Li Says China Can’t Shoulder Global Economy’s Heaviest BurdenBloomberg News
Lagarde calls for global policies to spur growth, before G-20
World Bank chief Kim frets over anti-globalization sentiment
As the world struggles to break out of a prolonged period of sluggish expansion, don’t count on its No. 2 economy to ride to the rescue.
That was the message from China’s Premier Li Keqiang on the eve of a gathering of finance chiefs from the top emerging and developed economies. While China’s contribution to the world will remain large, and serves as a stabilizer, the nation also faces long-term downward pressure, he said Friday at a press conference in Beijing.
"China is still a developing country -- we can’t shoulder the heaviest burden of the world’s economy," Li said after a round-table discussion on economic growth, trade and finance with heads of institutions including the International Monetary Fund. He called for countries around the world to implement "proactive" fiscal policies, as China is doing.
For her part, International Monetary Fund Managing Director Christine Lagarde at the same venue said the world needs fiscal, monetary and structural measures, and repeated that the U.K.’s vote to depart the European Union had reduced expansion estimates. World Trade Organization Director General Roberto Azevedo warned trade growth is at a 30-year low, while World Bank President Jim Yong Kim fretted about a very loud rejection of globalization in the West.
One thing that may be off the worry list: a major yuan devaluation. Li said his country would never enter a currency war, and will keep the yuan at a reasonable level as it continues to reform the exchange-rate system. Amid calls from abroad for capacity cuts in some sectors, Li said his government is willing to negotiate with others on trade in steel and coal.
China still has room for proactive fiscal policies and tax cuts while sticking to prudent monetary policy, Li said. He reviewed the country’s challenges as it transitions from an old model fueled by debt and investment to one led by consumers and services, and reiterated that it will keep pushing forward market reforms -- an area where economists say policy makers have disappointed.
Beijing is hosting the heads of six international organizations Friday, part of a broad effort to enhance China’s profile in discussions about global economic and financial policies, which up to now hasn’t matched its heft in terms of trade. This weekend, finance ministers and central bank governors from the Group of 20 meet in Chengdu ahead of a leaders summit in Hangzhou Sept. 4-5.
China’s traditional sources of growth, by massive investment in physical capital and exports "have largely run their course" and are producing low yields, low productivity growth, and overcapacity, OECD Secretary-General Angel Gurria said at the press conference.
"China is seeking a higher quality type of growth," Gurria said. "Science, technology, innovation, the digital economy, knowledge-based capital, skills -- all are indispensable parts of this new growth narrative."
— With assistance by Xiaoqing Pi, and Miao Han