China’s Premier is trying to soothe international concerns over market volatility and slowing growth in the world’s second-largest economy. Beijing had recently devalued the yuan and lowered its 2014 growth reading.
China has fended off potential risks to its financial system while keeping its economic prospects positive, Premier Li Keqiang said on Wednesday, as he seeks to quell fears that the country’s economy might be faltering.
“The government took measures to stabilize the market and prevent risks from spreading, we have forced out the possibility of any systemic risks,” Li said during a speech at the World Economic Forum in the north-eastern Chinese city of Dalian.
He admitted that China’s economy – a key driver of global expansion – was facing downward pressures, but tried to soothe concerns that the country was headed for a hard landing after years of breakneck growth.
“There has been overall stability in China’s economic performance in spite of a certain amount of moderation. There’s an overall positive trend in spite of difficulties we face,” he said, adding that Beijing would “fine tune” its policies to provide more support.
Stronger fiscal investment
China’s finance ministry said also on Wednesday it would adopt “stronger” fiscal policies to support growth, including accelerating major infrastructure construction projects and pushing reforms to its tax system.
On Monday Beijing had lowered its 2014 growth reading to 7.3 percent, down from 7.4 percent announced in January.
Official data released on Tuesday showed the country’s imports were down for the tenth consecutive month in August, dropping 13.8 percent, further adding to concerns over sluggish domestic demand.
These revelations and the surprise move to weaken the yuan in August continue to make investors nervous, who are concerned the currency might be set for a series of devaluations.
But Li on Wednesday reiterated China’s position that the devaluation was a reform aimed at allowing markets a greater role in valuing the currency, saying he expected it to remain stable from here onwards.
There’s no basis for continuing depreciation “because China has a large amount of foreign exchange reserves,” he said, adding that China doesn’t want to see a currency war.
Major reforms of state-owned firms coming up?
China is preparing to unveil broad reforms for state-owned companies, leading to the shutting of some firms and a more diversified ownership structure in others. A new batch of innovative state-owned companies is also in planning, according to a purported Communist Party document circulating online.
The official Xinhua news agency had reported that the ruling Party has approved guidelines for “deepening state-owned enterprise (SOE) reform,” which will soon be announced publicly.
“We consider this round of SOE reform a game-changer of China’s economic development,” ANZ Banking Group said in a research report on Wednesday.
“By encouraging private sector participation and allowing market forces to play a decisive role in resource allocation, the reform will unlock a massive amount of economic value,” the report said.
Many of China’s biggest state firms have already listed units on domestic and overseas stock markets, though the state continues to hold majority stakes.
el/nz (AFP, Reuters, dpa)
