Predictab-Li

China's jawboning is a poor substitute for reform

China's economic jawboning is no substitute for reform. Speaking at the World Economic Forum's Dalian gathering, Prime Minister Li Keqiang has tried to reassure nervous investors that the country's growth is on track. But a botched currency devaluation and clumsy attempts to prop up the stock market have undermined international trust in China's bureaucrats. In future, planners will have to show as well as tell.

In his first comments to an international audience since the summer, Li made only oblique references to the market turmoil of the past few months. He insisted China was not a source of risk to the world, and would never start a currency war. And while the country's economic transition would be "painful and turbulent", growth was intact and the government had "plenty of tools" to deal with any slowdown. Li also promised the economy would not suffer a hard landing - repeating the exact phrase he has used at the same event in the two preceding years.

Until a few weeks ago, the Western executives and investors gathered in the audience might have drawn comfort from Li's comments. His performance at the same venue in 2013 prompted some economists to brand his reform promises as 'Likonomics'. But the government's amateurish interventions in the equity markets and its bungled attempt at a 'one-off' devaluation of the yuan have shattered the blind belief that China's planners had the economy under control.

Of course the notion that a handful of technocrats - no matter how competent - could consistently steer a $10 trillion juggernaut towards a pre-determined growth target was always simplistic. If the market turbulence forces money managers to take a deeper and more nuanced view of China's future trajectory, this is probably just as well.

For the country's mandarins, meanwhile, vague blandishments will no longer suffice. Instead, they will need to enact reforms, such as the much-discussed shake-up of state-owned enterprises. As the economy slows, fiscal and monetary stimulus will be needed too.

Ask any central banker: talk is only a valuable currency when your credibility is sky-high.