[Analytics] Chinese Premier talks up ‘steady’ and ‘positive’ economy

Chinese Premier Li Keqiang gave a speech at the opening ceremony of the annual Boao Forum for Asia in China’s southern Hainan province on Thursday. Photo: Winson Wong

Speaking at Boao Forum for Asia, China’s premier remained upbeat about the Chinese economy as he promised further relaxation of foreign investment rules. Comments came as US and Chinese negotiators began two days of talks in Beijing in an effort to end the trade war. Amanda Lee, Cissy Zhou, Liu Zhen, Sarah Zheng specially for the South China Morning Post.

Chinese Premier Li Keqiang has attempted to play down the slowdown in China’s economy, in remarks coinciding with the start of the latest high-level trade talks between China and the United States in Beijing this week.
“For the economic slowdown, China has already formulated relevant countermeasures. Since the beginning of this year, China’s economy has been steady and there have been some positive changes,” Li said.

“Recently, the market expectation has significantly improved. Data from the first two months show that major economic indicators such as employment, prices, international balance of payment have been steady.”

Li’s remarks, given at the opening ceremony of the annual Boao Forum for Asia in China’s southern island province of Hainan on Thursday, run counter to negative official economic figures, documented in consecutive data released by Beijing’s National Bureau of Statistics (NBS).

The premier’s speech coincided with the start of a fresh round of high-level trade negotiations between China and the US in Beijing as both sides work towards a deal to end their months-long tariff war.

US trade representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin are meeting with Chinese Vice-Premier Liu He, Beijing’s chief trade negotiator, for talks in the Chinese capital on Thursday and Friday.

Liu is also expected to visit Washington for follow-up talks on April 3, the White House said.

However, the premier’s statement contrasted with official government data. The unemployment rate rose to 5.3 per cent in January and February from 4.9 per cent in December.

China’s consumer price index, a main gauge of inflation, rose 1.5 per cent in February, the NBS said.

On Wednesday, NBS figures showed that industrial profits fell by 14 per cent in the first two months of the year.
This was the worst performance since October 2011, when the method for measuring industrial profits was changed. Overall, including the former methodology, it was the biggest collapse since May 2009.

Li pointed to an increase in fixed asset investment, consumer confidence index, manufacturing orders and capital market transactions as positive signs in the economy.

“Especially in March, daily average power generation and electricity consumption has been increasing at a double-digit rate. The volume of import and export has increased,” he added.

While the government has been keen to highlight a trade recovery in the early weeks of March, China’s exports crashed by 20.7 per cent in February, the largest drop in three years, led by a large fall in trade with the United States.

Li admitted that “unstable factors have increased significantly this year”, adding that “it cannot be ruled out this year that the economy will encounter volatility on a monthly or quarterly basis, but as long as the economy is operated within an appropriate range throughout the year, we will maintain a certain strength”.

He reiterated that China would not “sacrifice long-term development for short-term goals, and will not rely on [what worked] in the past”.

“If the economy runs beyond expectations, we have sufficient tools [to maintain the economy]. But the tools are by no means going back to the old track, we will definitely not rely on quantitative easing or flood-like stimulus,” Li added.

“These measures this year will be implemented with considerable strength,” he said.

Li also used his speech to vow that Beijing will reform its free-trade zone foreign investment entry negative list, its catalogue of industries guiding foreign investment, and its industry catalogue list for China’s central and western areas.

“The lists will only be shortened,” Li told an audience of business leaders, diplomats and former foreign officials. “Nothing will be added.”

Li promised more opening up in modern service industries such as telecommunications, medical care and education, as well as transport, infrastructure, and human resources. China will also increase foreign investor access to its financial services sector, including for banks, securities, insurance, and financial institutions.

Li said the Chinese government will have a full review on the existing regulations and policies and remove anything that goes against the foreign investment law that China’s legislature passed earlier this month, before the law takes effect on January 1, 2020.

The world’s two largest economies have been locked in a trade war since last July, as they wrangle over issues including their bilateral trade imbalance, intellectual property protection, forced technology transfers, cybertheft, and industrial subsidies.

To address one of the key issues in the trade talks, Li said the legislature is working on an amendment of the Chinese Intellectual Property Law draft, in which “multiple” punishments will be included to prevent severe infringement.

“No forced technology transfer shall be imposed on foreign investment. We will be true to our words,” Li said. “Whoever violates that must be punished.”

While former US officials and trade negotiators at the Boao Forum were optimistic a deal would soon be reached, they warned Beijing would not likely accept a continuation of tariffs in an enforcement mechanism, which Washington has made clear will be at the centre of a trade agreement.

Li was the highest-ranking Chinese official at the forum this year, which was attended by Chinese President Xi Jinping in 2018.

US government officials were not in attendance, although American representatives included former US Commerce Secretary Carlos Gutierriez, former US Ambassador to China, Max Baucus, and US Chamber of Commerce executive vice-president Myron Brilliant.

In an interview with National Public Radio (NPR), a US network, earlier this week, Lighthizer sought to tamper expectations of a deal any time soon.

“I am hoping but not necessarily hopeful … If there is a great deal to be got, we will get it – if not, we will find another plan,” he said.

Many experts have claimed since talks began late in 2018 that it was unrealistic to expect major structural changes in the Chinese economy in a matter of months, as demanded by Lighthizer and US President Donald Trump.
Lighthizer alluded to this in his NPR interview, saying: “Everything will not happen in a month, for sure that is true. But I think you have to start with the proposition that there are people in China who believe that reform is a good idea. And you have to believe that those people are at a very senior level.”

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