Don't worry about China slow­down, Premier Li tells Davos

The Pak Banker - - COMPANIES/BOSS -

China will avoid a hard land­ing and is fo­cused on en­sur­ing long-term medium-to-fast growth, Premier Li Ke­qiang told global lead­ers in Davos.

While the econ­omy will still face large down­ward pres­sures in 2015, China won't have sys­temic fi­nan­cial risks and will seek to im­prove the qual­ity of growth to en­sure an "ap­pro­pri­ate" pace of ex­pan­sion, Li said in a speech at the World Eco­nomic Fo­rum in the Swiss ski town.

A few hours ear­lier, the cen­tral bank gov­er­nor said on a panel that a slower ex­pan­sion is "good news" if it's more sus­tain­able. The com­ments and the first re­verse-re­pur­chase agree­ments in a year on Thurs­day follow data this week show­ing 7.4 eco­nomic per­cent growth for 2014, the slow­est in 24 years and the first fail­ure to meet gov­ern­ment tar­gets this cen­tury. "For now, the Chi­nese lead­ers are try­ing to hold off broad­based pol­icy eas­ing," said Liu Li-Gang, head of Greater China eco­nomics at Aus­tralia & New Zealand Bank­ing Group Ltd. in Hong Kong. "But if eco­nomic in­di­ca­tors in the com­ing months point to fur­ther weak­ness, China has to act."

Liu said in­vestors aren't fully con­vinced that the world's sec­ond-largest econ­omy can en­gi­neer a smooth "soft-land­ing" into the "New Nor­mal" era of stead­ier growth. He cited risks in lo­cal gov­ern­ment debt and shadow bank­ing.

Kaisa Group Hold­ings Ltd. (1638), a prop­erty de­vel­oper based in Shen­zhen, missed debt pay­ments this month, high­light­ing stresses in the in­dus­try as a hous­ing down­turn weighs on growth.

For Li, the risks are un­der con­trol. "China has much room for ur­ban, sub­ur­ban and re­gional de­vel­op­ment, and do­mes­tic de­mand has huge po­ten­tial," he said. "China's con­di­tion will con­tinue to im­prove and China will bring more op­por­tu­ni­ties to the world if China's econ­omy keeps grow­ing at medium to fast speed for 10 to 20 years."

At an ear­lier panel in Davos on Wed­nes­day, Zhou Xiaochuan, gov­er­nor of the Peo­ple's Bank of China, ex­pressed will­ing­ness to sacrifice growth for sta­bil­ity. "If China's econ­omy slows down a bit, but mean­while is more sus­tain­able for the medium and long-term, I think that's good news," he said.

Zhou said the PBOC will keep money sup­ply sta­ble and not in­ject "too much liq­uid­ity" into the econ­omy. The cen­tral bank to­day con­ducted re­verse-re­pur­chase agree­ments for the first time in a year, help­ing to meet a sea­sonal pickup in de­mand for cash be­fore the Lu­nar New Year hol­i­days.

Li re­it­er­ated that China will pur­sue a pru­dent mon­e­tary pol­icy and proac­tive fis­cal pol­icy. Lead­ers are us­ing ef­fec­tive meth­ods to pre­vent po­ten­tial risks in fi­nance, and the na­tion's sav­ings ra­tio of as high as 50 per­cent pro­vides "strong support" to growth, he said.

Li was the first Chi­nese premier to speak at the an­nual Alps gath­er­ing since 2009. China sent its first of­fi­cial del­e­ga­tion there in 1979, when for­mer supreme leader Deng Xiaop­ing was start­ing to open China to the out­side world.

In 1992, when re­la­tions with western na­tions were thaw­ing after the 1989 crack­down on the Tianan­men Square democ­racy move­ment, thenPremier Li Peng told the Davos au­di­ence that China would con­tinue its eco­nomic re­forms. In 2009, Wen Ji­abao ex­pressed con­fi­dence in main­tain­ing sta­ble growth even as the U.S. and Europe were roiled by the global fi­nan­cial cri­sis and out­lined his mas­sive stim­u­lus re­sponse.

China's in­dus­trial out­put and re­tail sales for De­cem­ber in­creased at higher-than-an­tic­i­pated rates, re­flect­ing the ini­tial ef­fects of pro-in­vest­ment ef­forts and the cen­tral bank's first in­ter­e­strate cut in two years.

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