It's time for the "new normal" in China. The phrase has been used in the past several years to describe high unemployment, slow growth and heavy government debt in developed economies after the global financial crisis.
But just as Mohamed El-Erian, the ex-CEO of the giant bond fund manager Pimco, is ready to call an end to the phrase he coined and made famous because things are looking better in those economies, no less a leader than President Xi Jinping has adopted it to characterise slowing growth and reined-in liquidity in the Chinese economy.
He is not only saying China can live with slower economic expansion. The subtext is that one-party rule in China is much stronger and has more legitimacy than one merely guaranteed by breakneck growth and economic opportunism.
After more than two decades of double-digit growth, China may not even manage 7.5 per cent growth this year. This has led pundits to predict more stimuli for the economy. There have been minor ones such as allowing banks to lower reserve ratios.
But over the weekend, Xi said "the new normal" is here to stay. His words are usually taken to mean people should not expect any large stimulus programmes like the ones in 2008-09.
The issuing of new bank loans has slowed. Liquidity has been deliberately dried up to rein in the shadow banking system. Against calls for stimulus, Xi thinks the central government is comfortable with a continued slowdown in credit growth.
Xi is effectively confronting his many critics, who project their own democratic belief and criticism of the Chinese system of government to assume the central government has no real legitimacy and that, once growth slows, social unrest will follow and the regime will eventually collapse. What those critics forget is that many Chinese enjoy more personal freedom, social mobility and economic opportunity than ever.
Is Xi merely putting on a brave face or does he have real confidence in the strength of the nation's authoritarian rule?
Beijing may yet reverse course in the face of slower growth. But if Xi stays the course, it's not just economic reform he is attempting, but a proof of concept - that of political legitimacy.Topics: Xi Jinping