Likonomics: It's about reform

Like it or not, it will affect China's economic future with long-term gain

Many Chinese observers have been talking about Likonomics ,which aims to characterize the way Premier Li Keqiang is expected to manage the economy. There are three pillars of Likonomics often quoted: no stimulus, structural reform (short-term pain, long-term gain) and deleveraging. We believe these characterizations are misleading. The priority is not reform "instead" of growth, but reform "and" growth, as we believe it should be. Stimulus is already being implemented, although the size is likely to be small. And the concern for growth implies that the objective is not direct "deleveraging" but a controlled pace of ongoing "leveraging".

These factors imply some growth supporting policy stimulus and some structural reforms going forward but it is unlikely that either will be extremely aggressive. This more balanced approach promises to generate a growth path which is modestly lower than in past years but potentially more sustainable.