China’s Premier Li Qiang struck an upbeat tone about the world’s second largest economy on Tuesday, telling a gathering of global financial elites that growth in the current quarter will be higher than it was in the first three months of the year.
“We are on track to achieve the annual growth target of ‘around 5%’ that we set earlier this year,” he told delegates at a World Economic Forum (WEF) summit in the northern Chinese city of Tianjin.
“We are fully confident and have the ability to promote the high quality development track of China’s economy over a long period of time,” he added, promising to roll out more measures to support growth.
Following his comments, Chinese stocks and the yuan made gains. Hong Kong’s Hang Seng index (HSI), which briefly slid into a bear market last month, closed up 1.9%. The Shanghai Composite rose 1.2%. And after hitting its lowest level against the US dollar in seven months on Monday, the yuan gained about 0.3%.
Li’s speech comes as Beijing grapples with mounting economic headwinds, resulting in efforts to boost growth even as it censors critical voices.
After China achieved a solid 4.5% expansion in the first quarter, its recovery has lost momentum in recent months in many areas, including manufacturing, property, retail and exports. The unemployment rate for 16- to 24-year-olds hit 20.8% last month, shattering the previous record set in April.
On Monday, S&P Global cut its 2023 growth forecast for the country to 5.2% from 5.5% previously. It was the first time a global credit ratings agency had cut China’s growth projections this year. Its analysts cited weak confidence among consumers and in the housing market as the key risks.
Earlier this month, a string of Wall Street banks also slashed their forecasts. Goldman Sachs said the recovery sparked by the country’s post-Covid reopening in the first quarter appeared to have “fizzled out” in the April-to-June period as it downgraded its annual forecast to 5.4% from 6%.
But not everyone is similarly downbeat. In June, the World Bank raised China’s 2023 growth forecast to 5.6%, up from a previous estimate of 4.3% made in January, citing a possible rebound in consumer demand and “resilient” capital spending in infrastructure and manufacturing.
To bolster growth, the People’s Bank of China cut its main benchmark lending rates last week for the first time in 10 months. Many analysts said the move wasn’t enough and called for a much bolder stimulus package, including direct measures to boost consumption and the housing market.
On Tuesday, Li pledged to do more to support the recovery.
“We will introduce … more pragmatic and more effective measures,” he said, without giving much detail, adding the measures aim to boost domestic demand and market vitality.
No to de-risking
Li spoke at a forum that was held in person for the first time in four years. Known as the “Summer Davos,” it has over 1,500 participants, including the prime ministers of New Zealand, Vietnam and Barbados, as well as ministers from Saudi Arabia.
The premier, who is number two in the Communist Party’s hierarchy after Chinese President Xi Jinping, also dismissed talk about “de-risking” from China.
“Some people in the West are hyping up so-called concepts of reducing dependency [on China] and de-risking. I would say these concepts are false propositions,” he said.
US President Joe Biden and his European allies have stressed desire to “de-risk” from the Chinese economy. That has led to coordinated efforts to remove China from technology supply chains that can be used to advance its military strength.
Some Western companies have also been moving manufacturing away from China amid growing geopolitical tensions.
Li called for “de-risking” decisions to be made by companies rather than governments
Economic globalization remains unchanged, and there should be more cooperation and communication, he added.
“We are willing to work with entrepreneurs from all over the world to firmly support globalization, firmly maintain the market economy, firmly support free trade and lead the world economy towards a more inclusive, resilient and sustainable future.”
Li made similar comments during his trip to Europe last week, when he tried to woo the region’s biggest companies.
Greater censorship
But as China’s recovery loses steam, the authorities have ramped up censorship of comments critical of the state of the economy.
Wu Xiaobo, an influential writer on financial issues with 4.7 million followers on China’s Twitter-like Weibo, has been banned from posting on the platform for “hyping up the unemployment rate issue and disseminating negative, harmful information to smear the development of the stock market,” according to a statement issued by Weibo Monday.
The statement also accused Wu of “attacking and undermining China’s current policies and management systems,” without offering details on the posts that got the writer into trouble.
Two other influential commentators on Weibo were also banned from posting for the same reasons, according to the statement.
The censorship has sparked a wave of criticism on the social media platform.
“The state of the economy and the stimulus policy have become such sensitive issues that we can’t even talk about them,” said a Weibo comment.
Last year, China shut down the social media accounts of Hong Hao, a prominent market analyst, following downbeat remarks he made about the country’s dramatic economic slowdown and the effects of government policy on the tech industry. Hong left the state-owned bank he worked for days after his accounts were censored.
— CNN’s Nectar Gan contributed reporting.
