Don’t worry about China’s slowing economic growth, Li Keqiang tells Davos
Premier tells global leaders that economy will face headwinds but growth prospects to come from the country's vast urbanisation push
China's economy will still face large downward pressures this year but it will avoid a hard landing.
That was the message Premier Li Keqiang delivered to global leaders in the Swiss ski resort of Davos on Wednesday night after China reported its slowest annual economic growth in almost a quarter of a century.
In a keynote speech at the World Economic Forum, Li said China would not face systemic financial risks and the government aimed to improve the quality of growth to ensure an appropriate pace of expansion.
But he also pledged that China would forge ahead with major reforms in pursuit of long-term medium-to-fast growth.
"The Chinese economy will face comparatively large downward pressures in 2015," Li said. "China's economy has entered a period of new normal.
"The new situation has made structural reform all the more necessary."
The comments came a day after China announced that its economy expanded by 7.4 per cent last year, the slowest annualised growth rate since 1990.
China averaged near 10 per cent growth in the 25 years from 1978, when former paramount leader Deng Xiaoping launched market reforms and a policy of opening up.
Jianguang Shen, chief China economist with Mizuho Securities Asia, said Li's speech was pragmatic.
Watch: China's economy not heading for 'hard landing', premier Li Keqiang tells Davos
"It was very realistic, not avoiding problems. He explained Chinese policy well, saying that structural reform is more important and the Chinese government wants to avoid a hard landing. That's exactly what foreign investors want to hear," Shen said.
Louis Kuijs, chief economist for greater China at Royal Bank of Scotland, said Li's remarks were largely unsurprising, especially the assurances on avoiding a systemic financial crisis and a hard landing. "Whether this changed the minds of the China bears is another question," Kuijs said.
In his speech, Li also said that China's slowing economy reflected the broader, global situation but the world's largest developing economy still had room for expansion because of its urbanisation push.
"China has much room for urban, suburban and regional development and domestic demand has huge potential," Li said. "China's condition will continue to improve and China will bring more opportunities to the world if China's economy keeps growing at a medium-to-fast speed for 10 to 20 years.
"Domestic demand will keep improving and bring even greater development for the world."
China would also launch new projects, including in rail infrastructure, Li said.
Li underscored the urbanisation theme in another WEF session, where he said the programme would buoy long-term growth in the property market.
"The demand for property will be long-lasting as urbanisation will create long-term demand for housing," Li said.
Kuijs said Li's focus on the real estate sector was interesting, because he talked not just about its short-term prospects but also the longer term and the link with the urbanisation process.
"The reforms needed to change the nature of urbanisation have long been advocated by him," Kuijs said.
Li added that China had pledged to increase the share of non-fossil fuels in primary energy consumption to around 20 per cent by 2030, which would require painstaking efforts by the country's 1.3 billion people.
