In response to market expectations for economic improvement, Chinese Premier Li Keqiang stated on June 25 at the Dalian Summer Davos Forum in Liaoning that China’s economy “cannot use strong medicine.” However, this statement was deleted from the official press release, with experts suggesting various reasons for this, including Li Keqiang revealing sensitive information that China’s economy is beyond saving. The interpretation of what constitutes “strong medicine” varies among different experts.
Li Keqiang, during his speech at the opening ceremony of the Dalian Summer Davos Forum on June 25, praised the “favorable development trend” of China’s economy as usual. When addressing how Beijing plans to balance short-term stimulus demands and tackle issues such as high debt levels, aging population, and weak consumption, he claimed that China’s economy, after the impact of the pandemic in recent years, currently requires “consolidating and strengthening its foundation.”
According to the Singapore-based Lianhe Zaobao, Li Keqiang explained that just like a person recovering from a serious illness, “according to traditional Chinese medicine theory, this is not the time to use strong medicine, instead precise and gradual adjustments are needed to gradually restore its foundation.”
However, Li Keqiang’s statement of “not using strong medicine” was censored on the Chinese mainland. The Xinhua News Agency’s official release only mentioned Li’s words about “emphasizing consolidating and strengthening the foundation, enhancing the basic support capacity for economic development,” and other cliches. When Lianhe Zaobao posted “Li Keqiang: China’s economy cannot use strong medicine at this time” on Weibo, comments from netizens were prohibited from displaying.
In mainland media, it appeared that only the financial media Gelonghui had followed foreign media in reporting with the headline “Li Keqiang: China’s economy currently cannot use strong medicine, needs to ‘consolidate and strengthen its foundation'” but it was quickly deleted, and screenshots of the report were circulating on Weibo.
On June 25, a report on government bond futures by Caixin News implied Li Keqiang’s relevant remarks, stating, “Premier Li Keqiang’s statement about not using strong stimulus for the economy is interpreted by the market as no short-term incremental policies, further boosting bullish sentiment in the bond market.”
China’s economic conditions have been deteriorating, and since the lifting of lockdown measures at the end of 2022, the market has been anticipating the Communist Party of China to take “major measures” to boost the economy. However, with the passage of time, the various actions of the Beijing authorities have increasingly disappointed observers. As the Third Plenum of the Communist Party approaches, public opinion holds a cautious and skeptical attitude towards the recent declarations of “returning to reform and opening up.” Li Keqiang’s statement of “not using strong medicine” has gained attention.
A few netizens on Weibo discussed this matter:
– Hat Brother talks finance: “China’s economy cannot use strong medicine at this time! This might explain the recent strange policies.”
– Stock Market Little Yang Brother: “What does this statement imply? Perhaps it means there will be no strong stimulation in the short term. There should not be high policy expectations for the upcoming meeting. Expect disappointment again afterwards.”
– Yangliu Mountain Bamboo: “Bleeding too much, cannot receive a blood transfusion, you have to eat and strengthen nutrition, this remedy is clever!”
– Wind Outside the Window nb: “They admit they are incapable now, let the ‘leeks’ (common people) fend for themselves.”
– Used to Listening to Mountain Rain: “The eighty trillion back then turned China into an oasis in the desert, although there were side effects, it ultimately saved lives! When the condition deteriorates rapidly, strong medicine should be used to save lives first, then regulate. Otherwise, trouble if it’s too late!”
– Silent Earth 2010: “Not using strong medicine for a stubborn illness is dangerous.”
– Hxl521vs125: “Let the leaders retire safely.”
– Seven Fei Te: “Are there no pandemic impacts abroad?”
– Another netizen remarked: “Wasn’t it always stable and improving? Why is there a serious illness now?”
On an overseas platform, independent commentator Cai Shenkun quipped, “A quack doctor who has no understanding of economic common sense and the operational rules of the economy is prescribing ancestral remedies to the Chinese economy, now in critical condition. I wonder what the domestic and foreign experts, scholars, and business tycoons present at the meeting think about this?”
Regarding the deletion of Li Keqiang’s related remarks by official media and the censorship on the internet, experts indicate that it involves sensitive issues.
Associate Professor Sun Guoxiang from the Department of International Affairs and Business at Nanhua University in Taiwan stated to Epoch Times on June 16 that the reasons for deleting “not using strong medicine” could be threefold:
– Firstly, Li Keqiang’s comments implied that the Chinese economy is in a serious condition, necessitating cautious policy measures rather than strong stimulus policies, which might weaken market confidence.
– Secondly, Li Keqiang’s statement of not using strong medicine contradicts the positive economic signals consistently transmitted by the Communist regime, potentially being interpreted as his dissatisfaction with or questioning of current economic policies, affecting investor confidence.
– Thirdly, admitting severe economic problems without quick solutions could lead to public anxiety and dissatisfaction, especially against the backdrop of economic slowdown and rising unemployment rates, prompting the Communist Party to control speech to stabilize social emotions.
Sun Guoxiang believes that the censorship of Li Keqiang’s remarks indicates that the Chinese government is increasingly inept in handling economic issues.
Research Assistant Wang Guochen from the Chinese Academy of Economic Research told Epoch Times that Li Keqiang’s words reveal that there is no cure for China’s economy.
“Faced with relatively urgent situations, such as malignant tumors, we usually opt for surgical intervention by Western medicine first. Subsequent care would involve traditional Chinese medicine. The problem is, if there are too many tumors, performing surgery might lead to immediate death on the operating table. In such a scenario, the only option left might be palliative care. So, this statement to a certain extent explains that the mainland Chinese economy is beyond saving. Disclosing state secrets leads to being censored.”
Palliative care refers to providing end-of-life comfort care for individuals undergoing palliative treatment.
American economist Huang David expressed to Epoch Times that the deletion of Li Keqiang’s words is firstly because it would spark discussions among private businesses and the public, who already feel the current economic situation is very poor, and not using strong medicine would be contrary to common sense. Secondly, it tacitly acknowledges that there is immense pressure on the Chinese economy, conflicting with the government’s overall optimistic depiction, thus prompting its deletion.
There are varied perspectives on what the Communist Party of China considers “strong medicine.”
Sun Guoxiang believes that strong medicine usually refers to large-scale fiscal stimulus and loose monetary policies, which might have long-term side effects.
Purely from an economic standpoint, Sun Guoxiang stated that Li Keqiang’s speech reflects the reality that administering strong medicine now might result in a burden of debt, where accruing new debts to pay off old debts could lead to the bankruptcy of local governments and enterprises. Easing financial policies might result in overall price inflation and increased risks of non-performing loans in the banking system. Moreover, if the economic stimulus has a poor effect, it would lead to increased unemployment rates and worsened income distribution.
“These issues entwine together and cannot be easily resolved. China indeed needs strong medicine, but not in terms of economic policy. Political reforms and opening up are the real strong medicine that can truly address the accumulated chronic problems in the Chinese economy.”
Wang Guochen mentioned that strong medicine refers to printing money. However, the consequence of printing money is the risk of the Renminbi exchange rate collapsing, especially in real estate, as well as local government debts, which are all sinkholes. The recent exposure of state-owned enterprises’ falsification also reflects significant financial loopholes in them.
He noted that by acknowledging they will not use strong medicine, the authorities might be more concerned about moral risks because local governments are engaging in rampant infrastructure projects, and in the event of real estate losses, it would be the central government picking up the tab.
Wang Guochen expressed that since Li Keqiang has stated not to use strong medicine, they should be more concerned about the consequences of not using strong medicine. “Without using strong medicine, the entire economy will decline, foreign companies will be afraid to invest, and may even withdraw factories.” He mentioned that China’s economic slowdown is an inevitable historical trend, fundamentally due to the lack of democratization and marketization, which hinder smooth economic transition.
Huang David pointed out that strong medicine refers to active fiscal policies, such as reducing taxes and increasing subsidies. However, currently, neither aspect is being implemented, and increased monetary injections are not being channeled to private enterprises.
“Using strong medicine now is difficult because doing so would mean increasing fiscal deficits and government burdens, but the current government debt is already enormous. Considering all aspects, it’s a dilemma,” he added.