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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
Nov 19
1/13
It is helpful to think about Taisu Zhang's list of the EU's perceived weaknesses in the context of global trade, and especially in the context of a global trading system that exhibits the beggar-thy-neighbor characteristics that Joan Robinson warned about.
2/13
To take the first, the EU's lack of political unity means that it cannot respond unilaterally in a world in which its major trading partners (China, Japan, India and, increasingly, the US) are determined to control their external accounts and are able unilaterally to do so.
3/13
A country's ability control its external accounts affects the extent to which it can control its internal imbalances while externalizing their costs, along with the structure of its economy and its mix of manufacturing and services.
foreignaffairs.com/united-states/…
Read 13 tweets
Michael Pettis Profile picture
Nov 19
1/8
 SCMP: "China should add a quantitative target for consumption growth as part of its long-term modernisation goals to help sustain growth momentum as the country’s population declines, a prominent Chinese economist said."
via @scmpnewssc.mp/qmm5m?utm_sour…
2/8
 The article continues: "Currently, household consumption accounts for about 39% of China’s GDP, according to Cai Fang, an academician at CASS. Over the next decade it should rise to around 61% as China strives to become a “moderately-developed” country by 2035."
3/8
 Most prominent economists in China have already called for increases of anywhere from 5 to 10 percentage points of GDP, and while Cai is right that household consumption of 61% of GDP would indeed make China a more "normal" country, I wonder if he has done the math.
Read 8 tweets
Michael Pettis Profile picture
Nov 18
1/8
 NYT: "The biggest recipient of Chinese financing over the past two decades has been the United States, where Chinese banks have extended $200 billion in financial support to American companies and projects."
nytimes.com/2025/11/18/bus…
2/8
 This shouldn't surprise us, even if it seems to go against what we've been reading in headlines in recent years. China is the largest net export of capital in the world, which is just the flip side of its running the biggest trade surpluses in the world.
3/8
 While we often read about Chinese capital exports to the developing world, in fact these flows probably peaked in 2015-16, when problems in Venezuela taught Beijing just how risky this can be. This meant surpluses had to be recycled mostly to the advanced economies.
Read 8 tweets
Michael Pettis Profile picture
Nov 18
1/8
 Good FT piece on the increasing difficulty economists have in understanding, correlating and reconciling Chinese economic statistics. This leads to concerns among many analysts that GDP may be overstated, and fairly substantially.
ft.com/content/5b9e74…
2/8
 For the FT (and for many others), the biggest puzzle is over how GDP growth can stay constant at 5% even as investment (which plays a bigger role in driving Chinese GDP growth than in any other country in history) is reportedly declining.
4/8
 Part of the answer may be that GDP growth has in fact declined, and rapidly, over 2025, albeit from extremely high levels. Another part of the answer may be the surging trade surplus, which is extraordinarily high for such a large economy, and clearly not sustainable.
Read 7 tweets
Michael Pettis Profile picture
Nov 16
1/10
Important Benn Steil article on globalization, free trade, and the cost of underwriting both. He cites Wendell Willkie in 1944 as "recognizing how perilous it would be to integrate market economies with state-directed ones."
@ProSyn @BennSteil
prosyn.org/LkdDyx7
2/10
"When global prices fail to reflect supply-and-demand dynamics," Steil cites Willkie as arguing, "they distort production and trade flows, killing off more efficient enterprises, fueling imbalances, and breeding resentment."
3/10
This is a point I've often made, although in a different way, including in an upcoming piece in Foreign Affairs.

We start with the widely-recognized insight that every country's internal imbalances must always be perfectly consistent with its external imbalances.
Read 10 tweets
Michael Pettis Profile picture
Nov 14
1/7
 China's fixed-asset investment declined 1.7% year on year in the first 10 months of 2025, more than twice the expected rate of decline, and well above the 0.5% decline during the first nine months of the year.

english.news.cn/20251114/2bcf2…
2/7
 Excluding a 14.7% decline in the property sector, investment rose by 1.7% during the first ten months of 2025, led by a 2.7% rise in manufacturing investment.

As I see it, the weakness in investment growth suggests that the fight against "involution" is working so far.
3/7
 It suggests that the post-2022 surge in investment in preferred manufacturing sectors, such as EVs, batteries and solar panels, is being reversed.

But this leaves us with the same questions that we were left with following the post-2022 collapse in property investment.
Read 7 tweets

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