Reforms enter critical stage, says Premier Li Keqiang
Finance-sector restructuring poses the greatest challenges as drive moves into 'deep-water zone'
Premier Li Keqiang says Beijing's economic restructuring drive has entered a critical stage, with an overhaul of the financial sector one of the most important and most complicated tasks to be tackled.
Indicating concerns that the world's second-largest economy might decelerate too much as overdone, Li said the central government was confident it could meet this year's economic goals through structural reform, ruling out the need to significantly loosen fiscal or monetary policy to stimulate short-term growth.
In his opening speech to the World Economic Forum in Dalian yesterday, Li also said the government would seek to identify the core issues in reforms, which, once implemented, could exert a major impact on the entire process.
"Financial reform is an important part of economic system reform," he said. "It is a complex, systemic project, and because it is such a complex, systemic project, it means China's reforms have entered a deep-water zone, or the most difficult phase." In the next stage, he said, the key was to stick to market-oriented principles. The government would "actively and steadily" push forward with interest rate and exchange rate liberalisation, promote the yuan's convertibility under the capital account, and ease barriers for new, smaller players to enter the state-dominated financial industry, he said.
The steps already taken by Beijing to stem a sharp slowdown in economic growth had had an effect, he said.
"Some people expressed concern about whether China's growth might decelerate too fast, as some other countries experienced, or even see a so-called hard landing," he said.
But Li said the economy's fundamentals were "sound" and its operations stable.
The mainland's economic growth cooled to 7.5 per cent in the second quarter, from 7.7 per cent in the first and 7.9 per cent in the fourth quarter of last year, hit by global headwinds and excess capacity at home.
Since then, Beijing has cut tax for small companies, boosted investment in railways in poorer regions, and raised spending on urban facilities, while maintaining its grip on credit growth.
Industrial output growth jumped to a 17-month high last month while export growth quickened, suggesting a solid recovery in economic dynamics.
Li also said that local governments' borrowings, highlighted by analysts as an area of concern for financial risks, remained "safe and controllable".