Premier Li Keqiang boosts hopes of economic rebound

PUBLISHED : Saturday, 05 July, 2014, 1:51am
UPDATED : Saturday, 05 July, 2014, 1:51am

Premier Li Keqiang has declared initial victory in boosting the economy but analysts warn of persistent risks.

Li's comment on Thursday that the economy did better in the second quarter adds to market expectations of an economic rebound. It comes on the heels of gauges such as a purchasing managers' index that show economic activity has picked up after Beijing accelerated infrastructure investment, loosened credit and trimmed taxes for small businesses.

"The economic situation in the second quarter improved a bit from the first," Li said at a meeting with leaders from Hunan, Fujian, Shandong and Henan provinces. "This reflects the significant elasticity, potential and room for manoeuvre in economic operation."

But he added the continuing downward pressure on the economy could not be ignored.

This was Li's latest round of talks with local officials. Last month, he urged eight city and provincial leaders to work out plans to stem any economic downturn. Provinces including Heilongjiang and Sichuan have since rolled out aggressive projects worth hundreds of billions of yuan.

The government is to release the quarterly gross domestic product figures on July 16. The economy in the first quarter grew 7.4 per cent from a year earlier - an 18-month low - and 1.4 per cent from the previous quarter.

Beijing has vowed to meet annual targets, which include keeping the growth rate at about 7.5 per cent and creating 10 million jobs.

Excessive capacity and sluggish overseas demand have dragged down growth from a peak of more than 10 per cent in the past, with cooling property prices emerging as a major source of concern of late.

UBS Securities economist Wang Tao predicted economic growth of 7.5 per cent for the second quarter, saying more policy easing would be needed this year, partly due to a high comparison base.

"Headwinds from the ongoing property slowdown are likely to intensify later this year and into the next year," Wang said.