Premier Li's Summer Davos Speech dispels 'hard landing' concerns

Chinese Premier Li Keqiang was not delivering empty promises when he said China is not headed for a "hard landing" during the Summer Davos forum.

"We will be fully capable of dealing with the situation if signs indicate that the economy is sliding out of the reasonable range," Li said.

Admittedly, the broader economy is facing short-term fluctuations triggered by domestic restructuring and global volatility. However, it does not necessarily mean China is facing systemic risks serious enough to spread worldwide.

China's problems, especially mounting downward pressure, mostly stem from challenges in its own reforms. The world's second largest economy is suffering pains as it weans itself off reliance on industrial expansion, cheap labor, resource exploitation and low-end commodities, which had been unsustainable conditions powering growth in the past.

A slowdown is not surprising during this transitional period.

The government is neither panicking nor blindly optimistic. Reform and pro-growth policies have been issued and implemented. So far, the economy has stayed within a "reasonable range" and fluctuations are still tolerable.

The worst may be over. Signs of improvement have been observed thanks to the measures. Private firms have seen a recovery in foreign trade, and major regions such as Guangdong and Jiangsu are regaining strength. Exports to the United States and ASEAN keep rising. Electricity consumption and railway freight volume, two main economic indicators, have emerged from a losing streak.

Accordingly, an economic "hard landing" is extremely unlikely in China as long as the global recovery is not doomed.

Temporary fluctuations persist and influence the economy, but as the premier said, policymakers have many tools, including monetary easing, fiscal policies and infrastructure construction, which will help manage the economy and prevent excessive swings.

There is no need to worry about the "hard landing" or overstate the risks facing the economy. The real question for the government to ponder is how China can shorten this economic transition.