Davos WEF
Davos WEF

China Premier: This train will not lose momentum

Chinese economy: No loss of momentum
Chinese economy: No loss of momentum

The Chinese economy is not heading for a hard landing and will instead stick to its current path of reforms and create far-reaching opportunities for the whole world, according to the Chinese Premier Li Keqiang.

"We will maintain our strategic focus and continue to pursue a proactive fiscal policy and a prudent monetary policy," he said at the World Economic Forum at Davos.

"We will upgrade the structure of the economy to achieve better quality and performance."

Addressing an audience in his keynote address at the event in Switzerland, he detailed an array of reforms that the country is currently undergoing and would further achieve in the coming years. These included optimizing income distribution, encouraging entrepreneurship and reforms of its financial system like the liberalization of exchange rates. The internalization of the Chinese currency would be a long process, he later conceded.

China would promote free trade, economic co-operation, global value chains and new free trade zones, he added.

He said that the Chinese economy had now entered a "new normal" where development is moving to a "medium-to-high" level. Likening the Chinese economy to a train, he added that the train would "not lose speed or momentum" and will be powered with a stronger motor going forward.

"Regional systemic financial crisis will not happen in China. The Chinese economy will not head for a hard landing," he said, directly addressing concerns by some economists that the economy could face a significant fall in growth figures.

Premier Li Keqiang's visit to Davos this year is first time a Chinese leader has attended WEF Davos in five years, according to state-run Xinhua news agency, and comes as data showed that China's economy grew at its slowest pace in 24 years.

The annual expansion of 7.4 per cent in 2014 is the slowest since 1990, and the slowdown is expected to continue in coming years.

Oil price weakness

Getty Images

The speech came at a time of oil price weakness and slower global economic growth. If the sharp decline in the price of oil continues for a year, China will save over $100 billion which will enable them to purchase oil assets from overseas needed for the country's future, Dr Lin Boqiang the director of China Center for Energy Economics Research at Xiamen University told CNBC.

China will be particularly important for Russia this year, given how sanctions and low oil prices have affected their economy, as the nations forge closer ties, he said.

"Lower oil prices are good for China, there is no question about it. China will focus on cooperation with Russia and also the Middle East and Latin America. Right now it presents a window of opportunity for China to go out and buy oil assets," Boqiang said, speaking at the World Economic Forum (WEF) in Davos, Switzerland.

"For Russia, they really need the market at this moment, there is desperation there. China has the market – Russia has the resources, so put them together I think it is quite complimentary. Moving forward, even without this (low oil prices) there would be good cooperation, but with this there is even better deals coming," he said.

Any new deals between the two nations, follow an early agreement unveiled in November last year, where Russian President Vladimir Putin and Chinese leader Xi Jinping drew up initial plans for a gas route from Russia to China.

State owned Russian gas producer, Gazprom hopes to ship 30 billion cubic meters (bcm) of gas a year under the agreement, on top of a deal agreed in May to supply China with 38 bcm a year after 2018.

Visiting Davos as growth slows

Chinese premier: Must uphold peace together
Chinese premier: Must uphold peace together

China is still heavily reliant on coal consumption, and is currently responsible for around half of the world's coal usage according to International Energy Agency.

Last year, President Xi Jinping called for an "energy revolution" and warned that the nation needed to find new ways to produce and consume fuels, while alternative energy supplies need to be boosted.

Speaking at WEF earlier on Wednesday, People's Bank of China Governor Zhou Xiachuan agreed that falling oil prices are good news for China's economy, but raised concerns that it would stop people from switching to cleaner, more renewable energy sources, according to Reuters.

Doing business in China has been a hot topic of debate so far at the forum, but a number of business leaders has dismissed concerns surrounding the nation's slowing growth.

Chief executive of German chemical and detergent manufacturer Henkel, Kasper Rorsted said his firm had very strong double-digit growth in the first three quarters of last year in China, and any slowdown really needs to be put in context.

"While we are optimistic about Germany, I want to put that in context with China. China is growing about four to five times stronger than Germany and 10 times the rate of the euro zone, so there is a huge difference," he told CNBC, speaking from Davos.

"I have been here for many years, every year I hear about the decline of China. China is still growing at 7 percent, there are very few other countries in world that grow at 7 percent. U.S., of which I am a big fan, is growing at 2.5 to 3 points, so 40 percent of the growth rate of China. China is still the growth rate engine of the world," he said.