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Premier assures stable yuan

Global Times, March 25, 2016

 

Chinese Premier Li Keqiang said Thursday China will never devalue its currency to stimulate the country's exports, as he reassured the market of the government's continuing efforts to restructure the country's economy for long-term gain.

Currency devaluation does little to encourage enterprises to engage in competition and innovation, and does not help the country move into high-end manufacturing, the premier said during his keynote speech at the opening ceremony of the Boao Forum for Asia (BFA).

"The yuan will be kept at reasonable and equilibrium levels," he reiterated, adding that the fundamentals of China's economy offer sufficient grounds for the yuan to avoid long-term depreciation.

In a sign the country will continue to move toward opening up its capital markets, Li announced that a stock connect between the Shenzhen and Hong Kong bourses will be launched at the right time this year.

He added China still has sufficient policy tools to address challenges to short-term growth during this period of uncertainty both domestically and globally. Some international institutions have lowered their outlook for global economic growth this year, an indication of rising instability and uncertainty over the world economy which affects China's economy.

Pushing back against China growth woes, Li said the country will act decisively to carry out comprehensive measures to prevent a slide in economic growth and keep the economy operating within a reasonable range.

Specifically, he said there is still room for the country to implement a proactive fiscal policy, factoring in the central government debt ratio which only stands at 17 percent. In addition, China still has the leeway to develop multi-layered capital markets and also has innovative ways of financial fine-tuning, he added.

"The media ought not to harp on '...China's great slow-down' but instead praise it for prudence," Frank-Jürgen Richter, founder and chairman of Horasis, a Swiss-based think tank, told the Global Times on Thursday on the sidelines of the forum.

"Of course China, the second-largest global economy after the US, has many management issues - it would not be so vibrant if it had no issues across its huge geography and massive population," said Richter, who had previously served as director of Asian Affairs at the World Economic Forum.

But its recent investments in road, rail, waterways, and air and seaport infrastructure will make its future growth easier, he said, stressing that China is also pushing for the "One Belt, One Road" initiative through which it hopes to simulate growth across Central Asian states.

In an interview with the Global Times on the sidelines of the forum, Leslie Maasdorp, vice president of the BRICS-backed New Development Bank, also said that "the premier spoke very strongly about the call for Chinese institutions to expand their investments internationally. We understand that spirit very well, we hope that through investments China will make in the One Belt and One Road strategy, we could [work] alongside other institutions such as the Asian Infrastructure Investment Bank, so we see complementarity in what Chinese companies want to do."

Premier Li also highlighted the Belt and Road initiative, which he said will help reshape Asia's regional development. He added that participating economies should within this year strive to complete negotiations for the proposed Regional Comprehensive Economic Partnership. The mega regional trade deal involves a large number of economies in Asia - 10 member states of the Association of Southeast Asian Nations (ASEAN) as well as ASEAN's six existing FTA partners, including China, Japan, South Korea, India, Australia and New Zealand.

Insufficient and imbalanced growth in Asia still exists, with many countries facing sliding exports and rising debt. They also face a slowing economy, drastic currency depreciations and rising capital outflows.

Nonetheless, Asian economies, after having undergone two big financial crises, are no longer what they used to be, Premier Li stressed.

The premier suggested that "we hope that all countries could work to enhance macroeconomic policy coordination and jointly stand against various kinds of trade protectionism."

He said that developed countries should adopt more growth-friendly policies to avoid spillover effects of some countries' policy tweaks, saying China supports the establishment of an association for financial cooperation across Asia, and is willing to collaborate with all sides to prevent large-scale financial turbulence.

 


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