Jul 24, 2013

Likonomics,Watch It

From Chinese to English-speaking world the world, Li Keqiang Economics (Likonomics) This time finally realized export.

Abe Economics (Abenomics) hot on the occasion, I looked in the English-speaking world found no Li Keqiang Economics (Likonomics) this assertion (until now still show misspelled word software), but it was in the Chinese world has considered overwhelming, It is said that the earliest from the "Southern Weekend" reported in March this year.

Days of the New Deal Prime Minister on the occasion comes, the bank created by the Barclays English popular Chinese hot new word, then Likonomics how to define? Barclays reports that there are three pillars: Not introduced stimulus measures, deleveraging and structural reforms.

First of all, never introduced to stimulate policy, official apparently suffered no small pressure. China's current economy is clearly in a downward trend, the official June Purchasing Managers Index (PMI) was 50.1%, slightly higher than the 50 balanced line ups and downs, hit eight-month low, and the data show some important subprojects worrying. Medium and long term, China's economy is difficult to maintain 8% growth has become the industry consensus, the potential growth rate over the next decade interval may be 5% to 6% range or even lower. Today, this figure may seem incredible, but the country is indeed surpass the norm, from high-speed economic growth is slowing more in line with the laws of gravity, once flourishing in the Japanese economy also experienced this stage, the first slow down to 5%, then less than 1%. Li Keqiang does not stimulate indeed one of the highlights of the New Deal, recently he again shouted "Activate financial stock funds," or also imply generous stimulus cautious, specific measures are still to be seen. CPC eighteen before, many observers expect the new government came to power after the rapid introduction of incentives as a "policy package." The expectation then gradually fall, regardless of time or economic effect, apparently the new government has been cutting needs and past policies are unlikely to soon sell massive stimulus plan.


On the other hand, the incentives will certainly be negative it? Not necessarily. All kinds of large-scale investment projects launched essentially expanded government involvement and intervention in economic life will obviously lead to increased investment, credit expansion, inflation, expansion and other consequences. However, apart from this kind of empowering style stimulus policies, there is another type of stimulus, that massive tax cuts, increased investment in social security, etc., can be called decentralization style stimulus.

From a historical point of view, the Chinese government stimulus policies for the former type of frequent use, very much at home, after a class of policies is often no favor, rarely have a chance to be implemented, even though economists generally believe that the latter type of policy on economic growth with more large positive effects. China still needs now and in the future, after a class of stimuli, is difficult to assert the latter category should withdraw stimulus policy arsenal.

Secondly, deleveraging is the latest buzzword, which also comes from Li Keqiang for "To activate the stock of money and credit to support the real economy", "optimize allocation of financial resources, with a good increment and revitalize the stock" and other derivatives views. If you say no more performance for fiscal policy to stimulate the field, try to leverage the more reflected in monetary policy over the recent "money shortage" which can be described as a typical representative.

Under awash with liquidity, "money shortage" incident is thought-provoking, seemingly paradox of rationality what? Chinese economic leverage is too high, the future existence of further overcapacity drawbacks. Officials hope the initiative to leverage all truth, but this situation with Chinese investment and financing system inherent crux Away relations and hopes that docking is not always reality.

In interest rates, industry access yet to release the circumstances, on the one hand is the lack of investment channels have a large number of deposits at low cost into the bank, the other is the lack of private investment funds corresponding channels, leading to underground financial rampant. This dual system will inevitably lead to huge capital arbitrage motive, everyone they hate shadow banking system but is "shadow banking" Bale. It is precisely because deleveraging in the right direction, but this goal can be achieved is still uncertain number, but at least it difficult to squeeze through wishful thinking can get inter-bank market.

Last term structural reforms, and this is not the introduction of a superposition of stimulation and after the inevitable deleveraging point. Li Keqiang late last year called "Reform is the biggest bonus," for which he won a lot of extra points. Recalling China's three decades of economic growth and reform can be described as the core driving force, its effect over the demographic dividend, accession to the WTO and other factors. The problem is that, when the reform into deep water from the shallow waters after also means easy roads are completed, leaving China time but doubly urgent. Reforms in recent years can be described as the greatest voices of civil society, perhaps contrasting reform underpowered, the resistance is too large.

From "does not stimulate, deleveraging, structural reform," three in terms of solutions unspeakable stereotypes, then we are talking about economics, when Li Keqiang, in the end is talking about it? Council Li Keqiang economics, based on the direction of the moment as a standard, or in the future as the result of assessment?

Recalling Reagan economics, economics, etc. vocabulary Thatcher speaking, a head of state or head of government named economics, not only in its name and location, but also in its corresponding economic policies - in this sense, the future examine the economic history of modern China, Zhu Rongji economics ultimately have a place, and Li Keqiang, economics is still being constructed.

Indeed, Li Keqiang, the economic situation for many judgments, he overcapacity in the Chinese economy, excessive administrative controls, fiscal worries huge financial risks and other factors have a clear understanding. History is always cruel and impartial, and ultimately allow the definition and recognition of Li Keqiang economics to get a benchmark, not from problem diagnosis, but his policy achievements.

How complex situation, the design of the current political power structure that can be accommodated is recognized by the community, so that all parties Incentive reform program, the difficulty is huge. The program at least to answer the following questions: How to use decentralization style stimulus policies uphold fundamental growth? How to solve the problem of two-track system of financial markets? How to market-oriented means to resolve the excess capacity? How to constrain local government investment impulse? Only when such a specific program introduced when Li Keqiang economics really molding.

Policies a little slower, but also means to reform a little more space, perhaps a good thing. American Economic Jia Bali? Norton has long been concerned China's economic transformation, he once had a judge: He believes that Chinese policy makers are often more valued decisiveness (decisiveness) instead of credibility (credibility). I think this judge is very sensitive roots of the market economy era, the determination may be more powerful, as China entered an era of reconstruction rule, then the importance of credibility will rise. A credible policy makers, in order to win more support among the game, often better able to maintain market rules.

So far, all sectors of the legal background of the PhD in economics is not low expectations, high expectations need landing significant impact with their sudden introduction of wrong decisions, Xu correct figure is more reasonable reform program. Despite being regarded as a civilian prime minister, but the Chinese people for Li Keqiang's personality is still lack of understanding, FT Chinese Network interview Li Keqiang college classmate, he had revealed a detail: "You see these old photos of college. Li group photo shoot, almost always like to stand behind, or stand on the edge of his usual silence, never assertive, have learning problems ask him, Insider him. "

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