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Michael Pettis Profile picture
@michaelxpettis
Sep 30, 2020 • 4 tweets • 1 min read • Read on X
1/4
 I think this is a little deceptive. While the RMB may have appreciated against USD during the past three months by 3.7%, this was partly because the dollar was weak. Against the CFETS basket, which is a better measure of the performance of...

ft.com/content/ace4da…
2/4
 the RMB, it still performed well, but it rose by 2.8% during the past three months. For what it's worth it rose by 2.7% against the BIS currency basket and 2.3% against SDR.

The point is that analysts who only look at RMB in USD terms may think the RMB has been far...
3/4
 more volatile than it really is, but in fact over the past four years it has risen just 0.6% against the CFETS index, and has never been more than 3-4% above or below its current level.

I expect the RMB will remain stable or a little stronger over the rest of this...
4/4
 year, partly because Beijing wants to signal a stable currency and partly because I think there has been a lot of upward pressure on the RMB (and perhaps hidden intervention that isn't showing up in PBoC reserves.)

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More from @michaelxpettis

Michael Pettis Profile picture
Sep 17
1/6
 According to the WSJ, after a few years in which the earnings of the poor rose faster than the earnings of the rich, in 2025 the earnings of the rich have risen faster. In theory this should have resulted in a lower US trade deficit.
wsj.com/economy/us-eco…
2/6
 That's because the rich consume less of their income than the poor, and so a shift in the relative income share from poor to rich should have reduced overall US consumption and increased overall US savings, which in turn should have reduced the US trade deficit.
3/6
 But the US trade deficit continued to expand. This seems pretty strong evidence that the US trade account isn't driven only by domestic conditions, as most mainstream economists assume. What foreigners choose to do matters just as much or even more.
Read 6 tweets
Michael Pettis Profile picture
Sep 16
1/6
 SCMP: "President Xi Jinping has called for more efforts to develop a unified domestic market, arguing that it will be crucial to helping China secure an edge in international competition and meet its development goals."
scmp.com/economy/china-…
2/6
 In a hyperglobalized world, a country gets to choose between economic sovereignty and global integration. The more it chooses to integrate into the global trade and capital system, the less control it exerts over its domestic economy.

rodrik.typepad.com/dani_rodriks_w…
3/6
 The world is probably better off if every country chooses more global integration (i.e. has more open trade and capital accounts and less control over its external imbalances). This maximizes the benefits of international trade.
Read 6 tweets
Michael Pettis Profile picture
Sep 15
1/7
 In August, both growth in industrial output and growth in retail sales came in well below expectations, with the former up 5.2% and the latter up 3.4% (compared to 5.7% and 3.7%, respectively, in the previous month).
english.news.cn/20250915/7a106…
2/7
 As always, the key point is that for all the talk of rebalancing, the proxy for output growth continues to outpace the proxy for consumption growth by quite a large margin.

Meaningful rebalancing requires that consumption outpace GDP growth by roughly two percentage points.
3/7
 Some analysts argue that the weaker-than-expected growth in industrial output may be evidence that Beijing’s attempt to rein in involution is starting to work. Industrial output growth in July and August came in at the lowest paces in all of 2025.
Read 7 tweets
Michael Pettis Profile picture
Sep 12
1/8
 Bloomberg: "China urged Mexico to “think twice” before levying tariffs, a warning that could signal Beijing’s willingness to retaliate over a move it sees as giving into demands from the US."
bloomberg.com/news/articles/…
2/8
 Mexico announced plans earlier this week to impose duties of as much as 50% on cars and other products made by China and several Asian exporters.

These are the kinds of stories I think we'll see more of in the next year or two.
3/8
 In the past ten years Chinese exports to Mexico have nearly doubled, and its trade surplus has surged, to $71 billion last year.

This bilateral evolution must be understood as part of a global shift.
Read 8 tweets
Michael Pettis Profile picture
Sep 12
1/14
Barry Eichengreen warns, correctly, that "The dollar’s international primacy isn’t eternal. To be sustained, it has to be actively fostered and preserved."

But why sustain the dollar’s international primacy? Is this merely a modern monetary fetish?
wsj.com/finance/curren…
2/14
While the primacy of the dollar is certainly good for bankers, financiers, and very wealthy owners of movable capital, what's much less obvious is the extent to which it benefits or harms American workers, manufacturers and middle class households.
3/14
Some analysts will argue that being able to transact in dollars benefits American exporters and importers by reducing currency hedging costs, but the more honest ones will acknowledge that the benefits are tiny, at best, and that their lack doesn't seem to hamper rivals.
Read 14 tweets
Michael Pettis Profile picture
Sep 11
1/10
Interesting new IMF paper on the extent of industrial policy subsidies to Chinese manufacturers and SOEs (to the extent information is available) and their impact on productivity.
imf.org/en/Publication…
2/10
It measures national-level cash subsidies, tax benefits, subsidized credit, and subsidized land, which collectively amount, it says, to a high 4% of GDP. The authors note that other subsidies exist, including sub-national subsidies, but these are harder to measure.
3/10
I'd include in the latter what is perhaps among the biggest subsidies, which is over-spending on logistical infrastructure. To the extent that these cost more in resources than they create in economic value, they represent a large transfer to the users of the infrastructure.
Read 10 tweets

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