China Power

China’s Premier: Our Economy Is Doing Just Fine

Once again, Li Keqiang has the unenviable task of generating some good PR for China’s economy.

Li Keqiang defended the health of the Chinese economy this week, both in a phone conversation with the International Monetary Fund (IMF) director and in written comments. It’s become something of a running theme for Li, who as premier is responsible for China’s economic portfolio. Again and again, in speech after speech, Li has had to defend China’s economic health (and the government’s economic policies) before skeptical global audience.

On Thursday, Li spoke over the phone with IMF director Christine Lagarde, and tried to reassure her on both the health of the Chinese economy and the leadership’s continued commitment to economic reforms. Against the backdrop of a sluggish global economy, “China’s ability to deliver a medium-high growth of 6.9 percent, solid employment, higher income and savings growth than gross domestic product, and steadily improving environment last year came as no mean feat,” Xinhua paraphrased Li as saying. Li also reaffirmed that China will continue to vigorously pursue structural reform, particularly supply-side structural reforms, which will make it possible for China’s economy to continue growing steadily.

Likely of particular interest to Lagarde was Li’s reassurance that China will keep the exchange rate for its currency “basically stable.” Li also pledged that China “will press ahead with the reform of the renminbi (RMB) exchange rate formation mechanism in line with the principles of independence, gradualism and controllability.” Last year, the IMF finally included China’s renminbi in its “Special Drawing Rights” basket of currencies. Such currencies are certified as “freely usable” by the IMF – but China’s efforts to stem capital outflows, as detailed by the Wall Street Journal, are countermanding its promises to ease restrictions on overseas use of the RMB.

Meanwhile, Li’s more general comments on the economy, published online after an executive meeting of the State Council, included pointed remarks aimed at combating the damage done by high-profile U.S. investor George Soros, who remarked earlier this week that a hard landing for China’s economic “is practically inevitable.” Since then, Soros has become the favorite whipping boy of Chinese media outlets, which have published commentaries ridiculing his assessment. “[T]hose who held a theory of a bearish Chinese economy are merely based on uncorroborated evidence, or even erroneous data,” said a commentary published by the website of People’s Daily.

In comments published online, Li himself refrained from naming Soros, but spoke disdainfully of the “many international voices ‘shorting’ the Chinese economy.” “Some have even claimed that China’s slowdown is affecting the global economy – how absurd,” Li said, according to South China Morning Post. Li’s argument was two-fold: first, that China’s economy is still growing at a “reasonable” range (especially considering that its GDP is now worth $10 trillion). Second, he dismissed the idea that China could have such a large impact on the global economy: “China is still a developing country… Those who allege that China has caused international market turmoil really over-estimate China.”

This is nothing we haven’t heard before: China’s economy is doing fine; China isn’t to blame for global economic turmoil; China’s economic reforms are on track. But the very fact that Li has to keep repeating himself is evidence that the global community isn’t buying it — and neither are investors in China’s stock markets. After trading closed on Thursday, China’s stock markets were down $2 trillion since the beginning of 2016.