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Signals from the Premier’s press conference

Updated: Mar 16,2015 5:01 PM’s Daily

Premier Li Keqiang held a press conference at the end of the National People’s Congress annual session on March 15 during which he answered 17 questions from the media. Eight of them were concerned with the Chinese economy. Facing sharp questions, a series of positive economic signals were found in Li’s answers.

1. Confident of keeping growth on track

Premier Li said the slowdown will not derail plans to increase jobs and incomes while the rest of the world showed great concern about the Chinese economy.

He said that if growth falls below the desired range to affect employment and national income levels, the government will step up macroeconomic regulations to boost market confidence — while at the same time maintaining continuity of macroeconomic policies to anchor long-term market expectations.

It means the government will act if the market needs it to.

China has not provided a strong short-term stimulus to the economy for the past few years and has an ample stock of “policy weapons” that can be used when necessary to prevent the slowdown from worsening.

2. Risks are under control

The Premier gave pragmatic and insightful opinions concerning financial risks such as shadow banking and local government debts.

It is true that there have been individual cases of financial risk in China, but at the same we are capable of forestalling systemic and regional financial risks, the Premier said, allowing individual cases of risk and encouraging the practice of balancing the books in a market-based way.

It is because China’s economy continues to operate within the proper range and there is a fairly high savings rate in China. Moreover, 70 percent of local government debts are in the form of investments, Li said.

Risks can also be turned into opportunities, this year we are going to introduce the deposit insurance system, continue to develop multitiered capital markets and lower companies’ leverage ratio, he said.

The Premier also denied that China had entered deflation.

Explaining consecutive negative growth of overall consumer prices in the country as a major criterion in evaluating deflation, Li threw out concrete figures.

Regarding CPI, last January China had positive growth. And the figure of February further increased. “So I don’t think we are facing deflation in China,” he said.

Li then pointed out that a fall in international commodity prices affected the price of crude oil and iron ore.

Last year, China imported 310 million metric tons of crude oil and about 930 million tons of iron ore from the international market. The physical volume increased but the price declined, Li said.

China is not exporting deflation to other parts of the world. The truth is, China is at the receiving end of deflation, he added.

3. Real estate and online shopping

Urbanization continues to pick up speed in China which means that housing demand is here to stay, the Premier said when answering questions from the Financial Times.

We encourage Chinese people to buy homes as residences and for upgrading their living conditions, and hope to see a steady and sound growth of China’s real estate markets in the long term, Li said.

Admitting buying books on the Internet, the Premier stressed he is pleased to “advertise” for new types of business, like express delivery services and e-commerce.

Behind this is that in 2014 the tertiary industry accounted for 48.2 percent of China’s total GDP, 5.6 percentage points higher than the second industry.

Higher percentages in the service sector are pleasing as the Premier said “such businesses offer a strong boost for employment and consumption in this big country”.

4. Reassuring Taiwan and emphasizing the China-US relationship

The Premier said the mainland will continue to protect lawful rights and interests of Taiwan business people on the mainland, and continue to pursue preferential policies toward them as appropriate when a journalist said that Taiwan businesses run into difficulties on the mainland.

As for China’s ties with the United States, Li said President Xi Jinping will pay a state visit to the US this year and the two sides are advancing negotiations of the bilateral investment treaty.

Built around pre-establishment of national treatment and a negative list, the BIT itself is to break the ceiling over China-US business cooperation and will open new dimensions for the further growth of China-US ties, the Premier said.

Naturally, negotiations will take some time. But it has already sent a very clear message to the international community that China-US business ties will get even closer and it will put the overall China-US relationship on a more solid footing, he added.