Li Keqiang at Davos: Systemic Reform Needed for a New Economic Pathway

There could not be a greater contrast between the speech given by Chinese Premier Li Keqiang and the rantings of the berserker U.S. President Barack Obama in his State of the Union the day before, who insisted that the United States, i.e., Wall Street, is the grand arbiter of the the world economy. In his speech to the Davos World Economic Forum on Jan. 22, Premier Li began by noting that Davos had been famous once as a sanatorium for tuberculosis patients, and with the discovery of penicillin, they were able to overcome the disease. The issue for those gathered today, Li said, was to find the penicillin for the world economy. He underlined the seriousness of the international financial crisis, and said that the world cannot rely on old solutions, that they must have new thinking.

He noted that this year is the anniversary of the end of the Second World War and the creation of post-World War order. While it had created a solid framework for global collaboration, it had been disrupted by the Cold War. Now it was important to put that behind us.

“Countries should abandon the Cold War thinking and the notion that ‘the winner gets the food,'”

Li said. This attitude will not work in the present-day world, he underlined.

He also stressed that every culture had its own values, which are loved by its people. Each of these represents a treasure, he said, and each should be allowed to flourish like flowers in the common garden of humanity. Warning against a frantic move toward protectionism, Li referred to

“an old European saying,” that goes “when the storm winds start blowing, some people build a wall, and others build a windmill,”

thus trying to draw benefit from what appears as a crisis.

“We should resolve to seize the opportunity of today, unflinchingly push forward toward a free market, show the colors against the threat of protectionism, increase regional cooperation, forge a chain of world value, and welcome the arrival of a scientific revolution. Macroeconomic policy is, of course, very important, but systemic reform is imperative. This is the general consensus of the world community. Even though the difficulties are great, we should persist in our efforts, and in this way we will bring together the innovative forces of the entire world, and strengthen the world economy with a new kinetic energy.”

Li Keqiang also assured his listeners that the Chinese economy, while slowing somewhat, still had much excess capacity. He pointed out the major projects that had been launched, but by no means had reached completion, including their high-speed rail program, the water projects, the urbanization process, with still many people living on the land who will ultimately be brought into production and will provide new productive resources for a growing economy. There was also the fundamental issue of improving the “people’s livelihood,” raising the standard of living, particularly for those millions of people living in the countryside with a low standard of living. While noting that China would continue opening its market to foreign capital, he underlined that the government would be using the “two engines” of growth: one, the market, and two, the role of government, each with an important part to play in development.