Thread by @michaelxpettis

I hate repeating it so often, but the reason China is a drag on the global economy isn’t because of a “stronger, better and bigger” state-led economy, Beijing’s refusal “to allow the market to play a ‘decisive’ role in resource allow the...
scmp.com/economy/china-… via @scmpnews

@SCMPNews ...market to play a ‘decisive’ role in resource allocation”, or even “the unfair advantages enjoyed by Chinese state-owned enterprises”.

These conditions may hurt individual foreign companies in China, but in the aggregate they probably hurt the Chinese economy more than they...

@SCMPNews ...hurt the global economy (and not because “the state” is always bad and “the market” always good, but rather because the state does a better job only when the objectives are easily defined and a country is underinvested relative to its ability to absorb investment, after...

@SCMPNews ...which the market usually seems to be better job at driving needed institutional reform).

In our world of excess savings and weak demand, China’s adverse impact on global growth arises mainly through a domestic distribution of income that converts Chinese growth into more...

@SCMPNews ...savings and less consumption. The world needs more demand from China (and Germany, Japan, etc.), but how Beijing structures its economy to deliver that demand should really be seen as a domestic issue.

Instead of arguing over the structure of China’s domestic economy,...

@SCMPNews ...which really means fighting on behalf of their multinationals, other advanced economies can best protect themselves by reducing excess foreign inflows. If they do that, countries like China (and Germany, Japan, etc.) have only three options: first, direct their excess...

@SCMPNews ......savings to developing countries that need it, second increase domestic demand, or third, reduce domestic supply by letting unemployment rise. Only in those three cases will they no longer act as drags on global growth.