Li Keqiang has taken over where Ben Bernanke left off.
The instability and uncertainty buffeting global markets at the moment has caused some painful moments for investors. But it is necessary.
Wall Street suffered further heavy losses overnight as did European markets, commodities again came under pressure and further turbulence on currency markets saw the Australian dollar rise, all of which will contribute to another bout of selling here this morning.
What is occurring, however, is the first stage of a readjustment to more normal conditions, where the imbalances and distortions that have been deliberately put in place to cope with crisis conditions begin to be unwound.
For Australian investors, there will be pain for some during this transition period. Longer term, however, this will be a boon, particularly for the domestic equity market which was laboured under the yoke of an artificially high currency for almost four years.
It long has been a source of consternation that Australia, the world’s best performing developed economy, has experienced miserable equity returns during this period.
Emerging markets, on the other hand, have been huge beneficiaries of the US Federal Reserve’s money printing extravaganza. So as US bond prices drop and gold retreats, anyone overweight in Turkish equities, for instance, should contemplate withdrawing now.
US, European and Australian corporate bonds have all been in hot demand during the Fed expansion phase as well and the expected journey towards more normal yields during the next 12 months will impact on these markets as well.
Bernanke so far has given no indication of exactly when he will begin the taper caper. It could be late this year. It could be early next year. It most certainly will come when the US economy begins to improve. And it will be gradual, something equity and bond market traders appear to have overlooked in their rush for the exits.
His pronouncements in the past six weeks have been a deliberate softening up process, designed to shoe-horn global investors back towards more traditional and comfortable policy settings.
But where Ben has flagged a gradual withdrawal down the track, Li has simply turned off the credit tap.
The new Chinese leader has inherited an economy over-reliant on investment that for years pegged the yuan to the greenback, essentially running expansionist monetary policy during a period of rampant domestic development.
It created a resources super boom that already has begun to moderate as we have seen from the behaviour of the mining giants and the recent descent of the Aussie dollar from the currency stratosphere.
China remains a wild card. Despite the façade of economic control, the government’s ham-fisted approach to credit control in recent weeks is evidence that all is not what it appears in the Middle Kingdom.