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Michael Pettis Profile picture
@michaelxpettis
Sep 2, 2019 • 4 tweets • 2 min read • Read on X
Nobody who bought Argentine bonds in this century was making a long-term investment decision about the country’s eventual ability to grow out of its debt, at least nobody who should be allowed to manage a bond fund. They were all...
ft.com/content/5cfe7c… via @financialtimes
@FinancialTimes ...speculators, hoping to ride the short-term wave and get out before Argentina was back against the wall which, given the debt burden, everyone (except the IMF, apparently) knew was just a question of time. That’s why there is no reason Argentina’s creditors – those who bet...
@FinancialTimes ...and lost – shouldn’t be forced to accept the loss and take a major haircut, the sooner the better. Restructuring the debt with IMF support just means bailing out speculators and rolling out the loss over many years, during which time the Argentine economy will do worse...
@FinancialTimes ...than ever. The history of sovereign debt restructurings is the history of making the same set of mistakes made over and over again.

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More from @michaelxpettis

Michael Pettis Profile picture
Jun 26
1/6
 Xinhua: "A consumer goods trade-in program rolled out by Beijing has spurred rising sales of products such as cars, home appliances and furniture."

It is certainly good that Beijing fully acknowledges how weak domestic consumption...

en.people.cn/n3/2024/0626/c…
2/6
 has been, and how this creates enormous problems for the economy, but the very confused thinking expressed in this article will make it that much harder to implement effective programs to boost consumption.
3/6
 There was never any doubt that subsidizing the consumption of specific goods would cause the consumption of those goods to rise. That's exactly what should happen.

But that doesn't mean total consumption will rise.
Read 6 tweets
Michael Pettis Profile picture
Jun 26
1/4
 Bloomberg: "Average vacancy rates at logistics properties in east and north China are approaching 20%, the highest in years. More warehouses are being built, which is making the problem worse."

via @economicsbloomberg.com/news/articles/…
2/4
 While few analysts would consider that tenant losses and slashed rents in warehouses and industrial parks have anything to do with trade, this is part of the process in which weak...
3/4
 demand and excess savings are channeled into over-investment in logistics, which improves manufacturing competitiveness at the cost of weaker domestic demand.
Read 4 tweets
Michael Pettis Profile picture
Jun 25
1/4
 Xinhua: "China is moving to foster new consumption scenarios in multiple sectors, including tourism, automobiles and electronics, aiming to boost consumer demand and promote the steady growth...

english.news.cn/20240624/8b9ac…
2/4
 of consumption. According to the NDRC, China will expand its visa-free transit policy, loosen vehicle purchase restrictions and spur intelligent, AI-powered electronics consumption."
3/4
 Sigh. None of these policies will "promote the steady growth of consumption".

The only way to increase consumption is to increase household budgets, but Beijing finds this incredibly hard to do because it ultimately requires transfers.
Read 4 tweets
Michael Pettis Profile picture
Jun 24
1/6
 Interesting Caixin article on the proposed reforms of China's tax system. Because of a relatively low tax base and the dependence on surging land sales for revenues, local governments especially are having real trouble meeting their expenses.

caixinglobal.com/2024-06-24/cov…
2/6
 Much of the reform discussions focus on splitting responsibilities between local governments and the central government, and on ways to raise total funding without undermining domestic demand, especially business and household demand.
3/6
 One major problem that I don't think is being addressed is the difference between formal and informal tax revenues. While formal taxes in China are low, the Chinese economy in past decades has been driven by large implicit transfers from households (in the form of...
Read 6 tweets
Michael Pettis Profile picture
Jun 17
1/8
 "Has China’s property market hit bottom?" Bloomberg asks. "Not quite yet, according to May data, and to the National Bureau of Statistics, which said easing measures will need more time to take effect."

via @marketsbloomberg.com/news/articles/…
2/8
 Prices for new homes in the top 70 cities first began to decline month on month in October 2021, and except in January-March and June-July in 2022 and January-May in 2023, when prices were flat or rising, prices have fallen every month since.
3/8
 By my calculations, however, prices for new apartments in the top 70 cities have fallen cumulatively by only 4.5% since they began to fall in October 2021. This is consistent with the year-on-year data, but can that be true? Does anyone have a better sense of the decline?
Read 8 tweets
Michael Pettis Profile picture
Jun 17
1/5
 I think Bloomberg has got it right: "China’s industrial expansion slowed in May and retail spending beat forecasts, a sign that deep imbalances in the economic recovery may be easing at least a little."

via @marketsbloomberg.com/news/articles/…
2/5
 While many analysts worried about the slowdown in industrial output, China doesn't have a supply-side problem. It is true that May's year-on-year increase in industrial output (5.6%) was lower than April's (6.7%), but year to date it was nonetheless up a hefty 6.2%.
3/5
 On the other hand retail sales (a rough proxy for consumption) were up only 4.1% year to date. The gap between production and consumption must be met either by rising investment, of which China already has too much, or rising trade surpluses, of which the world has too much.
Read 5 tweets

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