Li Keqiang pledges reforms as economy slows

Premier Li Keqiang, part of China's new leadership, says his government remains focused on its program committed to reforms even as the national economy slows. Speaking to governors from western China, Li, an economist and leader of China's Cabinet, said the government will continue with reforms and create fresh growth engines, China Daily reported Thursday. The report said Li showed unusual tolerance for the slowing growth. The premier said so long as the economy stays within a reasonable range of growth, the government will be able to make a more focused effort on reform and generate new power for growth in the long term. His assurances came as China's exports, crucial for growth, fell 3.1 percent year-on-year in June to $174.3 billion, adding to concerns about the growth slowdown. June exports were the lowest since October 2009. June imports also declined 0.7 percent to $147.2 billion. However, Li had said the economy is still proceeding within a reasonable range, without the growth rate falling too low and inflation running too high, China Daily reported. He said the main indicators were still within the reach of this year's GDP growth target. China's GDP target for this year is 7.5 percent. Last year, the economy expanded 7.8 percent, the slowest growth in 13 years. The government's target for inflation this year is 3.5 percent. June inflation rose to 2.7 percent year-on-year in June from 2.1 percent in May, blamed largely on higher food prices. Also, China's manufacturing activity in June as shown by the official Purchasing Managers' Index slowed to 50.1 from May's 50.8. Although June marked the ninth consecutive month the PMI had stayed in the positive range, all major components that go to make up the index declined during the month, indicating downward pressure on the economy, an analyst said. An index above 50 indicates growth. Li said China is at a stage where "only economic transformation and upgrading can support sustainable and healthy development," adding macroeconomic policies should balance growth and reforms and avoiding sharp fluctuations in economic development. He also promised to support small and micro-entrepreneurs, saying they provide the most jobs. Economists have said the risk of a further cooling in the world's second-largest economy stems from weaker exports, stubborn industrial overcapacity and a fast-growing debt ratio. "The weak trade data pose further downside risks to the June and second-quarter growth numbers that will be released on July 15, helping to reinforce our concern over risks in the second half," Zhang Zhiwei, chief economist in China with Nomura Securities, told China Daily. The newspaper quoted a Barclays Capital report saying: "We continue to expect further structural reforms ... to be announced in coming months. These should help market mechanisms play a bigger role, increase private investment activity and inject more vigor into the underlying economy."