Reuters: "China's vice commerce minister Ren Hongbin said on Wednesday there are still many concerns for foreign trade, especially for struggling smaller exporters, and China will introduce a new round of measures to stabilise it in due course."
China's exports have surged in the past year, and it has been running the highest monthly trade surpluses in its history, and yet Beijing is still concerned about struggling exporters.
"Measures to stabilize trade" is usually a euphemism for additional indirect export subsidies, and so we should probably expect tax cuts, further spending on logistics and so on to increase export competitiveness, ultimately to be paid for by the household sector.
The timing isn't totally surprising. Beijing is trying to manage the contradiction between boosting growth and restraining debt, and larger trade surpluses help moderate the adverse consequences for GDP growth of slower credit growth.
These surpluses however do come at the expense of the US and other trading partners who are also trying to rein in debt while boosting domestic growth. Less debt for China, in other words, means more debt for its trading partners.

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More from @michaelxpettis

26 Nov
The Chinese challenge to US scientific and technological superiority, and the US response, may end up greatly benefitting the world. The question for China is its sustainability, especially as its GDP growth starts to drop rapidly.
scmp.com/tech/policy/ar… via @SCMPNews
I'd argue that the key is the mix of political and economic institutions that are best suited to make technological innovation commercially sustainable. Highly centralized systems can very be very efficient at achieving clear goals, like building needed infrastructure or...
restricting population growth. They are certainly capable too of tremendous advances in politically-directed areas of science (e.g. Germany in the 1930s, the USSR in the 1960s and 1970s). So far, however, the most successful high-tech economies seem to succeed...
Read 7 tweets
25 Nov
His logic seems pretty tight: "Liu Shengjun, head of the China Financial Reform Institute, said the property tax was likely to encounter strong opposition from local governments, which could lead to the proposal being delayed or even shelved."
He continues: "Local governments have limited sources of revenue other than land sales and are likely to either reject the idea of a property tax or recommend a high tax rate to boost their coffers.
His conclusion? “Under either of these scenarios, local residents will be the victim.” Whether local residents pay in the form of alternative taxes or a reduction in services, in other words, they won't benefit.

But there are other possibilities, although none is easy.
Read 4 tweets
24 Nov
I haven't read their report, but if this article correctly summarizes it, I half agree with their 5.5% 2022 GDP growth forecast for China. I've said almost since the beginning of this year that Beijing would probably choose...
a 5.5% GDP growth target in 2022, but whereas they seems to think that this is because deleveraging this year will "lay the foundation for high-quality economic growth" next year, I would argue that it is almost the opposite.
From early this year, because of a partial reversal of last year's contraction in consumption, I expected GDP growth to come in between 6% and 8%, depending on how seriously they took deleveraging (they expected 8.7%).
Read 10 tweets
24 Nov
"Losing money from their property investments, some trust companies are now suffering high liquidity pressure that has in turn prompted them to scale back their immense investments in the real estate sector."
This could be more important than it at first it seems — trusts are major lenders directly and indirectly to the property sector. If they do cut back their exposure substantially, I suspect that regulators will put...
pressure on the banks to make up for it by increasing their support for the sector, even though, ironically, banks often used the trusts as conduits to get around regulatory restrictions on property loans.
Read 8 tweets
23 Nov
I don't know nearly enough about the Tesla market to judge, but if what Robin (@RobinWigg) says is true, this is a very useful article. It suggests that an enormous amount of stock market activity, and not just in Tesla, is tied to technical factors.
As a result, because in many cases these technical factors are pro-cyclical, trading in Tesla can be highly self-reinforcing and thus volatility-enhancing. The fact that a large share of Tesla investors seem a little too emotionally about Tesla just adds to the mix.
I spent a big chunk of my trading days on Wall Street designing structured products, and so this was the money quote for me: "It’s incredibly lucrative for investors to put into structured products because it is so volatile.”
Read 4 tweets
23 Nov
Great piece. Although I have a lot more respect for Paul Krugman than Michael Lind does, I agree with what Lind says about trade. Ricardo showed that when businesses move abroad to benefit from comparative advantage, the global economy is better off.
But while lower wages in less developed countries can reflect a form of comparative advantage, this is no longer the case in countries in which the wage gap exceeds the productivity gap. In a Ricardian world, wages keep pace with productivity.
But when wage growth is repressed relative to productivity growth, this is always the result of explicit policy decision, in which case offshoring doesn't allow businesses to benefit from comparative advantage reasons so much as to benefit from mercantilist wage policies.
Read 6 tweets

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