The 9th Annual Meeting of the New Champions, a World Economic Forum conference hosted each year in China. It has come to be known as the “Summer Davos,” opened on Wednesday in the city of Dalian. It has become customary for the Chinese Premier to give a keynote speech at this forum in which the vision for the Chinese economy is showcased. This year more than 1500 participants from business, government, media and research from over 90 countries joined the forum where initiatives are translated in to realities to make a difference in the world.
This year’s summer Davos in Dalian and Mr. Li Keqiang’s keynote speech hold great importance as they come at the time when the average global economic growth rate is on a path of decline and China’s role in the global economy is tremendous. Mr. Li said the Chinese economy “has contributed around 30 percent for world economic growth during the first half this year.” With such a sizeable contribution on China’s part the world needs confidence in China’s economy. That is one of the reasons why the Chinese Premier Mr. Li started his keynote speech by drawing attention towards various economic indicators and the Chinese government’s resolve to stand by “the market-oriented and law-abiding principle in building a transparent, stable and healthy financial market” which emphasize the fact that China’s economy is in good health.
The reforms, that the Chinese government are bringing about aim at diversifying the economy and moving away from the model of being a manufacturing reliant economy towards an economy driven by consumer spending. Mr. Li explained that these reforms are yielding results as China now has a sizeable middle income group and their demand is triggering healthy enhancement in innovation and entrepreneurship. Premier Li in the start of his speech narrated the story of his visit to a local, small "maker enterprise" in Dalian on Wednesday. The company aims to upgrade 30,000 outdated machines in the former heavy industry base of northeast China, so as to exploit the values of these old machines. Mr. Li pointed out that the number of new business being registered in China has grown by 10% in just the first half of this year. "Millions of small and micro enterprises are the hope and future of China," the premier said that, "They deserve the title of 'new champions'"
Mr. Li explained that the Chinese economy is in a phase of transition and during transition there are ups and downs He was firm that China’s leaders “will not be swayed by short-term fluctuations of economic indicators” and he used the term “pulse” to explain this phenomenon. Mr. Li pledged that “short-term fluctuations” in economic data will not be taken “lightly.” “We will timely fine-tune policy measures,” and stress will be laid on subtle measures rather than taking drastic course corrections.
The reality of today’s world is that it is interconnected and with the global economy growth rate slowing down, there is massive downward pressure, it is very challenging to maneuver in such circumstances and the structural reforms being practiced by the Chinese government are holding through. Mr. Li accentuated China’s will to continue to promote structural economic reform as they are bringing home positive results, and that is why unlike other major economies in the world. China’s economic growth is still among the highest and Mr. Li emphasized this point by stating “the world's second largest economy expanded 7 percent” in the first half of this year.
Mr. Li also touched upon the recent market collapse in China. The fundamentals of China are still strong if not going stronger as Mr. Li explained to the business leaders from across the globe that the recent market collapse was stabilized by the government because they had “taken measures to prevent the spread of financial risk and stabilize the stock market,” saying that similar tactics are used by governments around the world. There has been a lot of speculation regarding the summer financial turmoil in China with the stock market crash but as highlighted by Premier Li various economists also believe that China has actually come out stronger. The most significant point to ponder upon is the fact; that Chinese government is not involved in massive bailout schemes to save businesses and markets, nor does it suffer from the risks of government debt. This lends credence to the fact that the Chinese government is reliant on reforms rather than stimulus packages in resolving financial fluctuations. This lauds confidence in the fundamentals of the Chinese government.
There have been diverse views regarding the depreciation of the Chinese Yuan. The premier addressed this issue by explaining that "We don't intend to stimulate export by devaluating the yuan, since it is not a move to match the government's aim to restructure the economy. Nor does China welcome competitive devaluation of currencies in the world." China believes in global interconnectedness and Mr. Li’s emphasis on the fact that the Chinese economy poses no threat should be accepted with confidence as China is deeply integrated with the global economy and with efforts to boost foreign investment in China by reducing hindrances by 50%, China’s resolve to further liberalize their economy and the One Belt One Road Initiative of connecting economies to boost development are all major confidence building measures to ensure Chinese economy’s stability and for the world to maintain confidence in China.
Various economists the world over feel that it is normal for an economy to pass through crests and troughs and this is very normal for a transitioning economy like China. Economists like Mark Schwartz chairman of the Goldman Sachs-Asia Pacific region, feels the same way and he expressed that when it comes to China “the market reaction globally is overdone; China is going through a very normal transition, from a state controlled system to a market oriented system.” Schwartz believed that globally people are impatient when it comes to China and the transition is going to take a long time. The reforms that the Chinese government is committed towards are all steps in the right direction and economists believe that China has enough financial leverage and policy options to recover from any future systemic financial risks and crises like the one they successfully fended this summer. These arguments by various economists assert that it could not have been better put, than Premier Li Keqiang’s statement; “China's economy faces challenges and downward pressures but there is no risk of a hard landing.”
