By Jack Denton
DAVOS, Switzerland -- Chinese Premier Li Qiang had a clear message on Tuesday for the business and political leaders gathered at the World Economic Forum: The world's second-largest economy remains strong despite setbacks, and China is open for business.
It will take more than that to win over investors.
Li is the second-highest ranking official in the Chinese government after Xi Jinping, and the most senior Chinese politician to visit Davos since Xi in 2017. The premier delivered a closely watched speech that promoted China's economy and targeted recent trade tensions, an apparent bid to win back the confidence of investors who have fled the country's markets in recent years.
The effort appeared to include the disclosure of preliminary economic data covering Chinese gross domestic product growth in 2023, which had been scheduled for official release on Wednesday. Li said that China's economy was estimated to have grown by 5.2% last year -- above the official target of 5%, but still some of the slowest growth in decades.
"The Chinese economy can handle ups and downs in its performance. The overall trend of long-term growth will not change," Li said.
China's economy has languished this year, despite expectations of a rebound after the country opened up in late 2022 following a series of strict lockdowns to fight Covid-19. Potential economic stagnation in China has been a concern among investors as the country faces deflation, weak consumer spending, a debt crisis in its property sector, and a slump in manufacturing that has resulted from trade tensions and global attempts to reshore operations.
All of this has weighed on widely held Chinese stocks such as Alibaba. Government stimulus measures have so far mostly underwhelmed.
"Choosing investment in the Chinese market is not a risk, but an opportunity," Li said. That may well be true, but the experience of many investors in recent years is that the rewards haven't been worth the risk.
And it isn't just a problem of economic growth. The Chinese tech sector in particular has suffered amid regulatory crackdowns by Beijing, as the government has sought to rein in its high-growth, high-tech industries.
"We will take active steps to address reasonable concerns of the global business community," Li said.
All of this did little to bolster the mood among investors on Tuesday. Shares in Alibaba were down 2.6%, while JD.com stock was off 3.4% and Nio slumped 7%. The S&P 500 was down 0.3%.
Li also addressed the escalation of trade tensions in recent months, referencing "new discriminatory trade and investment measures." Without mentioning the U.S., which has restricted China's access to high-tech chips used in artificial intelligence in a series of tit-for-tat exchanges, Li said that "obstacles or disruptions can slow down or block the flow of lifeblood of the world economy."
The World Economic Forum in Davos has played an integral role in global affairs in the half-century since its founding, acting as a venue for international business and political cooperation. It remains to be seen whether the issues that have made China uninvestible to some will be addressed this week.
Li's speech suggests there is hope, but so far the stock market doesn't seem to be buying it.
Write to Jack Denton at jack.denton@barrons.com
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(END) Dow Jones Newswires
January 16, 2024 12:11 ET (17:11 GMT)
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