China’s premier warns on Syria

Chinese Premier Li Keqiang expressed concern on Monday over a looming war in Syria, saying the global economic recovery could be negatively affected.

“A regional conflict could make the economic recovery more difficult,” Li said while meeting Klaus Schwab, executive chairman of the World Economic Forum.

Li said the principle of the UN Charter must be adhered to so that a political solution can be achieved. China is willing to work with the international community to build a peaceful and stable environment for the world economy to recover, he added.

Also on Monday at UN headquarters in New York, UN chief Ban Ki-moon said the world body is waiting for a report on investigation results on chemical weapons use in Syria by Åke Sellström, a Swedish expert on chemical weapons.

“Should Dr Sellström’s report confirm the use of chemical weapons, then this would surely be something around which the Security Council could unite in response, and indeed something that should merit universal condemnation,” said Ban. “I am already considering certain proposals that I could make to the Security Council when presenting the investigation team’s report,” Ban added.

Li met Schwab in Dalian two days before the opening of the annual World Economic Forum’s “Summer Davos”.

The premier expressed his confidence in the economic strength of emerging economies, which have been hit hard by capital outflows in anticipation of the tapering off of ultra-loose monetary policy of the US.

“Thanks to the more flexible exchange rate regimes and larger foreign exchange reserves, China is confident that the emerging economies are better placed to cope with the challenges than they used to be,” Li told Schwab.

Also on Monday, Li wrote in a Financial Times opinion piece that he believes Asian economies will not see a repeat of the 1997 financial crisis.

“In my view, the Asian countries have learnt lessons from their experiences and have significantly enhanced their capabilities to fend off risks,” Li wrote.

On China’s economy, Li said he sees sustainable and healthy growth, while promising to continue reform and opening-up. “Some observers ask whether China’s economic slowdown will lead to a sharp decline, or even a hard landing, and whether our reform program will be derailed by complex social problems. My answer is that our economy will maintain its sustainable and healthy growth and China will stay on the path of reform and opening up.

“We will continue to streamline government and delegate power, press ahead with structural changes and grow economic sectors under diverse ownership,” he wrote.

“Government will leave to the market and society what they can do well while concentrating on those matters within its purview.”

He promised to advance reforms on administrative management, fiscal and tax systems and pricing.

Jon Taylor, a professor of political science at the University of St. Thomas in Houston, said Li’s op-ed “sets the stage for major reform, particularly by fighting entrenched interests and inertia in local governments, state owned enterprises, the export sector, and even the financial system itself”.

“Using the Summer Davos conference in Dalian allows for Premier Li to reassure foreign investors and markets that China is sincerely committed to managing continued economic reform and growth,” said Taylor.

Ann Lee, author of What the US Can Learn from China, said she agrees what Li said about China being able to avoid another Asian crisis based on changes to Fed policies. “I believe that if all else remains the same, the only real risks I see to China’s growth trajectory are outright military conflicts and-or a Malthusian crisis,” said Lee, adding that the transition to a service economy will unleash a new wave of entrepreneurial activity.”

Tang Jianwei, an economist at the Bank of Communications, said Li’s remarks reflect the premier’s confidence in China’s economy and his resolve to push forward with reform.

“The centerpiece of Li’s reform is to define the boundary between market and government. Government will withdraw from where it should not be and leave the space for the market and society,” Tang said.

He said he disagreed with what the market describes as “Likonomics”, saying Li’s governing philosophy should not be summarized by short-term policies.

Ding Zhijie, dean of the School of Banking and Finance at the University of International Business and Economics, said China should refresh its thinking on opening-up in the next phase and gradually open its capital account to allow individuals, rather than the government, to hold the nation’s foreign exchange reserves.