From Nomura:
According to today’s official People’s Daily [link here and Bloombergwriteup here], an “authoritative” person who was not identified indicated that China should not support growth by adding leverage. “High leverage will lead to high risk; if not well controlled, it will lead to systemic financial crisis and negative growth”. Considering China’s severe structural problems, this “authoritative” person believes that “China’s economic growth trend in future should be ‘L-shaped’, rather than ‘U-shaped’, not to mention ‘V-shaped’”, which suggests that growth will trend lower. This individual believes China should avoid using strong stimulus to raise investment growth in the short term, as it would create larger problems later. For now, the most important thing, in this person’s view, is to push forward supply-side reforms (i.e., cutting over-capacity, reducing property inventory etc.) and actively but steadily reduce leverage.
Two examples within the last year include an article on 25 May 2015 in which five questions related to the economy were discussed, and on 14 January 2016, when seven questions on supply-side reforms were addressed. While the anonymity has been protected, the views expressed in these articles did have a large impact in China.
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