China's Economic Growth in Proper Range: Li Keqiang

K J M Varma/Beijing
China's Economic Growth in Proper Range: Li Keqiang

Chinese Premier Li Keqiang today tried to placate global investors about an economic slowdown in the world's second largest economy, saying growth is in the "proper range" and China has no plans to allow Yuan to depreciate further to trigger a currency war.

"The underlying trend of the economy is still moving in a positive direction," said Li, the country's No 2 leader after President Xi Jinping.

Claiming that 7 million urban jobs were created in the first half of the year, he said, "all this shows the Chinese economy has been running within the proper range."

He also said China, the world's largest trading nation, has no intention of boosting exports through currency depreciation.

Playing down global concerns over yuan's 4 per cent depreciation in a week last month, Li told the Summer Davos forum at Dalian that China is unwilling to see a currency war as it will be harmful to the country.

Top leaders in the Communist nation, a key driver of global growth, are making high-level efforts to normalise global financial markets which have been in turmoil since a collapse of the Chinese stock market and a sharp decline in manufacturing and exports.

Using yuan depreciation to boost China's export does not accord with the structural readjustment of the Chinese economy and export businesses also want the yuan to remain stable at an equilibration level, Li said.

China depreciated yuan about 4 per cent in a span of just two days, sending a cascading affect in India and other world markets.

Li, however, said there is no basis for continuing the depreciation, indicating there will be no more decline in yuan.

China is willing to make the yuan join the Special drawing rights (SDR). Instead of the source of global financial risks, China remains one of the drivers of global growth, he said.

About the stock market collapse in June-July in which USD 3.2 trillion worth of capital has been wiped out, Li said China fended off potential systemic financial risks during the market collapse.

Authorities have taken measures to prevent the spread of financial risk and stabilise the stock market during unusual fluctuations in June and July, Li said when answering questions from Yorihiko Kojima, chairman of Mitsubishi Corporation, during discussion with global business leaders.

The measures are normal practice in global markets and do not mean the government is trying to replace the market or weaken it, Li said.

China will continue to develop a multi-layered capital market and make it open, transparent and stable based on market forces and the rule of law, he added.

Weighed down by volatile global markets, Chinese shares have gone through major fluctuations in the past two months with the benchmark Shanghai Composite Index falling around 40 per cent from its peak in June.

"The recent volatility appeared to be a follow-up to the global financial crisis that broke out in 2008," Li said.

"China is not the source of it, but instead remains as one of major drivers of global growth," he added.

China will continue financial reform for the sake of stability and the opening up of the sector, the premier said.

China has scrapped the interest rate ceiling for both loans and deposits, established a link between Shanghai and Hong Kong exchanges and allowed more international investment.

The government will widen access for private and foreign capital to enter the sector in the future. The reform will not change its path nor slow its pace, Li said.

"The economy is stabilising despite a slower growth pace. On the one hand it is turning for the better while stabilising; on the other hand difficulties remain," Li added.

As China is promoting the structural reform, the change of growth engines can lead some economic indicators to fluctuate, which is inevitable, he said.

China will keep deepening economic reform and promoting structural adjustment, Li said.

"We will not be swayed by short-term fluctuations of economic indicators. We will not take them lightly either. We will timely fine-tune policy measures," he added.

An IMF forecast of the Chinese economy said it will grow at 6.8 per cent which is lower than the 7 per cent target set by the government.

In its recent World Economic Outlook update, the IMF forecast the Chinese economy to grow 6.3 per cent in 2016 and 6 per cent for 2017.

The Chinese government is capable of maintaining the economic growth at a medium-to-high level, Li said.

Assuring foreign investors the premier said China will make it easier for foreigners to invest in its industries.

Foreign direct investment in China remained robust at 7.7 per cent during the first half this year amid a sluggish global economy, he added.

China is striving for a level playing field for both Chinese and foreign firms as the economy is seeking to tap innovation from all sources for more sustainable growth.

The government has halved the number of industries that are off limit to foreign investors, and has cut red tape for foreign companies, he said.

It is negotiating with the United States and European Union over bilateral investment treaties based on the "negative list" approach of clearly-stated banned practices.

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