Dawn of 'Lionomics' promises new era of prosperity for China
Richard Harris says the new liberalised policies dubbed 'Lionomics' promise to be a potent force, delivering more prosperity for the people and powering China to new heights
China is formulating a new set of economic policies designed to support an economy that is growing at an astounding 7.7 per cent per annum, with inflation in single digits and acceptable unemployment. These new policy options will become known as "Lionomics" - the economics of Premier Li Keqiang .
An economy measured in those terms is not naturally regarded as being ailing - but China's transition from a very high-growth to a mature economy requires support. As the world's second-largest economy, China can no longer be described as emerging. It may be young, it may be growing fast, it may have an export-led economy; but it is no longer emerging.
Li is committed to pushing wealth down the economy, forcing it down rather than through trickle down
Simple maths tells us that 1.3 billion people cannot grow at 10 per cent a year indefinitely without overpowering the planet. President Xi Jinping said recently that the days of "ultra-high-speed growth" were over and no longer desirable. Li is tasked to deliver manageable debt, low inflation, steady growth and a strong currency. This new leadership has plenty on its plate.
Xi is encouraging the ideal of the Chinese Dream - the pursuit of co-operation by inspiring a revival of pride in the country. But Li has to deliver the American Dream - of wealth and prosperity. Hard policies are as yet few, but the recent State Council statement gave a few hints of the main thrust of Lionomics. He has set the scene for as bold a reform in the economics agenda as ever in China's history.
Lionomics concentrates so far on two major areas of economic policy. The first is a surprising commitment to relax the capital account. In simple terms, this means relaxing the controls leading to the free floating of the renminbi. I have long argued that one of the quickest ways of doing this is to combine the Hong Kong dollar with the offshore renminbi to produce a "stepping-stone currency". In the meantime, Lionomics means widening the bands that collar the renminbi's value to the US dollar. Relaxing currency controls would enhance China's credibility on the economic world stage that even its very size cannot do alone.
Lionomics is also hinting that interest rates will be set by the market. This would mitigate profligate, corruption-inducing spending on state-sponsored projects and would make the use of capital more efficient. Easing capital controls would allow easier investment by Chinese overseas - and by implication the reverse.