Premier Li Keqiang makes case for deeper economic reforms over stimulus

Premier says reverting to short-term stimulus would only 'make life harder' in the future

PUBLISHED : Thursday, 01 May, 2014, 11:10pm
UPDATED : Friday, 02 May, 2014, 5:46am

Premier Li Keqiang has said the government will steer clear of short-term stimulus measures to boost the economy.

Li (pictured) said in an article published yesterday that pushing through deeper economic reforms was a wiser and more courageous approach than relying on government spending and borrowing to produce growth.

The 10,000-character article, headlined "Several questions regarding deepening structural reforms", was published in the magazine Qiushi, or Seeking Truth, a political periodical published by the Central Party School and the Communist Party's Central Committee.

The government is trying to rebalance the economy to rely less on state spending fuelled by debt and to open up markets and encourage the growth of the private sector to encourage domestic consumption and spending.

The mainland's economy grew at its slowest pace for 18 months in the first quarter of this year, expanding by 7.4 per cent.

Reflecting on the steps the government had taken to cope with a slowing economy last year, Li said it was crucial it had launched reforms to decentralise decision-making and allow the market to play a bigger role.

Li attributed last year's successes to this "proactive and creative way to macro-manage".

"In a complicated economic environment, we acted calmly, neither tightening up nor easing monetary policies," he wrote.

"If we had instead resorted to stimulus measures, not only would things have turned out very differently last year, we would end up having a harder time in the coming years, too.

"This is the most fundamental lesson last year's experience has taught us."

Li said the government must facilitate more reforms by giving more power to the market. He reiterated his administration's promise to cut the number of permits and initiatives that need government-approval by a third.

Beijing has set a 7.5 per cent GDP growth target this year.

The State Council resisted calls for introducing strong stimulus measures last month, but said the reserve requirement ratio for some rural banks would be cut, allowing them to lend more cash, and tax relief would be expanded for private firms that create jobs. The People's Bank of China later announced it would lower the reserve ratio at county-level rural banks to boost rural development.