China’s Premier Li Qiang warned governments that attempts to politicize their economies will only fragment the world as the US and Europe “de-risk” supply chains from the Asian nation.
(Bloomberg) — China’s Premier Li Qiang warned governments that attempts to politicize their economies will only fragment the world as the US and Europe “de-risk” supply chains from the Asian nation.
“The invisible barriers put up by some people in recent years are becoming widespread and pushing the world into fragmentation and even confrontation,” China’s No. 2 official said Tuesday at the World Economic Forum’s Annual Meeting of the New Champions in Tianjin, a coastal city close to Beijing in northern China.
“We should oppose the politicization of economic issues and work together to keep global industrial and supply chains stable, smooth and secure,” he added at the first in-person gathering of the forum since 2019 following the end of Covid restrictions. The event is often described as the “Summer Davos.”
The Chinese premier’s comments come as the Biden administration pushes forward with an executive order that would regulate and potentially cut off certain US investments in China, according to people familiar with the plans, and as Russia’s war in Ukraine sparked an attempted military uprising against President Vladimir Putin, casting further doubt over the future stability of global energy markets.
Li’s address was a rare opportunity to hear China’s premier official lay out his roadmap for the world’s second largest economy, as its recovery flashes a growing number of warning signs.
The Chinese premier projected a positive outlook for the domestic economy, reassuring investors China was “fully confident and capable” of developing stable, high-quality growth over the long-term. He added that the nation would “roll out more practical and effective measures” on expanding domestic demand and stimulating market dynamism.
Those promises were largely reiterations of prior statements made by Chinese officials, and gave few concrete answers to investors who have been on high alert for a raft of new support measures to boost the economy since the central bank’s recent interest rate cut in June.
After falling for five straight days, Chinese equities rose early and extended gains on Tuesday — likely reflecting a boost in sentiment as the People’s Bank of China pushed back against a weaker yuan through its daily fixing. The Hang Seng China Enterprises Index increased as much as 2.4%.
“There is slight optimism driven by the speech, but I don’t think he announced anything concrete,” said Vey-Sern Ling, managing director at Union Bancaire Privee.
Li said China was on course to hit the government’s growth target of around 5%, a goal already seen as conservative. Even though several major investment banks have lowered their forecasts for gross domestic product growth, they still see the economy expanding 5.5% this year, according to the median estimate in a Bloomberg survey.
“China seems to be rather confident in terms of maintaining its growth target,” said Gary Ng, senior economist at Natixis SA. “The way to do it is that there will be more stimulus coming out and probably regulatory relaxation as well.”
More details are likely to come after a key meeting next month of the Communist Party’s Politburo, the top decision-making body led by President Xi Jinping.
European Outreach
The three-day event in Tianjin is a chance for China to woo overseas capital and global governments. The forum is being attended by leaders from the worlds of economics and politics, including New Zealand Prime Minister Chris Hipkins, director-general of the World Trade Organization Ngozi Okonjo-Iweala, and Saudi Arabia’s minister of economy and planning, Faisal Alibrahim.
Li’s speech at the event came after he traveled to Europe last week to meet with leaders from Germany and France, in a bid to reset ties with Beijing’s major trading partners as Berlin finalizes its updated China security strategy.
In his first overseas trip as premier, Li also shared a stage with US Treasury Secretary Janet Yellen, who plans to visit Beijing in early July for the first high-level economic talks with her new Chinese counterpart, people familiar with the scheduling said this week.
The US and European allies are seeking to reduce their supply chain reliance on China in order to “de-risk” their economies, an approach that Beijing has criticized as a form of decoupling that it says would be harmful to growth and investment. During his trip last week, Li urged German CEOs to take the lead on risk-proofing their supply chains, saying they were better placed to do so than their governments.
That was a message Li reiterated on Tuesday. “It is businesses that are most sensitive and are in the best position to assess such risks,” he said. “Governments and relevant organizations should not overreach themselves. Still less, overstretch the concept of risk or turn it into an ideological tool.”
Li is seeking to lure foreign investors amid a slump in sentiment. Foreign direct investment has declined in recent months, reversing the first-quarter’s gains. A survey by the European Union Chamber of Commerce published this month shows that a record share of European companies say doing business in China is getting more difficult.
“We still need to look into what kind of follow-up policies that are really the key factors for how easy it is for foreign firms to continue to invest in China,” said Ng, the Natixis economist. “Words are one thing, but we also need to look into the follow-up actions.”
–With assistance from Yihui Xie, James Mayger, Jiyeun Lee and Zhu Lin.
(Updates with market reaction from eighth paragraph.)
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