World Economy

China Appeals for Restoring Confidence in Global Markets

China Appeals for Restoring  Confidence in Global MarketsChina Appeals for Restoring  Confidence in Global Markets

Chinese Premier Li Keqiang has called for joint efforts to restore global economic confidence following the shockwaves of Britain's vote to leave the European Union.

He said, today the British referendum has had "an obvious impact'' on financial markets and increased uncertainties in the global economy, AP reported.

Li was speaking at the Annual Meeting of New Champions 2016, also known as the Summer Davos Forum.

Speaking at the business conference, Li said, "Under such circumstances, we need to jointly handle challenges, strengthen confidence and create a stable international environment and find solutions to address root causes together.''

Li said Beijing wants to see a "united and stable'' European Union and a "stable and prosperous'' Britain.

In an attempt to address the bubbling market concerns about a deep economic slowdown, Li reiterated that the economy remained stable, CNBC reported.

"China will not head for a hard landing, we are capable of meeting primary targets for economic and social development this year," he said.

He pointed to steady rises in corporate profits within the industrial sector, service-sector expansion, stable consumer price inflation and narrowing declines in producer price inflation as justification for his faith in a soft landing for China's economy.

He also noted the government's progress in job creation, noting that 5.7 million new jobs were created in urban sectors, marking 58% completion of Beijing's annual job-creation target.

Commenting on the implications of Britain's milestone Thursday referendum, in which the UK voted to leave the European Union, Li said the Brexit added a new layer of uncertainty to the global economy at a time when its recovery was only tepid.

Still, he said, China remained committed to growing ties with the UK, as well as the EU, in the future.

Sino-UK Deals

Amid record levels of Chinese international deals, speculation is building whether Britain's decision to exit the European Union will turn off the tap of investment into the region.

Official data last week showed Chinese outbound direct investment soared 61.9% year-on-year during the first six months of 2016, with the ASEAN region, Australia, the EU, and Hong Kong among major destinations.

While no regional breakdown was available, business leaders at the WEF in Tianjin said the UK wasn't a major recipient compared to other European nations, which could mitigate the impact of last Thursday's referendum.

"I don't think a Brexit will have much impact on Chinese companies. We've seen more activity between China-Germany than the UK. Western Europe collectively has been a big destination for outbound investment but the majority of that hasn't been into the UK," John B. Veihmeyer, chairman of KPMG International, said.

Klaus Kleinfeld, Alcoa chief executive, echoed those sentiments. "Brexit won't have a substantial impact on China. The UK doesn't play as important a role as other countries in the EU."

Global regulators have been concerned about Chinese purchases across the US and Europe however, citing tax and antitrust issues.

Earlier this year, Midea Group's attempts to buy out German industrial robot maker Kuka spared a political outrage in Germany, forcing the Chinese home appliances maker to offer numerous guarantees to preserve jobs, Reuters reported.

No Fear

"Chinese investment shouldn't be feared, it should be welcomed. For example, we can help UK companies expand their reach in China," commented Victor L.L. Chu, chairman and CEO of First Eastern Investment.

"A Brexit means more opportunities for Chinese companies," he added.

Speaking on Sunday, Xu Shaoshi, chairman of the National Development and Reform Commission, told WEF attendees that mainland companies would likely wait and see to assess the impact of Thursday's vote. But KPMG anticipates outbound purchases to continue at their current rate as companies in China embrace a more forward-looking approach, instead of short-term profits.

"Half of the Chinese CEOs we surveyed in our Global CEO Survey indicated their primary responsibility was to drive innovation that was a significantly higher percentage than any other country. That passion is driving Chinese outbound investment and M&A activity," said Veihmeyer.