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CAUSE FOR OPTIMISM

So here's a tip – if you want to form a view on China over the next year ignore the headline economic data and focus on reform.

For it is reform and nothing else that will keep growth at elevated levels.

Already there's some cause for optimism.

Andrew Baston, the China economist at Gavekal Dragonomics, has identified financial liberalisation, fiscal reform and business deregulation as three "main areas of achievement" so far.

"Some economic reform projects have indeed made real progress," he says.

He is among a growing chorus of analysts who say China is no longer paralysed by inaction.

This has gone some way to silencing the China bears in recent months, partly because the leadership has also proven itself surprisingly deft at managing some of the bigger problems.

The property market looks to have been stabilised, the shadow banking sector tamed and a solution found to the indebtedness of local governments.

As UBS's Wang Tao said in a recent report: "What happened to the crisis?"

MAIN GAME

Topping the Party's list of economic achievements has been resisting the urge to allow the yuan to devalue in line with the yen and euro, which would have provided an easy boost to the manufacturing sector.

Not doing this has taken some geopolitical heat off of Beijing, while forcing manufacturers to retool, upskill and move quickly to higher value products.

Such a transition will take many years, but in the meantime, the strong-yuan policy has allowed the People's Bank of China, the central bank, to move more quickly on interest rate liberalisation and opening up the capital account.

This has advanced to a point where China is now expected to lift capital controls for mainland residents from their current level of $US50,000 ($65,700) a year.

Such a move was effectively flagged last week when the state media said a pilot program would soon be launched allowing mainland residents to invest directly in offshore bonds and equities.

EASY WINS

At the same time the government has taken a few easy wins. It announced import duties on cosmetics, shoes and clothes would be slashed in an effort to boost domestic consumption. Economists have urged the government to do this for years as higher prices on the mainland only encouraged parallel trading, smuggling and tourists to shop overseas.

Perhaps even more significant than the announcement however was the fact that Beijing slashed the duties, by half on average, in the absence of a free trade agreement or pressure in another area.

It was straight-out pragmatic reform.

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