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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
Dec 21
1/4
 WSJ: "The number of ride-hailing drivers in China tripled to 7.5 million in the four years to 2024, even though the number of rides grew only by about 60% during the same period, government data shows."
wsj.com/world/asia/14-…
2/4
 By shifting into the gig economy, workers reduce overall unemployment numbers without increasing the the total amount of wages workers receive. This is one of the reasons consumption growth has been so weak.

To boost consumption growth, Beijing must figure out how to...
3/4
 get total wages to rise much more quickly, although it must do this without further undermining already-unprofitable businesses. But if it continues to subsidize business profits while also subsidizing wage growth, the rise in debt will only accelerate.
Read 4 tweets
Michael Pettis Profile picture
Dec 17
1/10
President Macron says "We must acknowledge that these imbalances are both the result of weak EU productivity and China’s policy of export-driven growth."

The first part of that statement is technically not true.
via @ftft.com/content/c8fdf1…
2/10
Countries don't run trade deficits because of low productivity, any more than they run surpluses because of high productivity. That is not at all what global trade imbalances around the world tell us, and that is not why countries have lower or higher saving rates.
3/10
American productivity, to take one obvious example, is higher than that of Europeans, and several times higher than that of the Chinese, and yet it is the US that runs huge deficits and China, with the highest saving rate in the world, that runs huge trade surpluses.
Read 10 tweets
Michael Pettis Profile picture
Dec 15
1/8
 It's hard to find anything good in the November economic data for China, just as it is hard to find anything new to say. All the important indicators continue to weaken, as they have throughout the year, in some cases even decelerating further.
english.news.cn/20251215/a5915…
2/8
 Retail sales, for example, were expected to grow a very disappointing 2.9% year on year in November. In fact they only grew 1.3%.

For all the talk of a greater role for consumption in driving growth, in the first 11 months of the year, retail sales were up just 4.0%.
3/8
 Meanwhile industrial output rose 4.8% in November, a little below expectation and well below the 6.0% growth in the first 11 months of the year.

For me the main worry is the gap between the two, with the former so far this year growing 2 percentage points more slowly than...
Read 8 tweets
Michael Pettis Profile picture
Dec 12
1/8
 Caixin: "While concerns about weak demand and external uncertainties persist, this year's Central Economic Work Conference, which concluded on Thursday, marked a shift in tone. The official readout framed China's core economic challenge as...
caixinglobal.com/2025-12-12/chi…
2/8
 a “prominent contradiction between strong supply and weak demand” — a structural issue rather than just insufficient consumption."

"The change" Caixin writes, "suggests Beijing sees supply-side imbalances, not just inadequate consumption, as a constraint."
3/8
 Perhaps, but the only way you reduce a “contradiction between strong supply and weak demand” is either by reducing GDP growth, which Beijing doesn't seem to want, by increasing growth in consumption, which for all its efforts Beijing has been unable to do, or by increasing...
Read 8 tweets
Michael Pettis Profile picture
Dec 11
1/4
 WSJ: "President Trump’s barrage of tariff increases threatened to chill global trade flows, but commercial exchanges continued to increase as most of the international commerce system functions as it did before the onslaught."
via @WSJwsj.com/economy/trade/…
2/4
 Contrary to what WSJ says, Trump's tariffs never really threatened to "chill global trade flows" except in the view of those (including far too many economists) who mistakenly thought of trade in incremental terms rather than in systemic terms.
3/4
 As I wrote two years ago, the word "resilience" was going to be used over and over to describe trade as Trump's tariffs shifted trade and trade imbalances around without fundamentally changing them. That's because the only way the US can cause a reduction in its trade...
Read 4 tweets
Michael Pettis Profile picture
Dec 10
1/4
 The IMF formally recognizes that it is a depreciating RMB, not rising manufacturing efficiency, that drives China's growing trade surplus.
ft.com/content/9c92aa…
2/4
 That's because a depreciating currency is both a subsidy for manufacturing (and tradable goods) and a tax on consumption. It works by reducing the household share of GDP, especially when reinforced by other production subsidies paid for directly or indirectly by households.
3/4
 The net result of boosting manufacturing with subsidies and restraining consumption with taxes is to force the production of manufactured goods to grow faster than consumption – which also means forcing up the saving rate.
Read 4 tweets

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