BEIJING, China – China’s No. 2 leader tried Wednesday to mollify foreign concerns about its economic slowdown, saying growth is in the “proper range” and Beijing has no plans to allow its currency to decline further.
Speaking at a meeting of the World Economic Forum in the eastern city of Dalian, Premier Li Keqiang said Beijing will stick to plans for market-opening reforms despite recent “fluctuations” in economic performance.
Communist leaders are in the midst of an unusually high-level effort to calm global financial markets after a collapse in Chinese stock prices and abrupt downturns in manufacturing and exports.
The central bank governor, finance minister and securities regulatory agency issued similar statements last weekend that stock market turmoil was ending and the economy was stable.
“The underlying trend of the economy is still moving in a positive direction,” said Li, the country’s No. 2 leader and its top economic official. Pointing to data showing more than 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.”
Li announced no new initiatives but touched on a wide range of issues that are sensitive for foreign investors in a clear attempt to assure them business conditions would remain stable.
China’s economy has cooled steadily over the past two years as communist leaders try to steer it to more self-sustaining growth based on domestic consumption instead of exports and investment. But foreign concern about a possible “hard landing,” with slumping growth fueling political tensions, spiked up after trade and factory activity fell in July and August.
Li said current growth, forecast by the government at about 7 per cent for the full year, is acceptable so long as it generates enough jobs.
The premier said Beijing has no further plans to allow its yuan to decline in value following a surprise Aug. 11 devaluation.
Chinese authorities said the change was aimed at making the yuan’s state-set exchange rate more market-oriented, but it prompted concern Beijing might depress it further to give a price advantage to exporters that are struggling with weak global demand. That sparked fears of a global “currency war” if other governments responded by pushing down their own exchange rates.
The premier said “continuous depreciation” would hurt Chinese exporters by causing foreign customers to postpone orders. He said exporters told him they want stable exchange rates.
“We don’t wish to boost our exports by devaluing the Chinese currency,” said Li.
“Still less do we want to see a ‘currency war’,” he said. “As the Chinese economy has become so closely integrated with the global economy, such a currency war would bring more harm than any possible gains to China.”
The premier also tried to reassure investors that recent economic turmoil would not disrupt progress on carrying out pledges to open more of the state-dominated economy to private and foreign companies.
Reform advocates complain Beijing is moving too slowly in carrying out a long-range development blueprint issued in 2013 that calls for giving market forces a central economic role for the first time.
In a report this week, the European Union Chamber of Commerce in China said regulators are backtracking in some areas, including with the introduction of proposed security legislation that would limit access to foreign computer security products.
“The direction is for China to open wider to receive more foreign direct investment and to open more areas to foreign investors,” said Li.
Li affirmed that Beijing plans to let its currency trade freely, though he gave no time frame. A growing amount of Chinese trade is settled in yuan but Beijing still determines the exchange rate and restricts the flow of money into and out of the mainland.
“It needs to be a process determined by the market,” Li said. “It will take some time, in keeping with the actual situation of China’s economic conditions. But we will press ahead with steps to achieve full convertibility under the current and capital accounts.”