Premier confident about economy

Pau Polman, CEO of Unilever:

We are all following the world economy very closely. In our brief discussion just now, you mentioned the slowing down of global growth, including China itself. What you said is very important, making us optimistic in the future of the Chinese economy. You also mentioned the need to find new drivers for growth. What are the new drivers specifically? As China takes over the chairmanship of the G20 next year, what agenda have you set for the G20 summit? How could this agenda bring about more sustainable, equitable and longer-term growth?

Li Keqiang:

It has been seven years since the global financial crisis broke out. Global growth remains sluggish. It's true that the Chinese economy has come under downward pressure. I know that you all follow the Chinese economy very closely. The "shape" of the economy is that there have been some ups and downs, but the underlying trend remains positive. In the first half of this year, the Chinese economy expanded by 7 percent, which is one of the highest among the world's major economies.

I have said on several occasions, a GDP growth that secures sufficient employment, increase in household income in step with GDP growth and improvements in the environment would be one that we can live with. In the first half of this year, the surveyed urban unemployment rate was around 5.1 percent. And we added over 7 million urban jobs. All these show that the Chinese economy has been running within the proper range.

Talking about the new drivers of economic growth, we are encouraging mass entrepreneurship and innovation. Thanks to business registration reform and other reforms as well as mass entrepreneurship and innovation, since last year over 10,000 new market entities on average are being registered on a daily basis. There are also positive changes in the economic structure. For instance, consumption is contributing about 60 percent to China's economic growth. The service sector now accounts for almost 50 percent of GDP. Growth of high-tech industries is over 10 percent. All these are the changes we have been promoting, and we feel heartened by these developments.

There has been overall stability in China's economic performance, despite certain moderation in speed. The overall trend is positive, yet there are also difficulties to overcome. We are pressing ahead with structural reform to advance structural adjustment. As the traditional growth drivers get replaced by new ones, it is only natural to see fluctuations in some of the economic indicators on a monthly or quarterly basis. This has happened this year, and it happened last year and the year before. The economy is still running within the proper range. We will stick to the basic orientation of our macroeconomic policy. We will continue to advance reform and opening-up, and promote structural adjustment. We will also step up range-based, targeted and discretionary macro regulation to maintain steady economic growth within the proper range. All these will create enabling conditions for structural reform and adjustment.

We will not be swayed by short-term fluctuations in certain economic indicators, but we will not take them lightly either. We are prepared to undertake preemptive adjustments and fine-tuning as appropriate, and step up targeted macro regulation. I am confident that the Chinese people have the wisdom and the Chinese government has the capability to maintain medium-high speed of growth and achieve medium-high level of development. The G20 summit is going to be held in China next year. The agenda is still being discussed among the parties. China will play a constructive role in this process.

Thank you.

Klaus Schwab, founder of the World Economic Forum:

Mr Premier, I think you gave us, as far as the economic situation is concerned, a reassuring message. But I would like to return to capital market and financial risks which have been very much on the mind of the media and the world recently.

Yorihiko Kojima, Chairman of Mitsubishi: My question is about financial risks. Our company has offices in 90 countries worldwide. China, including its stock market and debt, has attracted close global attention. What will the Chinese government do about the financial reform? This is very important for our company and customers. When will the reform measures be announced?

Li Keqiang:

There have been new fluctuations in the global financial markets recently. They are a continuation of the 2008 global financial crisis. Last June and July, there were also unusual fluctuations in China's capital market. Relevant Chinese authorities took steps to stabilize the market to prevent any spread of risks. Now we can say that we have successfully forestalled potential systemic financial risks. This is not to replace or weaken the role of the market. What we did is common international practice and is in keeping with China's national conditions. Going forward, we will continue to develop a multi-tiered capital market in China and pursue a market-driven and law-based approach in this process. The purpose is to establish an open and transparent capital market of long-term, steady and healthy growth.

On China's government debt, the risks are under control. China's government debt is still at quite a low level. The central government debt is below 20 percent of GDP, and over 70 percent of local government debts take the form of investment with returns. And we are taking steps to regulate issuance of local government bonds to keep the front door open and block back doors, so to speak. Those who are concerned that China's government debt may bring serious risks are worrying too much. Having said that, I don't mean to question if there is a need for you to raise this issue, because for the Chinese, our philosophy is that one should always be mindful of potential dangers even in times of peace.

We will press ahead with the financial reform. This is critical for China's financial stability and opening-up. For example, while the central bank cut interest rates and the required reserve ratio recently, we lifted restrictions on the interest rate ceiling for fixed term deposits above one year. We will ease market access for private banks, including the orderly introduction of foreign investors into the financial sector and their partnerships with Chinese counterparts. China will not waver in its commitment to pursuing the reform, nor will the reform grind to a halt. But, the reform will be conducted in a step-by-step way.

Thank you.

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