China’s president on the slowing economy: We meant to do that Not to worry, President Xi Jinping said Tuesday, the government has everything under control. In fact, it made a conscious decision to slow the growth rate down in order to begin tackling some fundamental problems that are hindering China’s long-term economic prospects. The three pillars of Likinomics—named after China’s premier, Li Keqiang, and the foundation of China’s engineered slowdown—all carry long-term benefits but short term costs: 1) Ending fiscal stimulus by diminishing state-led investment. 2) De-leveraging in order to slash debt. 3) Structural reform, including relaxing controls on utility prices and liberalizing interest rates. each of those reforms is problematic—local governments and state-owned enterprises are addicted to low-cost loans, and Chinese banks are unprepared for liberalized interest rates that will make them much less profitable. Smaller-scale moves like a crack-down on fake trade invoicing and a credit squeeze aimed at the huge “shadow banking” sector caused huge swings in reported trade data and market volatility. What will Rajan do for Indian economy ?
Posted on: Thu, 05 Sep 2013 03:36:12 +0000
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