Premier Li’s WEF speech: stabilize price, stabilize employment

Chinese Premier Li Keqiang attends the Special Virtual Dialogue with Global Business Leaders organized by the World Economic Forum, delivers comments and conducts dialogue and exchanges with participating global business leaders at the Great Hall of the People in Beijing, capital of China, 19 July 2022/ Xinhua

Chinese Premier Li Keqiang attends the Special Virtual Dialogue with Global Business Leaders organized by the World Economic Forum, delivers comments and conducts dialogue and exchanges with participating global business leaders at the Great Hall of the People in Beijing, capital of China, 19 July 2022/ Xinhua

Editor’s Note: John Gong is a professor at the University of International Business and Economics and a research fellow at the Academy of China Open Economy Studies at UIBE. The article reflects the opinion of the author and not necessarily that of CGTN.

Chinese Prime Minister Li Keqiang delivered a speech at the Special Virtual Dialogue with Global Business Leaders hosted by the World Economic Forum on July 19, in which he gave a brief status report on China’s economy today, giving some perspectives on policy initiatives. of his government.

Let’s face the facts. The Chinese economy is currently facing challenges due to the COVID-19 pandemic and the global impact of the conflict in Ukraine. GDP growth in the first quarter was 4.8 percent, below the overall annual target of 5.5 percent, and the second quarter was even worse, barely 0.4 percent, which is understandable given the country’s major cities. imposed a lockdown.

Prime Minister Li’s speech acknowledged these facts and seemed to indicate that going overboard with monetary and fiscal stimulus in the second half of the year to meet the target of 5.5 percent GDP growth is not a policy option. In his speech, he mentioned the phrase twice, not a “flood of strong stimulus.” This expression refers specifically to the four trillion Chinese yuan stimulus package that the previous government injected into the Chinese economy during the 2007-2008 financial crisis, but whose negative impact continued for several years afterwards. There is broad consensus within the community of macroeconomic experts today that the effort seemed overdone at the time and should not be repeated in the future.

Prime Minister Li even seemed to indicate that the government should not be too fixated on achieving a specific growth target, but instead should focus on stabilizing prices and jobs. He said that “we are responding directly to the needs of market entities in implementing macro policies, stabilizing employment and increasing personal income by stabilizing market entities.” In this regard, the government of Li has launched a basket of 33 concrete policy initiatives.

Vegetables at a supermarket in Mengzi, southwestern China’s Yunnan province, May 11, 2022. /VCG

Vegetables at a supermarket in Mengzi, southwestern China’s Yunnan province, May 11, 2022. /VCG

No “flood of strong stimulus” will also give the government more leeway to deal with potential inflationary trends. It is well known that inflation has become a major problem as a result of the US Federal Reserve’s tighter interest rates and a stronger dollar, as well as skyrocketing energy and food prices resulting from the conflict in Ukraine. The US consumer price index rose to 9.1 percent last month from a year ago. So far we haven’t seen inflation creep ashore in China, but Prime Minister Li seems to be prepared for any eventuality.

The last part of Prime Minister Li’s speech was about the Chinese government’s commitment to ongoing reform and opening up. Amid China’s numerous assurances of such a policy, there is lingering doubt in some corners of the West about the future direction of China’s economic interactions with the rest of the world. Continuous opening also means continuous improvement of the Chinese business environment in terms of providing a level playing field so that foreign companies operating in China have an opportunity to compete.

Continued opening also means an improved legal environment, as Prime Minister Li said, to protect foreign companies looking to enter more sectors and industries the more they open up. Indeed, these are areas where China has made great strides in transitioning from a former Soviet-style planned economy to a market-oriented economy. We will continue in that direction.

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