target, down from last year’s “about 7,” will be hard to meet without more stimulus. The IMF and other forecasters say it will likely fall to 6.3% or lower from last year’s 6.9%.
The economy suffers from “government overreach,” Li said, referring to complaints over the dominance of state companies in areas from energy to finance to telecoms. He said Beijing is failing to do “an adequate job of ensuring a level playing field” for entrepreneurs who generate most of China’s new wealth and jobs.
Li promised to make it easier to set up new businesses. He said the state-dominated financial system would become more market-oriented to support growth.
Mixed Success
The latest jitters over China began with a share sell-off in June that wiped out some $5 trillion. The government spent heavily to buy shares to stop the slide.
The surprise introduction in August of a new mechanism for setting the yuan’s state-controlled exchange rate fueled fears Beijing would weaken the currency to boost exports. The yuan slid against the dollar and capital flowed out of China, limiting Beijing’s ability to support the economy with interest rate cuts without causing more turmoil.
Official efforts to calm markets have had mixed success.
Central bank governor Zhou Xiaochuan’s pledge to avoid “competitive devaluation” calmed depreciation expectations enough to cut interest rates, economist Prakash Sakpal of ING said in a report.
PPP Fund
China will launch a 180 billion yuan ($27.61 billion) fund by the end of March to help financing public-private partnership projects, sources with direct knowledge of the facility told Reuters on Wednesday.
The Ministry of Finance-led PPP fund will be jointly launched with 10 financial institutions, with each of them contributing between five billion and 30 billion yuan, the sources said. The first contribution payment is expected to be made next week.
The ministry did not immediately comment when contacted by Reuters. China’s biggest banks have joined other financial firms in a 180 billion yuan fund to invest in PPP projects, the ministry said in an online statement last September.
