China premier Li Keqiang just promised that his country will not enter an economic crisis even as he admitted that the pace of economic growth there is slowing.
“Regional or systemic crisis will not happen in China. Nor will there be any hard landing,” he told attendees at the World Economic Forum in Davos, Switzerland.
Li’s words stand in contrast to the actual situation in China right now, which appears to be on the verge of a massive debt/property crisis. Since 2008, China and Hong Kong have seen private sector debt-to-GDP increase by a staggering 78.2% and 105.2%, respectively. In real estate, sales fell by 10.8% over the first nine months of 2014, according to the country’s National Bureau of Statistics.
Li admitted that China had entered a “new normal” economic phase. He said, “At present, China’s economy has entered a state of new normal, or medium to high-speed growth.” Previously China had high-speed growth. That is now a thing of the past he said, repeating that medium to high-speed growth was now a permanent feature in Chinese economics.
He compared the Chinese economy to a “running train.” “This train will not lose speed or momentum, but run with greater dynamism,” he said.
That “new normal” growth looks about 5-7% of GDP. Li noted that this was in part because China was so massive. 7% growth today adds $US800 billion to the Chinese economy annually, and that would be 10% growth if it occurred on the base of four years ago.
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