China’s economy will not suffer a hard landing

Wednesday, Mar 16, 2016,14:12 IST By Metrovaartha A A A

Beijing | Allaying global concerns over the possibility of China’s struggling economy heading for a hard landing, Premier Li Keqiang said today that the world’s second largest economy has the ability to withstand financial risks.

China’s economy will not suffer a hard landing and there are more hopes than difficulties for the world’s second largest economy, Chinese Premier Li Keqiang said in his annual press conference here today answering questions over the growing domestic and global concerns over China’s economic slowdown. Hard landing refers to the state of economy rapidly shifting from growth to slow-growth to flat as it approaches a recession.

As long as we stay on the course of reform and opening up, China’s economy will not suffer a hard landing, Li, 60, who is second in the leadership hierarchy to President Xi Jinping said in his press conference telecast live all over the country. On the sliding path since 2011 ending about the three decades of double digit growth, China’s GDP last year slipped to 6.9 per cent with forecasts by IMF and World Bank that the slowdown will continue in the next two years.

Early this month Li in his work report of legislature the National People’s Congress (NPC) proposed to cut down the GDP target for the next five year 6.5 to seven per cent. About the status of the economy, Li said global economic growth is sluggish and China has been affected by the weak performance. China is also going through a transition and some deep-seated problems, which have built up over the years, have become more acute, he admitted. All these have added to downward pressure on China’s economic growth, Li said.

He also played down concerns over financial risks faced by China, spiralling debts of the local government as well as falling profits of the Chinese banks. Local government debts along was stated to be over USD 1.20 trillion. Li said China is in a good position to defuse financial risks adding that the non-performing loan ratios of some financial institutions increased in China because of the difficulties in some enterprises and some sectors.

But capital adequacy ratio of China’s commercial banks exceeded 13 per cent, below the international warning line, and banks’ provision coverage ratio was above 180 per cent, higher than the level of 150 per cent set by the government, Li said. The fairly high corporate debt ratio is no new problem in the country, Li said, as Chinese companies still raise capital mostly indirectly. But we also have other market-based tools at our disposal to help bring down corporate debt ratio, Li said. We have a good reserve of policy instruments in our tool kit to deal with the slowdown, Li said.

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