Chinese leaders stress reform balancing act

High-profile speeches by Chinese leaders have refuted claims of a derailing of growth in the world's second-largest economy, highlighting confidence among the new leadership in carrying on rebalancing efforts.

In the latest effort to assure the world about the economy's health, Premier Li Keqiang said Wednesday that the Chinese economy, which is at a crucial stage of transformation and upgrading, is moving forward in a steady way.

"As long as the economy runs within the reasonable range, we will keep the macro economic policy generally stable, and focus on shifting the growth model and on structural readjustment," the premier said at the opening ceremony of the Summer Davos Forum in China's northeastern port city of Dalian.

The statement echoed remarks made by President Xi Jinping last week in a speech delivered at the eighth G20 summit.

"China's economic fundamentals are sound," Xi said. "China has realized that it has to advance structural reforms in order to solve the problems hindering its long-term economic development, even though it will mean slower growth."

The speeches showed that Chinese leaders have made a sober assessment of the economy's growth prospects, judging that the government should neither relax its vigilance against risks nor overlook growth potentials, said Kuang Xianming, director of economic research at the China Institute for Reform and Development.

Since taking office in March, the new administration has demonstrated greater tolerance for slower growth in a bid to restructure the economy, which has aroused fears that the shift in focus away from growth will lead to crises in the short term and a loss of growth momentum in the long run.

"The speeches have made clear that the economic slowdown was self-initiated although there was the choice to stimulate growth," Kuang said.

Sluggish overseas demand and government reluctance to ease policies have left China's growth stuck in a protracted slowdown, with second-quarter growth declining to 7.5 percent from 7.7 percent in the first three months and 7.9 percent in the final quarter of 2012.

"Clearly, a consensus has been reached among the leadership that the huge consumption market, vigorous investment and ongoing urbanization are areas for potential growth but that multiple problems exist at the same time," Kuang said. "So measures serving both long-term and immediate interests have been adopted."

With "reform" a key word in the the top leaders' recent speeches, analysts believe that the government is playing "reform and opening up" as a trump card.

"In the face of economic downturn, a short-term stimulus policy could be one way to drive up growth. But after weighing the pros and cons, we concluded that such an option would not help address the underlying problems," Li said when addressing the forum.

This indicated that the government will not follow the old path to stimulate the economy, but take the initiative to tackle the problems through bold reforms, said Wang Xiaoguang, an expert at the Chinese Academy of Governance.

The message is not only meant for the world, but also for local Chinese officials, who should change their mindset of "begging for stimulating policies" and shift to the new growth pattern pursued by the central government, said Zuo Xiaolei, chief economist at China Galaxy Securities.

Recent months have seen a raft of eye-catching measures introduced by the government to deepen reforms. They include delegating administrative power to lower levels, cleaning up local government debts and reducing overcapacity.

The newly established pilot free trade zone in Shanghai has also been viewed as the latest move to widen opening up.

The Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee, which is scheduled for November, will further highlight discussions on comprehensively deepening reforms.

"More measures and policies designed to boost reforms and opening up will be unveiled at the upcoming meeting of the CPC. They will be much ahead of public expectations," Kuang predicted.

Analysts believe that the growing signs of economic stabilization exhibited during the past two months have proved that the economy doesn't need stimulus. This will help steel the resolve of the leadership to pursue the rebalancing act.

"The upbeat trend shows that economic restructuring alone will bring new sources of economic growth," according to Zuo.

Key economic data for August showed higher-than-expected pick-ups in manufacturing, export growth and industrial profits, prompting economic institutions to raise China growth forecasts.

"The message delivered by the leadership is important to stabilize public expectations, while the motivation and vitality inspired by the expectations will be more powerful than a trillion-yuan stimulus package," Kuang said.