Premier Li Keqiang’s reassuring words must be met by action

The world media came to ask the man in charge of China’s economy questions on everyone’s mind, and Li Keqiang (李克強) was ready for them. The premier’s traditional press conference after the annual sessions of the NPC and the CPPCC has in the past been the forum for raising a range of issues. This time nearly all the questions from Chinese and foreign media were about the economy. This reflects considerable anxiety and scepticism over whether China can continue to develop and grow its economy at a rate necessary to drive global growth and recovery.

Li struck a note of confidence that the country could meet a 6.5 per cent annual growth target for the rest of the decade, bring debt under control, push ahead with reform of state-owned enterprises, provide jobs or welfare – a “new rice bowl” – for millions of displaced workers to safeguard social stability, and maintain decent health care and pension for an ageing population. He therefore left out few of the widely held concerns about mainland growth. The world hears what he says and feels relief at his confidence, but it is sure to be watching closely to see whether policies and actions justify it.

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In trying to ease concerns about China’s ability to achieve targeted growth, Li sought to convey reassurance on some sensitive specifics. For example, he insisted that recent cuts in banks’ required reserve ratio and interest rates did not amount to quantitative easing or crude stimulus, but support for the real economy, such as small to medium-sized businesses. His admission that the state remains too involved in the economy – “managing affairs that [it] should not be managing” – is encouraging. Likewise his admissions that the non-performing loans ratio in the financial sector is rising and that corporate debt is high and needs to be lowered by means such as “debt-for-equity” swaps; that there is a need to improve the financial regulatory system to cover the risk of innovation without rolling back the clock and tightening control over markets; and that China can solve its economic problems only through further reform. If actions equal words, particularly in financial regulation, they will ease worry that difficult and painful reform in China is stalled.

The tone of his remarks carried through to his answer to a question about Hong Kong’s future and the Mong Kok riot. Ignoring the latter, he repeated the ritual expression of respect for “one country, two systems” and said the city had to make its own efforts for development, though Beijing would support proposals to maintain its prosperity and stability. The ball is in our court.