China Will Continue To Implement Proactive Fiscal Policy

At present, the world economic situation in deep adjustment is still complicated, and the momentum of recovery is insufficient, and the uncertain factors are increasing.

Promoting growth, restructuring and strengthening cooperation has become an international consensus.

China's economy is deeply integrated with the world economy.

In the background of the slowing down of world economy and trade and the intensification of international financial market fluctuations, China's economy maintained a high growth rate of 6.9% during the past year, and achieved full employment. Residents' income and savings growth were all higher than the economic growth rate, and the environment has been improved continuously. These are not easy to come by.

Li Keqiang pointed out that the key to China's development depends on reform.

Face

The downward pressure and the deep-seated contradictions in China, we should strengthen our confidence and face difficulties. We will take comprehensive measures to make good use of the great potential, toughness and leeway of China's economy.

While moderately expanding the aggregate demand, we should focus on structural reforms, especially the structural reforms on the supply side.

We will continue to implement the proactive fiscal policy and prudent fiscal policy.

We should further promote the strategy of innovation driven development, promote public entrepreneurship and innovation, mobilize the enthusiasm and creativity of millions of people, so that the new development momentum will continue to grow and the traditional kinetic energy can be pformed and promoted.

We have the ability to maintain sustained and steady development of China's economy.

Li Keqiang appreciates

Over the years, we have made positive efforts to promote global growth and maintain financial stability. The Chinese government is willing to strengthen communication with the International Monetary Fund and other international institutions on economic development and macroeconomic policies, and together with other countries and parties concerned to release signals for the recovery and growth of the world economy and boost market confidence.

Lagarde expressed the belief that the Chinese government can maintain steady growth in China's economy through effective macro policies, structural reforms, stable exchange rate policies and communication with the market.

The IMF is willing to continue to strengthen communication and cooperation with China and share the confidence and confidence of reform in the market.

When it comes to the issue of RMB exchange rate, Li Keqiang stressed that the Chinese government did not intend to promote exports through currency devaluation, nor would it fight trade wars.

In fact, the RMB exchange rate has basically maintained stability against a basket of currencies, and there is no basis for sustained depreciation.

We will adhere to the principles of autonomy, gradualism and controllability, steadily push forward the reform of the RMB exchange rate formation mechanism, strengthen communication with the market, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

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The people's Bank of China is facing a dilemma. In the past 10 years, the people's Bank of China's efforts to curb the continued appreciation of the renminbi were finally successful in the first quarter of 2014, when the central bank's strong market intervention lowered the RMB exchange rate to curb arbitrage.

But now, the central bank is facing a more difficult challenge. The seemingly irreversible devaluation is expected to undermine economic stability, while China's ability to withstand extra instability is the worst.

The intervention in 2014, along with the weakening of China's economic fundamentals, eventually promoted the continued depreciation of the RMB.

Not only did the renminbi not provide reliable force to resist the pressure of appreciation of the exchange rate, in order to achieve its own intentions, it led to a radical reversal drama, and the expectation of depreciation began to spread to the foreign exchange market.

Therefore, in the second quarter of 2014, China's capital account deficit for the first time in decades.

By the first quarter of 2015, the deficit exceeded the current account balance, which means that China has been in the state of deficit of international payments for the first time in recent years.

Nevertheless, considering the size of China's foreign exchange reserves, the market is confident that the people's Bank of China will be able to lock the RMB exchange rate at its own level, no matter what the external revenue and expenditure situation is.

Therefore, the expectation of market depreciation is not strong.

In August last year, the PBC lowered its central parity rate by 1.9%. This may be a response to the IMF's report encouraging China to move the central parity of exchange rates to market interest rates.

This practice has disturbed the market and strengthened the expectation of depreciation.

The PBC has stepped in quickly to avoid panic, but it is too late: the expectation of further devaluation of RMB is firmly established in the market.

Devaluation is expected to trigger more and more capital outflows in China, and the pressure of devaluation is further strengthened. PBC continues to intervene in the foreign exchange market, usually in an unpredictable way (the purpose is to curb speculation).

Therefore, the PBC actually adopted a crawling pegged exchange rate system.