China alone cannot save world from Brexit downturn, says Chinese Premier Li Keqiang

The world should not rely on China to save it from an economic downturn following UK’s vote to leave the EU, Chinese Premier Li Keqiang said on Friday.

His remarks came after a meeting with six global trade and finance leaders including World Bank president Jim Yong-kim, International Monetary Fund (IMF) managing director Christine Lagarde, and the Financial Stability Board chairman and Bank of England governor Mark Carney.

Li said that the world economic recovery could not be driven by mainly China.

Countries should work together on economic policies in the wake of the Brexit vote, according to Li.

“Given the financial fluctuations as a result of Brexit, China will advance market-based reform of its exchange rate.

“But it is impossible to carry all of the burden of the whole world on our shoulders,” he said.

“Improving global economic growth would require the world to step up macroeconomic coordination and increase the transparency of macro policies,” Li added.

On Tuesday, the IMF has revised up its forecast of China’s 2016 GDP growth by 0.1 per cent to 6.6 per cent, citing the country’s “recent policy support”, including interest rate cuts, fiscal expansion and rising investment.

At the same time the organisation slashed its forecasts for UK growth, becoming the first official economics body to revise its growth estimates heavily downward in the wake of the shock Brexit vote last month.

The IMF now says it expects the UK GDP to grow by 1.7 per cent this year, down from the 1.9 per cent it forecast in April, and the forecast for 2017 is just 1.3 per cent, down from 2.2 per cent previously. 

Li said the IMF’s upward revision of China’s gross domestic product growth had put “pressure” Beijing’s efforts to stabilise the economy.

His comments came ahead of a meeting of G20 finance ministers and central bank governors in China this weekend.

The Brexit shock has given the economy “a good kicking”, according to a special set of surveys of businesses taken in the wake of the European Union referendum vote, which suggest the UK economy is now contracting at its steepest pace since the last recession in early 2009.

The “dramatic deterioration” will significantly increase the odds of a major monetary stimulus from the Bank of England next month to support the economy.