Tags: China | inflation | stimulus | yuan

Li Says China to Avoid Hard Landing While Limiting Stimulus

Wednesday, 18 June 2014 09:43 AM

Chinese Premier Li Keqiang said that the nation will avoid a hard landing, while limiting the scale of any stimulus to support economic growth.

“The Chinese government is adjusting its economic operations to ensure the minimum growth rate is 7.5 percent, the level to ensure job creation,” Li said in a speech at Mansion House in London today. Inflation won’t exceed 3.5 percent, he added, without specifying a time period for the prediction.

China will have “medium to high-level” growth in the long run and will rely on “smart and targeted regulation” rather than strong stimulus measures, Li said.

“I can promise everyone honestly and solemnly, there won’t be a hard landing,” the premier said.

A property-market slowdown is adding to the risk that the nation will miss a 2014 target of an expansion of about 7.5 percent. China’s new-home prices fell in May in 35 of 70 cities tracked by the government, a statistics bureau report showed today. In the financial center of Shanghai, prices decreased 0.3 percent from April.

“Property remains the biggest macro risk in the near term,” Zhu Haibin, Hong Kong-based chief China economist at JPMorgan Chase & Co., wrote in a note to clients today. The real-estate industry accounted for about a fifth of China’s gross domestic product and further softening will bring additional downside risks to the economic outlook, Zhu said.

Pound-Yuan Exchange

Li’s comments came after an announcement that China will allow the yuan to be exchanged directly for British pounds from tomorrow in Shanghai. The pound will become the fifth major currency to trade directly against the yuan in Shanghai, joining the Australian and New Zealand dollars, the Japanese yen and the U.S. dollar. The People’s Bank of China appointed China Construction Bank Co., the nation’s second-largest lender, as London’s first yuan clearing bank.

London also has the potential to become an active market for yuan trading, PBOC Governor Zhou Xiaochuan said in a speech in London.

There is “much more to do” on yuan internationalization and China will support foreign companies issuing yuan-denominated debt in China, he said. Zhou also said that China will see capital-account convertibility and would continue to try to control short-term, speculative capital flows.

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Chinese Premier Li Keqiang said that the nation will avoid a hard landing, while limiting the scale of any stimulus to support economic growth.
China, inflation, stimulus, yuan
Wednesday, 18 June 2014 09:43 AM
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