DALIAN: Business executives and analysts on Thursday welcomed Chinese Premier Li Keqiang’s pledges of reform during his inaugural speech at the World Economic Forum’s “Summer Davos” meeting, but warned the process will be slow and incremental.
Li, who took office six months ago, delivered a message of change in the world’s second-largest economy to global business leaders gathered in Dalian, in northeastern China.
“China’s modernization will not be accomplished without reform, nor will it be achieved without opening up,” he said.
“Without structural transformation and upgrading, we will not be able to achieve a sustained economic growth,” Li added.
He pledged that China would make its yuan currency freely convertible and allow bank interest rates to be set by the market—but did not give any timetable for the moves.
Li’s remarks came before a key Communist Party meeting in November, but analysts said that a “big bang” approach to change was off the table.
“What will happen, is that China will announce it would open more on the financial market side,” Hellmut Schütte, vice president of the China Europe International Business School, said on the sidelines of the meeting.
“But China would be very ill-advised to call for a ‘big bang,’ they will take progressive steps,” he added.
China has repeatedly vowed to move toward making its currency fully convertible, meaning the unit could be freely bought and sold, allowing unrestricted movement of funds in and out of the country.
The Chinese yuan is only convertible for trade, to buy imported goods or turn revenue from exports back into local funds.
In July, China began allowing banks to set their own lending rates but the central bank still fixes deposit rates by administrative order.
A Chinese banker said that deposit rates could be freed as early as 2015.