International confidence in China’s economy needs a boost, and premier Li Keqiang is addressing the situation head on. Today (Sept. 10) at the World Economic Forum in Dalian, a city in China’s northeast, he spoke to a collection of multinational corporate bigwigs about China’s stock markets, GDP growth, and debt, all topics that have had investors worried in recent months.
Speaking to the crowd at “Summer Davos,” Li pointed to a global economic sluggishness that has lingered since the 2008 economic crisis, but accepted China faces challenges of its own. Nonetheless, he said, China’s “overall fundamentals are still upbeat.”
Below are a few excerpts from Li’s speech (full text here):
“Consumption is contributing about 60% to China’ s economic growth. The service sector now accounts for almost 50% of GDP. Growth of high-tech industries is over 10%. All these are the changes we have been promoting, and we feel heartened by these developments.”
“Last June and July, there were also unusual fluctuations on China’ s capital market. Relevant Chinese authorities took steps to stabilize the market to prevent any spread of risks. Now we can say that we have successfully forestalled potential systemic financial risks.”
“On China’s government debt, the risks are under control. China’s government debt is still at quite a low level. The central government debt is below 20% of GDP, and over 70% of local government debts take the form of investment with returns […] Those who are concerned that China’s government debt may bring serious risks are worrying too much. Having said that, I don’t mean to question if there is a need for you to raise this issue, because for the Chinese, our philosophy is that one should always be mindful of potential dangers even in times of peace.”
“With global foreign investment in decline, FDI flowing into China still grew by 7.7% in the first half of this year.”
As can be expected, Li bounced from specifics to general claims, but his underlying message—that China’s fundamentals are sound—is already the source of great debate among China watchers and economists.
Perhaps the most important fundamental in China is the one target it’s been aiming at for years; GDP growth. And even optimist might find it hard to be cheerful about that this year: