China’s Premier Li Keqiang said the economy is facing downwards pressure but warned that there is little room for stimulus or official investment to take up the slack

TUESDAY, MAY 14, 2013 – 19:26

China’s Li Warns Econ Under Pressure; Little Room For Stimulus

BEIJING (MNI) – China’s Premier Li Keqiang said the economy is facing downwards pressure but warned that there is little room for stimulus or official investment to take up the slack. He said the economic situation remains “complicated” and said market forces will be needed to support growth. Li’s comments were posted in a statement about reforming the structure of the State Council on the government’s main website late Tuesday.

Li Signals Reluctance on Stimulus to Boost China Growth

Chinese Premier Li Keqiang signaled policy makers are reluctant to use stimulus to counter a slowdown in the world’s second-largest economy because the risks outweigh the benefits. “To achieve this year’s targets, the room to rely on stimulus policies or government direct investment is not big — we must rely on market mechanisms,” Li said in a May 13 speech broadcast to officials around the country, according to a transcript published last night on the central government’s website. Relying on government-led investment for growth “is not only difficult to sustain but also creates new problems and risks,” he said.

The comments indicate China may be unlikely to boost government spending or follow central banks across Asia in cutting interest rates as Li tries to pare the state’s role in the economy. Bank of America Corp. and JPMorgan Chase & Co. this week lowered 2013 growth estimates to 7.6 percent after April industrial production and investment trailed forecasts.“The comment suggests that there won’t be any large-scale stimulus, but that doesn’t mean the government won’t try at all to boost growth,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “The growth in the first first four months is too weak for the government to be fully relaxed.”

Last year China cut interest rates twice and accelerated investment approvals in response to slowing growth.

Li’s comments were made at a nationwide teleconference on reducing’s the government’s role in economic development. The government will cut unnecessary checks and approvals to boost private investment, Li said. The country’s growth is under “relatively large” downward pressure, he said.

Lending Spree

Li’s predecessor, Wen Jiabao, rolled out a 4 trillion yuan stimulus ($586 billion at the time) and an unprecedented bank lending spree at the end of 2008 to shield the economy from the global financial crisis, leaving an overhang of debt from loans.

China needs to break an “administrative monopoly” in finance, telecommunications, logistics, health care and education to boost the growth of service industries, Li said in the speech. “The barriers to entry in these areas are high or very high, but the potential of these areas is huge for China,” he said.

Economic growth of 7.7 percent in the first quarter trailed the median forecast of 8 percent in a Bloomberg News survey and fourth-quarter expansion of 7.9 percent. The government in March set a 2013 goal of 7.5 percent, the same target as in 2012.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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