YIBADA

China's Anonymous 'Authoritative' Figure Reveals Economic Policy Shift

| May 10, 2016 09:55 PM EDT

China's stock markets remain volatile amid economic fears.

An anonymous but "authoritative" People’s Daily source claims that China will soon be experiencing the effects of a massive economic policy shift to put an end to the country’s debt-fuelled growth.

According to Bloomberg, the Chinese have an unusual way of determining the current flow of the nation's economic path.

"To get a read on U.S. economic policy, investors may parse minutes from Federal Reserve meetings," the report read. "In Europe, they scrutinize Mario Draghi's public remarks. When it comes to China, they're increasingly studying an 'authoritative person's' anonymous prognostications in the Communist Party's most important newspaper."

Authoritative Source

Apparently, the anonymous source told one of China's top state-run newspapers about a possible shift in China's economic policy since the country can no longer "borrow its way to long-term economic health."

The person's statement based on the understanding South China Morning Post indicates the possibility that China's economy will enter an L-shaped trajectory.

According to the People's Daily article, the person said that the "contradictions" for the past three months were not very helpful, adding that the quarter cannot be considered a "warm spring."

"A tree cannot grow up to the sky--high leverage will definitely lead to high risks. Any mishandling will lead to systemic financial risks, negative economic growth, or even have households' savings evaporate. That's deadly," the person was quoted as saying as translated by Bloomberg.

Though the person was not identified, there is reason to believe that the source is a very credible considering that it was on the front page of one of the country's top state-run media outlets.

"It should be understood as a consensus view reached at the senior level, rather than an individual point of view," Chinese Academy of Social Sciences Institute of Economics senior researcher Han Meng told Bloomberg.

The Article

Hong Kong-based non-Japan Asia chief economist Tao Dong expressed his admiration for the statement to SCMP, stating that the source's words are part of a "policy stance statement."

"It's a policy stance statement that China will stop its practices in the first quarter of bolstering growth by credit injection. It's clear-minded to see high leverage as a source of risks, and I applaud such a statement," he explained.

Written in a question-and-answer format, the 11,000-word article reportedly renounced some of the country's economic policies such as boosting the leverage ratio to maintain expansion and propping up stock prices to address a slowdown in growth, which were all imposed by the State Council under the rule of Premier Li Keqiang.

Related News

Most Popular

EDITOR'S PICK