The yuan is making the most of its new-found exchange rate 'flexibility' .
Photograph by Mark Ralston — Getty Images
By Scott Cendrowski
September 11, 2015

At “Summer Davos” in the coastal Chinese city of Dalian, a city whose large public squares and progressive modern urban layout were built during the heady days of double-digit Chinese GDP growth earlier this century, Premier Li Keqiang took the stage Thursday to assure business dignitaries that the outlook for the world’s second largest economy is still fine.

Li told the attendees not to worry about the slowdown in China’s economy that some economists speculate could lead to GDP growth as low as 4% this year. “The Chinese economy has been running within the proper range,” he said.

Conspicuously, he did not discuss criticisms of the government’s response to the recent crash in China’s stock market. He was also elusive when offering details of financial reforms, preferring to offer platitudes like, “China will not waver in its commitment to pursuing the reform.”

 

That evasiveness may be because this summer China backtracked on the key economic reform it promised two years ago when President Xi Jinping assumed power: namely, freer markets.

This year the government has repeatedly intervened to prop up an economy suffering from a huge slowdown in manufacturing and heavy industry. It has cut interest rates, enacted fiscal stimulus, spent nearly a quarter of a trillion dollars buying stocks, and spent even more on supporting its currency. Meanwhile, the European Union Chamber of Commerce in China this week described “an emerging political-economic environment that can be described as one of ‘reform and closing up” for foreign businesses.

The economists at Bloomberg tallied the spending to help the economy; the total so far is roughly $800 billion. The sheer levels are not just astounding but a reminder that China is not on a path toward economic liberalization, no matter the comments from its leaders.

 

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