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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
Apr 16
1/4
 Because the only sustainable way to rebalance the Chinese economy towards a greater role for consumption in driving demand requires that household income, including transfers, rise faster than GDP, it is good news that...
english.news.cn/20250416/47426…
2/4
 China's per capita disposable income increased by 5.6% (5.5% nominal) year on year in the first quarter of 2025, versus GDP growth of 5.4%.

The problem is that the gap between GDP growth and household income growth must be much larger.
3/4
 For China to balance meaningfully over the next ten years, for example, consumption must grow by roughly 3 percentage points more than GDP every year, which suggests that household income must also grow that much faster.
carnegieendowment.org/posts/2024/09/…
Read 4 tweets
Michael Pettis Profile picture
Apr 16
1/8
 China's GDP growth for the first quarter of 2025 came in above expectations on a year-on-year basis and below expectations on a quarter-on-quarter basis, which shows how hard it is to reconcile the two.

english.news.cn/20250416/fb2cb…
2/8
 At 5.4% year on year, compared to 5.3% in 2024, economic activity in the first quarter of 2025 was disproportionately driven by a surge in exports. On a quarter on quarter basis GDP growth was only 1.2%, however, below expectations and well below last year's 1.5%.
3/8
 Much of the growth occurred in March. Retail sales and industrial production both grew much faster than expected, with the former rising 5.9% year on year (compared with 4.0% in the first two months), and the latter rising 7.7% (compared with 5.9% in the first two months).
Read 8 tweets
Michael Pettis Profile picture
Apr 15
1/10
WSJ: "Around this time, less developed parts of the world, where labor costs were much lower, began dialing up manufacturing of nondurable goods in Latin America and Asia. The U.S. started importing more and more of those items."

wsj.com/economy/us-man…
2/10
I think this is a common misperception. It is not low wages abroad that drove manufacturing out of the US. After all Japanese wages in the late 1980s matched or even exceeded American wages, and yet Japan nonetheless absorbed a great deal of manufacturing from the US.
3/10
What is more, the most successful manufacturing exporters to the US were not the countries with the lowest wages, but often countries, like Japan and Germany, with the highest wages.

That's because what matters is wages relative to productivity.
Read 10 tweets
Michael Pettis Profile picture
Apr 15
1/6
 SCMP: "Yu has been outspoken in his advocacy for the reduction of China’s US Treasury bill holdings and has advised Beijing to stay alert for any attempts to use the country’s foreign assets against it."

via @scmpnewssc.mp/8tmps?utm_sour…
2/6
 It won't be easy for China to shift away from US assets, but to the extent it tries, this could create a new set of tensions within the global trading system. That's because every year China must acquire enormous amounts of foreign assets to balance its surplus.
3/6
 In the past these foreign assets have mostly been in the US, but if China were to start buying non-US assets while, at the same time, selling off part of its existing US holdings, this would mean a major redirection of asset purchases, mainly to the EU and Japan.
Read 6 tweets
Michael Pettis Profile picture
Apr 5
1/4
 Good article on how US tariffs are complicating the relationship between China and the EU. Some analysts argue that US tariffs will force China and the EU closer together as each diverts its exports from the US to the other.

nytimes.com/2025/04/04/wor…
2/4
 But that assumes that either the EU is willing to replace the US as consumer of last resort for excess Chinese manufacturing capacity, or that China will play that role for the EU. The former will be extremely painful for the EU, while the latter is all but impossible.
3/4
 The point is that what had seemed like a stable global trading regime was in fact based on an unsustainable dependence of the rest of the world on the willingness of the US (along with the UK and Canada) to exchange ownership of domestic assets for large trade deficits.
Read 4 tweets
Michael Pettis Profile picture
Apr 4
1/9
 Citibank thinks that "the 54% US tariffs on China’s goods announced since the start of Trump’s second presidential term may drag the country’s gross domestic product growth down by 2.4 percentage points in 2025."
via @economicsbloomberg.com/news/articles/…
2/9
 I don't think this is the right way to think about it. The surge in China's trade surplus contributed 1.5 percentage points (ppt) to China's GDP growth in 2024. This is an extraordinarily high contribution, and there is almost no way it will be...
3/9
 achieved again in 2025, but because I don't think Trump's will have much as much of an impact on reducing the US trade deficit this year as many think, the chances are that China's trade surplus will be as big this year as it was last year, or not much smaller.
Read 9 tweets

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