On September 11, Premier Li Keqiang announced more economic reforms for China, focusing on the financial system and the stable flow of capital in order to promote sustainable growth. Recent increases in borrowing rates have boosted the economy, with industrial output growing 10% in August, the greatest increase since April 2012. However, Chinese industries’ heavy reliance on credit-fueled growth represents a significant future financial risk. Li’s plan would liberalize interest rates and the convertibility of the yuan, as well as slow growth down to a forecasted seven percent so as to curtail over-leveraging among Chinese businesses. Li also announced that foreign companies would receive the same treatment as Chinese state-owned enterprises from the government in order to encourage foreign business and investment. The reforms are part of an important shift in Beijing’s policy, which seeks to move China from an export-driven economy to a consumption-based one. This represents a significant departure from previous plans that relied heavily on investing in industry. A more specific blueprint for sustainable economic growth is slated for approval at a meeting of Chinese Communist Party leaders in November. (Reuters, September 10; Bloomberg, NPR, Reuters via Chicago Tribune, September 11, 2013)
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