Chinese vice premier speaks up on economic woes, confidence rallied in markets

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Chinese Vice Premier Liu He has spoken up on Friday addressing major market concerns, stressing that the risks and problems lurking in the world's second largest economy which have been brought to day light should be examined “rationally.”

Sitting down with three leading Chinese state media, Liu first shared his analysis of the recent market correction in China, attributing it to a combination of multiple factors that range from interest rate hikes by major economies, investor psychology and the Sino-US trade frictions.

"The Sino-US economic and trade frictions have also caused [an] impact on the stock market, but the psychological effect is bigger than the actual impact, frankly speaking," said Liu, adding that “China and the US remain in contact with each other.”

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"China is becoming the most valuable market for investment in terms of global asset allocation. The bubble has been greatly reduced. The quality of listed companies is improving, and their valuation is at a historic low level. Therefore, many institutions suggest paying close attention to China's stock market, believing in its high investment value."

No such thing as 'the state advances as the private sector retreats'

Liu also shut down the criticism that state-owned firms are creating a wedge in the country's private sector, calling the view “one-sided and wrong,” but in the meantime recognizing that problems exist in policy execution, which hampers the financing of private businesses.

“Some lenders are under the impression that it was safe to provide loans to state-owned enterprises (SOEs) but politically risky to loan to private businesses,” Liu noted.

“This kind of understanding and practice is completely wrong.”

Recently, some private enterprises that expanded quickly through massive borrowing in early days have encountered liquidity problems due to their deviation from the main business. To help them out, state-owned banks and enterprises participate in their restructuring, an operation which some regard as withholding support.

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China's private sector plays an important role in the economic system, contributing more than 50 percent of tax revenue, 60 percent of GDP, 70 percent of technological innovation, 80 percent of urban employment and 90 percent of new jobs and new firms.

"Without private enterprises, the entire economy cannot achieve stable development," Liu said.

The vice premier did not flinch from addressing the difficulties in the economy during the interview, saying that "the country's economic structural adjustment has yet to be completed, and supply-side structural reform needs to be further advanced." But he remains optimistic about the country's future development.

"China must identify and seize new opportunities to transform traditional industries, foster new sectors and step up the building of a modernized economy," Liu said.

Liu He: No such thing as 'the state advances as the private sector retreats'