Xi Jinping is lost.
China wants to know how it can better sell its stimulus policies to foreign investors.
The securities regulator is said to have stepped up meetings with global banks to get their view on the country’s efforts to shore up growth.
In one such discussion, the regulator sought advice on what it needs to do to increase foreign appetite for Chinese assets.
Beijing faces a difficult balancing act in trying to convince outsiders its policies will succeed without taking action to directly stimulate domestic demand that investors have repeatedly called for.
The Communist Party’s reluctance to deliver a bigger fiscal punch has led to weakness in Chinese financial markets — thereby undermining the stimulus officials have undertaken.
The prospect of Donald Trump’s presidency and a more hawkish approach to China are adding urgency to Beijing’s outreach to global banks.
Well, we could be glib and say offer markets a liberal democracy with the rule of law, but we’ll let that go.
What China could do instead is learn from everybody else’s housing bubble and bust mistakes.
It needs to aim for what Ray Dalio calls a “beautiful deleveraging”.
This requires the PBoC to crash real interest rates so that the savings pulse slows, there is a bid for assets, and deleveraging itself is aided via lower repayments on the debt stock.
Let CNY crater and open your markets to import competition. The export tariffs are coming anyway.
In addition, complete the project of a social safety net for workers to encourage less saving and more consumption.
In the same vein, privatise SOEs to transfer national income from the state to households.
Add tax reform and fiscal incentives to boost wages plus cut income taxes.
Alternatively, ignore everything above, watch the economy die, and then invade Taiwan, which will result in exclusion from the global economy.
