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The Geopoliticalmonitor's Zachary Fillingham delves into the opening act of "Likonomics" in China.

China Moves to Pop the Debt Bubble August 6th, 2013 There’s a new economic catchphrase making its rounds in pundit circles around the world: “Likonomics,” or the economic policies of China’s new premier, Li Keqiang. To the casual observer, Likonomics might seem somewhat like Abenomics in reverse, as its goal is to recalibrate an overheating economy rather than kick-start an economy that has languished for a decade. Nevertheless, the path faced by this new Chinese administration and its Likonomics will be long and winding, particularly because of the unique political challenges faced by the CCP. Likonomics loosely refers to a group of policies meant to transition the Chinese economy from its current export-oriented growth to a more sustainable model based on domestic consumption. In effect, this means promoting higher wages, lower savings rates, and easy access to credit for consumers and small businesses. The opening volley of Likonomics seems to be an attempt to de-leverage some of the growing debts held by local governments and State-owned enterprises (SOEs). Last week, the central government announced a country-wide audit of such debts, and many believe the final tally will be much higher than the previous result of $1.8 trillion due to high levels of post-2008 stimulus lending and the popularity of “non-traditional sources of credit” (read: shadow banking). Once the true extent of these debts are known, the central government will be better placed to determine where de-leveraging can actually occur and where public money has been irretrievably blown on inert monuments to state capitalism such as government buildings and manufacturing overcapacity. Ideally, the results of the audit will also produce guidelines to avoid future wasteful spending by local authorities.   For full article text, please visit: http://www.geopoliticalmonitor.com/china-moves-to-pop-the-debt-bubble-4843/

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