China's economy to expand 5% in second quarter, Prime Minister Li says

Several major banks have cut 2023 growth estimates after May industrial output and retail sales data missed forecasts, indicating Beijing needs to take further steps to shore up post-Covid recovery

Chinese Prime Minister Li Qiang told the World Economic Forum's 'Summer Davos' in Tianjin that China will roll out more effective policies to expand domestic demand and open markets. AP

China's economic growth in the second quarter will be higher than the first and was projected to reach the annual economic growth target of around 5 per cent, China's Prime Minister Li Qiang told delegates at the World Economic Forum gathering in Tianjin on Tuesday.

As factory output slows amid weak external and domestic demand, Mr Li said China will roll out more effective policies to expand domestic demand and open markets, as well as continue to act as a strong driving force for the global economy.

However, analysts are now downgrading their economic growth forecasts for China for the rest of the year.

Several major banks have cut their 2023 gross domestic product growth forecasts after May industrial output and retail sales data missed forecasts and indicated that Beijing will need to take further steps to shore up a shaky post-Covid recovery.

The pandemic is unlikely to be the last public health crisis the world faces, said Mr Li.

The trend of globalisation remains intact despite some setbacks, he said, reiterating a key theme of his since taking up his post in March. He insists that China remains open for business and welcomes foreign investors.

Effective communications and exchanges are vital and countries should strengthen dialogue and communications to avoid misunderstanding, said Mr Li.

He warned governments against politicising their economies saying it would only fragment the world, as the US and Europe press ahead with plans to “de-risk” their supply chains from the Asian nation.

“Some in the West are hyping up the so-called phraseologies of reducing dependencies and de-risking,” China’s No. 2 official said at the WEF's Annual Meeting of the New Champions in the coastal city close to Beijing in northern China.

It’s the first in-person gathering of the forum – often described as the “Summer Davos” conference – since 2019 following the end of Covid restrictions.

“These two concepts are false propositions. As economic globalisation has already made the world economy an integral whole where everyone’s interests are closely intertwined,” Mr Li added.

He also called on countries to co-operate as global challenges and regional conflicts keep flaring up.

His comments come as China and the US try to manage an increasingly fragile relationship, plagued by disagreements on trade and human rights, and as Russia’s war in Ukraine led to an attempted military uprising over the weekend, casting further doubt over the future stability of global energy markets.

Mr Li’s address was a rare opportunity to hear China’s Prime Minister lay out his roadmap for the world’s second largest economy, as it faces challenges in youth unemployment, domestic consumption and an increasingly fractured geopolitical environment.

Since taking office, Mr Li has held one public press conference in China and only made a handful of speeches.

Business executives and investors will be listening closely to Mr Li’s assessment of China’s economy for any hints Beijing may step up stimulus amid mounting evidence of a slowdown in growth.

Mr Li chairs the State Council, China’s cabinet, which said earlier this month it’s studying new support measures to boost the economy.

Investors have been on high alert for an announcement since the central bank’s recent interest rate cut in June, although policymakers have been slow to follow up with any specific steps.

Mr Li’s speech comes after he travelled to Europe last week to meet with leaders from Germany and France, in a bid to reset ties with China’s major trading partners.

In his first overseas trip as Prime Minister, Mr Li shared a stage with US Treasury Secretary Janet Yellen, who plans to visit Beijing in early July for the first high-level economic talks, people familiar with the scheduling said.

The US and European allies are seeking to reduce their supply chain reliance on China in order to “de-risk” their economies, an approach that Beijing has criticised as a form of decoupling that it says would be harmful to growth and investment.

Mr Li is seeking to lure foreign investors amid a slump in sentiment.

Foreign direct investment declined in recent months, reversing the first-quarter’s gains. A recent survey by the EU Chamber of Commerce shows that a record share of European companies say doing business in China is getting more difficult.

The three-day event will be attended by leaders from the worlds of economics and politics, including New Zealand Prime Minister Chris Hipkins, Director General of the World Trade Organisation Ngozi Okonjo-Iweala, and Saudi Arabia’s Minister of Economy and Planning, Faisal Alibrahim.

Agencies contributed to this report