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China can ‘live with’ slightly lower GDP growth if inflation stays below 3.5 per cent, says Premier Li Keqiang

  • Premier Li Keqiang says if China can keep the unemployment rate below 5.5 per cent and inflation under 3.5 per cent it can tolerate a slightly lower growth rate
  • China’s economic recovery is still fragile, but Beijing has ruled out large stimulus because it is wary of fuelling high inflation that has ravaged Western economies

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China’s consumer price index (CPI) rose by 2.5 per cent in June from a year earlier, up from a rise of 2.1 per cent in May. Photo: Bloomberg

Chinese Premier Li Keqiang has signalled a higher tolerance for inflation this year, as Beijing looks to stabilise the economy in the face of multiple headwinds ranging from global recession risks to geopolitical uncertainty.

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Speaking at a forum of nearly 400 business leaders from more than 50 countries last month, Li indicated that China’s inflation rate could reach 3.5 per cent this year, a broader range than the target of around 3 per cent proposed by government in March.

China’s consumer price index (CPI) rose by 2.5 per cent in June from a year earlier, up from a rise of 2.1 per cent in May.

“If we can keep the unemployment rate below 5.5 per cent and the CPI rise stays under 3.5 per cent for the whole year, we can live with a growth rate that is slightly higher or lower than the target, not too low of course,” Li said in an address to the World Economic Forum (WEF), which was posted online last month.

“Why is it acceptable? That’s because, with stable employment and stable prices, we can say the economy has stayed within a proper range.

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