Monitor | 'Liconomics' could mean a weaker yuan
After climbing by a third against other currencies in inflation-adjusted terms, the yuan may have overshot and could be seriously overvalued
With Premier Li Keqiang just over 100 days in the job, investors have concluded that he is serious about pressing ahead with financial reforms.
That means economic pain in the short term, with growth set to slow as Li attempts to curb China's runaway credit creation.
Many private sector analysts now expect gross domestic product to expand by less than 7.5 per cent this year. If they are right, it will be China's weakest economic performance since 1990.
With corporate profit margins already squeezed, slower growth is sure to hurt, one reason why Chinese stock prices are down by 13 per cent over the year to date.
But there are things the authorities can do to sweeten Li's bitter medicine. For example, they could alleviate some of the pain by weakening the yuan's exchange rate.