Li Keqiang: China'S Downward Pressure On Economic Growth This Year

The three session of the twelve National People's Congress (NPC) opened in Beijing this morning. Li Keqiang, premier of the State Council, pointed out that the downward pressure on China's economy is still increasing, and the deep-seated contradictions in development are highlighted. The difficulties faced by this year may be bigger than that of last year.

At present, the world economy is in the process of deep readjustment. The momentum of recovery is insufficient, the geopolitical impact is aggravated, the number of uncertain factors is increasing, promoting growth, increasing employment and adjusting the structure become the consensus of the international community.

In the face of difficulties, Keqiang pointed out that the development of China is still of great importance.

It has great potential, toughness and room for maneuver.

New industrialization

With the continuous development of urbanization and agricultural modernization, the foundation for development is increasingly strong, the dividends of reform are being released, and macro-control has accumulated rich experience.

"We must enhance our sense of hardship, strengthen our belief in success and firmly grasp the initiative of development."

Li Keqiang said.

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In addition to concerns about the depreciation of the renminbi, the market is also concerned about whether the adjustment of the floating range of the renminbi is likely to be adjusted.

Yi Gang clearly stated that there is no urgent need to adjust the floating range of RMB, and the current RMB floating interval elasticity is much larger than in the past.

This statement is mainly in response to recent market speculation.

As the RMB has been in a "soft pegged" state against the US dollar, but the US dollar has strengthened, and the Chinese economy is facing the dilemma of "three phase superposition" (the shifting period of growth rate, the throes of structural adjustment, and the digestion period of the previous stimulus policy). The RMB has nearly closed down against the US dollar, after which the spot exchange rate touched a new low for 28 months. So the market is worried that the current 2% volatility is not enough to reflect the real exchange rate market.

Many foreign banks are forecasting that the possibility of easing the fluctuation zone of China's currency is rising.

Under the pressure of deflationary pressure, this may further lower the yuan.

"Since the launch of the euro zone QE, there has been a significant change in the central parity of the RMB - more depreciation with the euro, rather than a stare at the dollar, which shows that the middle price is more market-oriented, which is undoubtedly an important reference for the future trend of the renminbi."

Xie Yaxuan said.

Specifically, in the second day (January 23rd) of the European Central Bank's trillion QE launch, the spot exchange rate of the renminbi dropped by 222 basis points. In January 26th, it continued to depreciate by 254 basis points, hitting a new low since June 2014.