Premier Li hints at more easing measures to maintain China’s economic growth

HONG KONG – China’s Premier, Li Keqiang, said today that Beijing has sufficient policy ammunition to counter disinflationary risks and to maintain GDP growth above the bottom line. Commenting on the statement, HSBC said it believes this implies that more easing measures will be deployed in coming months.

Addressing a National People’s Conference press conference, Li emphasised that China’s debt problem can be solved through ongoing fiscal reform and restructuring. More individual defaults would be allowed provided that they do not trigger systematic risks.

He also noted that China currently ranks around 80th in the world on the basis of per capita income and still needs to grow at a reasonable pace. Reducing red tape remains on top of the reform agenda, and is expected to play the dual role of giving market forces a bigger role and stabilising the labour market.

HSBC says Beijing has a lot of manoeuvring room on the monetary as well as fiscal fronts, and it believes the growth target of 7% for 2015 mostly likely represents Beijing's bottom line on growth.

“As economic activity data has weakened further in 2015 and growth is likely already close to the bottom line, more policy easing, most likely monetary policy easing, will be delivered in the coming months, if not weeks,” HSBC says.

Premier Li said  China's overall debt level is manageable. He also said the Government will allow individual cases of defaults to occur, and that these will be settled by market mechanisms. The government will closely guard the bottom line on systematic stability through introduction of a deposit insurance scheme and the development of direct financing (equity and bond market) to support growth. www.hsbc.com (ATI).