World Economy

Li Tells World Not to Pin Hopes on China

Li Tells World Not to Pin Hopes on ChinaLi Tells World Not to Pin Hopes on China

Chinese Premier Li Keqiang on Friday called on world leaders to step up macroeconomic policy coordination, after meeting the heads of the International Monetary Fund, the World Bank, and other senior global economic officials.

Li said the sound fundamentals of China’s economy remained unchanged despite facing strong downward pressures, and that the government’s debt ratio was not high, although he added that the government would step up regulation of the shadow banking sector and monitor local government fiscal practices, Reuters reported.

At an unprecedented roundtable talk with six global trade and finance leaders, Li said, the world should not pin its hopes on China being the sole engine of growth to bolster the global economy. World economic recovery should not be driven by mainly China, but in concert with many countries.

“China is still a developing country. We cannot shoulder the major responsibilities of the world economy,” Li said.

The premier also addressed concerns that China is promoting its exports through aggressive policy support with the yuan weakening against the dollar.

“Given the financial fluctuations as a result of Brexit, China will advance the market-based reform of the exchange rate,” Li said.

“We will maintain a basically stable exchange rate at a balanced level and we will not engage in a trade or currency war,” he added.

Li made the remarks at a joint briefing with the officials, which also included the heads of the World Trade Organization, the International Labor Organization, the Organization for Economic Cooperation and Development, and the Financial Stability Board.

The world’s second-largest economy grew 6.7% in the second quarter from a year earlier, steady from the first quarter but still the slowest pace since the global crisis.

An anemic private sector and signs of fatigue in the property market point to the increasing possibility the government may need to provide additional stimulus this year to hit its growth target of 6.5 to 7%.

  Lagarde’s Advise

Investors worry a further slowdown in China, aggravated by Britain’s decision to leave the European Union, would leave the world more vulnerable to the risk of a global recession.

International Monetary Fund Managing Director Christine Lagarde called on Europe to quickly resolve questions over Britain’s exit from the European Union.

“Our first and immediate recommendation is for this uncertainty surrounding the terms of Brexit be removed as quickly as possible so that we know the terms of trade and the ways in which the United Kingdom will continue to operate in the global economy and vis-a-vis its partners,” Lagarde said.

The IMF cut this year’s global growth forecast by 0.1 percentage points to 3.1% in a report released this week due to the shockwaves of the British vote, said Lagarde.

She said that before the British vote, the IMF had been preparing to raise its global growth forecast by 0.1 percentage points due to improvement in Japan, China and the 17-country eurozone.

“Unfortunately, the United Kingdom decided to go for Brexit,” said Lagarde, a former French finance minister. “This is disappointing.”

Investors are watching the G20 meeting for any sign the United States, Germany, China and other major economies may agree on joint action to accelerate a weak global economic recovery.

  Yuan Rises

The yuan edged up against the dollar for a fourth straight day on Friday, heading for its biggest weekly gain since April, as traders said state-owned banks were suspected of supporting the currency in the morning.

This week has seen heavy intervention by those banks after the yuan breached a key psychological level of 6.7 on Monday.

Friday is the last trading day before the Group of 20 finance ministers and central bankers meet in Chengdu, China this weekend.