On May 9, Party mouthpiece People’s Daily published an anonymous interview with an “authoritative source” who claimed that China’s economic trajectory will retain an “L shape” in the long run.
Party customs allow “authoritative sources” to comment on big issues, often giving top leaders the opportunity to make pointed remarks they would not normally make. In 2016 alone, an “authoritative source,” presumably the same person, has published three commentaries on China’s economy in the Party paper.
In the latest interview, the source pointed out that despite a 6.7 percent GDP growth rate in the first quarter of 2016, China is trapped by shrinking investment from private enterprises, real estate bubbles, a high debt ratio and a low level of marketization in some sectors, all of which the source attributed to “improper economic structures.” “Given it is hard for China to radically ease low consumer demand and excess production capacity, China’s economy will not be ‘U-’ or ‘V-shaped,’ but ‘L-shaped,’” the source told People’s Daily. “However, we still have huge economic potential and will maintain growth without stimulus.” Such ideas seem to endorse the central government’s supply-side structural reform program, which the leadership has promoted since 2015. Many economists have come to echo the “authoritative source,” saying that it is no longer wise for China’s administrators to stimulate the economy by simply racking up larger debts.
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