China’s new Premier pledges reform, sees risks

Reuters: Chinese Premier Li Keqiang said on Sunday ensuring economic growth was the top priority for his Government, pledging to fight graft, tackle vested interests and calling for an end to a cyber-hacking row with the US.

Li’s first news conference as premier, at the close of the annual meeting of China’s rubber-stamp Parliament that confirmed his appointment, covered topics that have been the principal focus of recent Government rhetoric, with a strong emphasis on the necessity of reform to deliver long-term economic stability.

“The highest priority will be to maintain sustainable economic growth,” Li said at the start of the conference that lasted almost two hours and in which he repeatedly stressed the need for economic, social and government reform.

“The key is to have economic transformation. We need to combine the dividends of reform, the potential of domestic demand and the vitality of creativity so that these together will form new drivers of economic growth,” he added.

“We said that in pursing reform we now have to navigate uncharted waters. We may also have to confront some protracted problems. This is because we will have to shake up vested interests,” said Li, looking relaxed and repeatedly gesturing with his hands.

“Sometimes stirring vested interests may be more difficult that stirring the soul, but however deep the water may be we will wade into the water. This is because we have no alternative. Reform concerns the destiny of our country and the future of our nation.”

America/Merrill Lynch Bank Hong Kong Chief China Economist Ting Lu, said in a note to clients that the pro-reform tone of the speech would go down well with investors.

“He understood very well that key barriers for reforms are vested interests rather than ideology,” Lu said.

But beyond a specific pledge to cut administrative red tape on some 1,700 processes needing Government approval by at least a third, Li’s answers to the 11 pre-arranged questions he took from journalists offered no new policy initiatives. However, he said that planned reform of the controversial system of forced labour camps would come by the end of the year.

The premier pledged to reform capital markets, the currency and fight China’s pervasive corruption crisis, saying that Government officials, having chosen public life, should give up thoughts of riches.

Li said China’s broad reform effort would also lead to improvements in environmental controls, cutting pollution in the atmosphere and raising food and water safety standards.

A growing environmental awareness and willingness of Urban people to voice concern about industrial pollution have led the ruling Communist Party to worry about the risk of yet more protests that could undermine social order.

Similar worries exist in the leadership about growing discontent over inequality in China, which has one of the world’s widest gaps between rich and poor and which has now reached levels which the Government fears could spark unrest.

About 13% of China’s population still live on less than US$ 1.25 per day, the United Nations Development Program says. Average Urban disposable income is just 21,810 Yuan a year.

On the other hand, according to the latest reckoning by Forbes, China has US$ 122 billionaires. A rival list in the Hurun Report says China has 317 billionaires a fifth of the total number in the world.

Li (57) officially took over as premier on 15 March from Wen Jiabao whose 10 years in charge is increasingly regarded by analysts as a lost decade in which economic reform slowed and state-backed businesses tightened their grip on the country’s new-found wealth.

Li, as head of the State Council, or cabinet, is charged with executing Government policy and overseeing an economy in which growth slowed to a 13-year low in 2012, albeit at a 7.8% rate that is the envy of other major economies.