Managing China's economic slowdown is a lot like a 'chess game', says the man in charge

Photo by Dan Kitwood/Getty Images

Managing China’s economic slowdown is akin to playing a “chess game”, balancing short-term stimulus needs against longer-term efforts to push ahead with market reforms.

That’s Chinese premier Li Keqiang’s view according to Bloomberg. Speaking at the World Economic Forum’s “Summer Davos” meeting in the Chinese port city of Dalian, Keqiang suggested the government has “plenty of tools” at its disposal to address downward pressures within the economy .

“You need to be careful with immediate moves you take. That is to say, we need to take targeted measures to resist downward pressure on the economy at the same time we need to build momentum for sustainable and healthy economic growth”, he told the summit.

Attempting to address growing international concerns about the current state of China’s economy, Li stated that should growth “show signs of slipping out of the reasonable range, we have sufficient capability to respond”, adding “China will not see a hard landing”.

“We will not be swayed by short-term fluctuations in the economy but we will not take it lightly either. We are taking necessary measures of targeted, discrete and precise macro controls”, he said.

While a strong rebuttal to those who believe China’s economy is in a far more dire state than official government figures would suggest, the words are unlikely to appease even modest China bears.

Recent economic data has been hardly stellar: the manufacturing sector is contracting while growth in the nation’s services sector, which the government is pinning much of its economic hopes on, is decelerating. Coupled with weak trade data suggesting weak internal and external demand, slowing industrial production and retail sales growth and a sharp decrease in raw materials prices, it’s clear why so many remain sceptical that the government can achieve its goals without reverting yet again to short-term, large-scale stimulus spending.

These concerns are merely compounded by the collapse of China’s stock market bubble, something that has seen major indices lose around 40% of their value in the past three months. Constant government intervention to stymie the market’s losses raised eyebrows, and drew the ire of many, who point to the constant meddling as a sign the government is not serious about truly implementing market-based reforms.

So who will be proven right in this highly-important chess game – the bears or Li?

Both sides have lost pawns in the battle so far, question is who’s king will be standing last?

You can read more here.

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