China is in control, and its reform will continue. This was the message that Premier Li Keqiang delivered to an international audience in a briefing about the Chinese economy on Wednesday.
Referring to the recent wild fluctuations in the Chinese stock market, Li sought to assuage the world's concerns by saying that China is fully capable of overcoming systemic risk to its financial system.
Effective policy measures have been taken toward stabilizing the market, the premier said in a dialogue with global business leaders at the annual meeting of the New Champions of the World Economic Forum, also known as Summer Davos, in the northeast port city of Dalian, Liaoning Province.
"Such efforts are made to prevent the wide spread of financial risks, and so far we can say that the systemic risks to the financial market have been prevented," Li said in his first public comments on the financial market since the Shanghai Composite Index dropped by about 40 percent in July to trigger a government-led, large-scale intervention.
However, Li said government intervention is a standard global practice and is "by no means intended to weaken or replace" the role of the market itself.
He offered assurance that the next step that China will take is to "stick to the market-oriented and law-abiding principle in building a transparent, stable and healthy financial market".
China will not be a cause of world economic risk. Instead, the country will continue to be a driving force of global development, he said.
Commenting on the exchange rate of the yuan, the Chinese premier said China doesn't think continued depreciation will benefit its intended yuan internationalization, signaling that Beijing has no interest in deliberately influencing the yuan's exchange rate against the U.S. dollar.
The Chinese yuan has seen a dip of more than 4 percent in its exchange rate against the U.S. dollar since the central bank changed its exchange rate formation mechanism in August. But the change was made "in response to the global tendency led by the depreciation of many other currencies against the U.S. dollar", Li said.
But even with the recent adjustment, the yuan's exchange rate against the U.S. dollar is still higher than in 2013 by 15 percent, when the current government was set up, he said.
"We don't intend to stimulate export by devaluating the yuan, since it is not a move to match the government's aim to restructure the economy. Nor does China welcome competitive devaluation of currencies in the world," Li emphasized.
Because China has been deeply integrated with the global economy, the country would not benefit and could only be harmed should a competitive devaluation occur, Li said.
As a case in point, Li said business people from Chinese export companies told him that the best thing they wanted was a stable yuan, because otherwise it would be hard for those companies to obtain long-term contracts.
Yorihiko Kojima, chairman of the board of Mitsubishi Corp, Japan's largest trading company, said he believes that the Chinese market will improve in a couple of years, since Li is a very capable leader, and he doesn't think that the Chinese economy overall is facing great difficulties.
Kojima said China has always been a major market for his business. "The company's biggest office outside Japan was based in New York in the past, but it has moved to Shanghai since 2013."
(China Daily September 10, 2015)