The Annual Meeting of the New Champions, a World Economic Forum conference hosted each year in Dalian, China, opened on Wednesday. It’s become something of a tradition for the meeting, more often known simply as the “Summer Davos,” opening with a speech from China’s premier defending the basic health of his country’s economy.
Last year, Prime Minister Li Keqiang used his keynote speech to underline that China’s economy was healthy, despite easing into a “new normal” of slower (but more sustainable growth). This year was much the same: with the Summer Davos coming soon on the heels of a sharp downturn in China’s stock markets, Li spent much of his time on the opening day of the meeting trying to convince global economic leaders that China’s economy is in good health.
China’s economy is “turning for the better while stabilizing,” Li said, while acknowledging that “difficulties remain.” He also insisted that China’s leaders “will not be swayed by short-term fluctuations of economic indicators” – almost an exact quote from his 2014 speech as well. In both cases, Li’s goal was to convince leaders and investors alike that China will continue to promote structural economic reform rather than being spooked by slowing growth.
But Li also said that China’s leader would not take “short-term fluctuations” in economic data “lightly.” “We will timely fine-tune policy measures,” Li promised.
In terms of systemic structural issues, though, Li was adamant that China’s fundamentals are sound. He told business leaders that China successfully “fended off potential systemic financial risks during the recent market collapse,” according to a paraphrasing in Xinhua. He said that the government 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.
China’s stock market decline in July sparked global concerns that Chinese leaders were no longer in firm control of the economy. Most worrying to foreign analysts was the fact that Beijing attempted to intervene early on in the crash to limited success – meaning the government upset both market purists and investors eager to see their gains protected at all costs. As Dingding Chen put it in his analysis for The Diplomat: “It was a bad idea for the government to prop up the stock market in the first place; it is a even worse idea to think that the government could control the pace of stock market development and decline.”
Li emphasized that Beijing’s attempts to stabilize the stock market did not mean the government is going to eliminate or even weaken the role of market forces.
Li also reassured businesspeople that China’s government debt is not a major concern: “Government debt is at a relatively low level and concerns over China’s government debt risks are unnecessary,” he said. News that China’s debt-to-GDP ratio hit an all-time high in July sparked concerns that government debt (particularly at the local level) could hamper China’s economy moving forward.
The Summer Davos comes at the perfect time for China. It provides a global spotlight for Li, himself rumored to be under fire for China’s poor economic data this summer, to defend the Chinese economy just as the world’s attention moves on from the summer crisis. Improving economic indicators (such as power consumption) have given leaders concrete data to point to when they claim the worst is over.
But if history is any indication, global concerns about China’s economic health aren’t so easily assuaged. In all likelihood, Li will be back again making a similar speech next September.