Share this page!

Michael Pettis Profile picture
Twitter logo
14 Oct, 5 tweets, 1 min read
1/5
 Aggregate financing (TSF) was up RMB 2.90 trillion in September, and if this was well below expectations, as Caixin claims, it is only because expectations were unreasonably high.

caixinglobal.com/2021-10-14/chi…
2/5
 In fact TSF rose by 1.0% in September (an annualized 11.7%), which is a little bit higher than the average monthly increase this year. For 2021, TSF is up nominally 8.7%, which is equal to roughly 11.7% on annualized basis.
3/5
 This is lower than the 2020 growth rate, but higher than previous years. If TSF for the next three months continues to grow at this pace, China's debt-to-GDP ratio at the end of 2021 will rise by roughly 3-4 percentage points over 2020.
4/5
 This would be a lower increase than in previous years, but a little more than the 1-2 ppts I had been expecting. After last year's extraordinary 26 ppt rise in the debt-to-GDP ratio, I expected that Beijing would be able to limit credit growth by a lot more this year.
5/5
 The weaker-than-expected consumption rebound, however, dragged down what Beijing calls "high-quality" growth, and so the economy required more debt to achieve growth targets.

• • •

Missing some Tweet in this thread? You can try to force a refresh
　

Keep Current with Michael Pettis

Michael Pettis Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @michaelxpettis

Michael Pettis Profile picture
15 Oct
1/4
 The PBoC has finally commented directly on Evergrande-related turmoil, criticizing the company for its “poor management”, while playing down the potential spillover effects to the financial system, which they say they can control.
scmp.com/economy/china-… via @SCMPNews
2/4
 They're probably right, but as I've argued before, domestic financial contagion wasn't the main risk from Evergrande. The regulators have had plenty of practice managing domestic financial contagion before, and as long as the banking system is still...
carnegieendowment.org/chinafinancial…
3/4
 largely closed and the regulators credible, this was never likely to be a problem.

The bigger risk, in my opinion, is the domestic economic contagion through the financial-distress behavior of different sectors of the economy, all seeking to protect themselves...
Read 4 tweets
Michael Pettis Profile picture
15 Oct
1/4
 Good article. It notes that business profits in Germany have risen 8.1% a year since 2004 (versus 1.5% annual increases for France, and 2% annual decreases for Italy and Spain) whereas nominal wages in Germany grew by less than 3% annually.

ft.com/content/74d6cb…
2/4
 German growth, in other words has been accompanied by a substantial transfer of the benefits of growth from workers to businesses, which of course is also why domestic German demand is so weak and Germany began running such large trade surpluses.
3/4
 The author also notes that in pre-euro days, DM appreciation didn’t derail German exports but, unlike under the euro, allowed German imports to rise in line with exports – which is of course the sign of a country in which workers retain their share of productivity increases.
Read 4 tweets
Michael Pettis Profile picture
14 Oct
1/4
 In September once again Chinese exports grew faster than expected and imports slower than expected, to generate a $66.8 billion trade surplus, among the highest monthly trade surpluses China has ever recorded.
reuters.com/world/china/ch…
2/4
 This means China is running a trade surplus roughly equal to 4.7% of its GDP, and the rest of the world a trade deficit roughly equal to 1.0% of its GDP.
3/4
 Every month for the past six months, using an incremental sector-by-sector approach, analysts have incorrectly predicted slower export growth for China and a smaller trade surplus. It should be clear by now that this is the wrong way to look at trade and trade imbalances.
Read 4 tweets
Michael Pettis Profile picture
11 Oct
1/10
Chinese and foreign analysts who have made similar claims over the years as this Xinhua Commentary never distinguish between types of "bearish" views. But their approach, if taken seriously, would actually makes things worse for China.

news.cn/english/2021-1…
2/10
While I agree that those who have predicted imminent political, financial or social collapses have gotten it wrong — mainly because they failed to understand the structure of the Chinese financial system — for well over a decade the most sophisticated critique was not...
3/10
that China was about to collapse (which was always very unlikely) but rather that the Chinese economy was locked into an unsustainable process, and that the longer it took to adjust, the longer and more difficult the adjustment would be.
Read 10 tweets
Michael Pettis Profile picture
10 Oct
1/7
 Very interesting article. A series of Chinese studies may be discovering something about the high-speed rail system that France had already learned: rather than boost the economies of secondary cities, being connected...

scmp.com/news/china/sci… via @SCMPNews
2/7
 to the HSR may actually reduce economic activity and encourage a brain drain. Even patent applications in secondary cities have dropped significantly, according to one study, after the city was connected to a high-speed line.
3/7
 If this is true, it undermines the claim that even if much of the HSR is not economically viable today, it will generate enough growth in the less economically advanced areas to become viable in the future. The value of HSR is more likely to decline than to increase.
Read 11 tweets
Michael Pettis Profile picture
8 Oct
1/8
 In 2006-07 I published an article in the now-defunct (and lamented) FEER about prices of Chinese banks stocks, which at the time were trading at 3-4 times book value.

http://200.144.254.127:8080/english/archives/oldsiteinenglish/articlesbooks/pettischinasvolatility.pdf
2/8
 This was much higher than the major international banks, and while that was widely interpreted by analysts (and senior Chinese bankers) as evidence of the high quality of Chinese banks, I argued instead that these high prices told us something very different.
3/8
 If you analyzed prices within a classic option framework, it was clear that most of the value in Chinese bank-stock prices represented time value, and not intrinsic value, and so mainly reflected very high growth expectations and the volatility around those expectations.
Read 9 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!

Like this author's thread?

Get emails when @michaelxpettis has new unrolls!

Check out other threads from @michaelxpettis!

Read all threads by @michaelxpettis

:(