China tries to reassure in Davos

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The recent slowdown in the Chinese economy will be addressed, according to China’s Vice President Li Yuanchao. Official data released on Tuesday by the National Bureau of Statistics shows that the Chinese economy grew at its slowest pace since 1990. Officially, China’s economy grew by 6.9% in 2015 – this would be seen as positive elsewhere, but not for the world’s second-largest economy.

At the World Economic Forum in Davos, Switzerland, Mr. Li told delegates that the Chinese government will introduce cuts to industrial overcapacity and policies that will ensure it’s much easier for private businesses to compete with state-owned companies, something vital for the future of the Chinese economy. Along with fellow delegates, Mr. Li promised to continue with a reform program that will see China move further away from a heavy reliance on investment which has slowed its growth.

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“China has the confidence and capacity to maintain medium to high growth”, Mr. Li said. “The economy will grow more steadily and have more diversified driving forces”.

Those looking to invest in a company have shown serious concern about Beijing’s grip on economic policy after a further drop in its stock markets and the yuan caused further worries that the economy may be rapidly deteriorating.

The goal for the Chinese government is to transition from an export-led growth to a growing consumption. However, many investors have analysed the numbers to conclude that the slower pace of growth is being caused by poor investments into real estate and infrastructure. For investors to invest in Chinese companies, the economy is going to have to follow what Mr Li said, a ‘medium to high growth’ with ‘more diversified driving forces’.

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