Davos will look to China for positive message

Analysts say Li must allay fears about the 'new normal' of slower growth

PUBLISHED : Tuesday, 20 January, 2015, 2:04am
UPDATED : Tuesday, 20 January, 2015, 7:56am

Since the global financial crisis of 2007-08, the world has often looked to Chinese leaders for reassurance that the nation can continue to drive global growth - and this week's World Economic Forum gives Premier Li Keqiang the opportunity to do just that.

Analysts believe Li will seek to bolster international confidence in the Chinese economy and allay fears about slower growth in the world's second-largest economy when he addresses the gathering of global leaders in Davos, Switzerland, tomorrow.

Li told his ministers yesterday that the government needed to push ahead with reforms and provide more public services amid challenges to the economy.

"China will still face relatively significant downward pressure this year, and it might face more difficulties than before," Li said at a State Council meeting in Beijing. He said the government would promote entrepreneurship and innovation in the private sector.

Jianguang Shen, chief economist with Mizuho Securities Asia, said Li faced "a huge task to provide confidence to global leaders and investors".

Growth in China has slipped to a level unseen for decades, while confidence in European economies has become more uncertain since the de-pegging of the Swiss franc from the euro.

China's stock market slumped yesterday amid fears over economic prospects as well as tighter regulation of high-risk margin trading.

Economists are worried over what President Xi Jinping has described as the mainland economy's "new normal" - the transition from the 10 per cent annual growth of the past 30 years to forecasts of less than 7 per cent in the next few years.

"Premier Li's top priority is to explain how China's economy is entering a period of slower growth and what the implications of such a slowdown are likely to be for the global market," said Feng Zhongping , director of European Studies at the China Institutes of Contemporary International Relations.

Li will be the first premier to attend the meeting since 2009, when Wen Jiabao visited weeks after unveiling China's 4 trillion yuan stimulus to counter the global financial crisis.

The forum, scheduled to run until Saturday, will draw more than 300 heads of state and government leaders and 1,500 business leaders from more than 140 countries.

Wang Tao, chief economist at UBS Securities Asia, said she expected Li to pledge that China would continue to open up to foreign investors, but would also seek investment overseas.

Louis Kuijs, chief China economist at the Royal Bank of Scotland, said Li was likely to urge governments of other major economies to support growth, limit financial risks and pursue economic reforms.

Li will be in Switzerland until Thursday, and meet Swiss President Simonetta Sommaruga.