Thread by @Brad_Setser

Hauge to me and Pettis: "Don't hide behind the language of "imbalances." If you think China is a competitive threat and that wealthy nations should actively use industrial policy to keep it at bay, say so"

I object to the idea that arguing about imbalances is hiding ...

China's imports have grown in volume terms at an annual rate of ~ 1% over the last 5 years. China's exports have grown at a faster rare that world trade. that is a real imbalance, not a fake one ...

China's savings rate is exceptionally high (comparable to Norway which saves its oil and gas proceeds as a matter of policy and Singapore which hides its investment returns from its citizens and the budget) and China's consumption to GDP ratio is incredibly low

dismissing such concerns as just western anxiety misses the level of concerns in countries like India. It also denies the underlying exceptionalism of China's macro numbers

if folks want to ignore Martin Wolf and Paul Krugman (bigger names in the economics profession than Pettis and Setser) feel free, but I don't think any one with an open mind can look at China's macro numbers and say this is a normal country, let alone a normal large economy

yes, I do think China's policy decision to juice exports to make up for the lost demand from the property sector had negative spillovers to the rest of the world. I have tried to document that with real numbers. the radicals over at Goldman Sachs reached a similar conclusion

And yes, I do think a world where China has weaponized supply and the US under Trump has tried to weaponize demand (w/o support from Congress or the courts it seems) has profound global consequences

But I also think those who celebrate China's impressive development should not ignore the unbalanced nature of China's domestic economy, or the increasingly unbalanced way China interacts with the global economy

and I equally believe that highlighting those imbalances is a first step towards constructing a better international system, one less threatened by disruptive unilateral action from either of the world's two economic superpowers.

/end