China will not use ‘all-out stimulus’ to boost slowing economy, Premier Li Keqiang says
- Premier Li Keqiang says China will continue opening up its economy to foreign firms at 1+6 meeting with major international economic organisations
- China’s economy is growing at its slowest pace in decades, amid a trade war with the US and slowing domestic consumption
Chinese Premier Li Keqiang again ruled out stronger stimulus measures to boost economic growth during a meeting with leaders from major international economic institutions, signalling Beijing’s top policymakers have reached consensus on how to manage the country’s domestic slowdown.
“No matter how the external situation changes, China will firmly implement a higher level opening-up [of the domestic market to foreign firms]. We’ll implement policies precisely, ensure thorough implementation of [past] tax and fee cuts, and agree not to use all-out stimulus,” Li said at a press conference in Beijing after Thursday’s annual 1+6 Roundtable with the chiefs of the International Monetary Fund, World Bank and World Trade Organisation, among other institutions.
Li’s remarks may help dampen expectations among many private-sector economists who believe Beijing will be forced to implement more aggressive policy easing to halt an economic slowdown amid a trade war with the United States and domestic headwinds.
We’ll implement policies precisely, ensure thorough implementation of [past] tax and fee cuts, and agree not to use all-out stimulus
Many analysts believe Beijing needs to boost growth next year to meet its goal of doubling the size of the nation’s economy over the decade to 2020.
Zhang Yu, chief macroeconomic analyst with Huachuang Securities, estimated a growth rate of 5.8 per cent would be enough for China to hit its 2020 target, at least 0.3 percentage points lower than previous estimates based on the old 2018 GDP level.
“If the census data eases the pressure for meeting the GDP doubling target and employment is stable, policymakers’ tolerance for the economic slowdown would obviously increase, even if there’s possibility that quarterly GDP growth drops below 6 per cent” in coming quarters, she wrote in a research note.
While rejecting large-scale stimulus, Beijing is continuing to fine-tune its economic policies to prop up its economy, including bringing forward next year’s local government bond issuance quota to this year to ensure the funding of infrastructure construction projects.
On Thursday, Premier Li emphasised the government would continue to use its countercyclical adjustment tools and take measured steps to boost domestic consumption. Priority will be given to policies that support employment and development of small and medium-sized enterprises.
To avert a sharper slowdown, it’s essential to resolve bilateral trade relationships, and also to improve the quality and transparency of China’s lending
After the 1+6 Roundtable meeting, David Malpass, president of World Bank, warned China’s economy faces growing debt and structural constraints that require new drivers of growth.
“To avert a sharper slowdown, it’s essential to resolve bilateral trade relationships, and also to improve the quality and transparency of China’s lending,” he said at the press conference.
“I encouraged new reforms and liberalisation: China could improve the rule of law, allow the market to play a more decisive role in allocating resources including debt and investment, reduce subsidies for state-owned enterprises and other distortions in the economy, and remove barriers to competition.”
