1/7
"Factory gate prices in China are far outpacing consumer prices, signaling a gulf between weak domestic demand and strong overseas demand that is powered in particular by U.S. hunger for China’s manufactured goods."
wsj.com/articles/boomi… via @WSJ
"Factory gate prices in China are far outpacing consumer prices, signaling a gulf between weak domestic demand and strong overseas demand that is powered in particular by U.S. hunger for China’s manufactured goods."
wsj.com/articles/boomi… via @WSJ
2/7
This is a point too easily overlooked: while strong US demand might explain surging Chinese exports, contrary to what most analysts seem to think it does not explain a surging Chinese trade surplus.
This is a point too easily overlooked: while strong US demand might explain surging Chinese exports, contrary to what most analysts seem to think it does not explain a surging Chinese trade surplus.
3/7
In principle, surging Chinese exports should raise the income of workers in the manufacturing sector, which should in turn raise Chinese household consumption, and this is turn should cause imports to rise broadly in line with exports.
In principle, surging Chinese exports should raise the income of workers in the manufacturing sector, which should in turn raise Chinese household consumption, and this is turn should cause imports to rise broadly in line with exports.
4/7
This is just another way of pointing out that for any country, what drives a rising trade surplus is not rising exports but rather a rising gap between savings and investment.
This is just another way of pointing out that for any country, what drives a rising trade surplus is not rising exports but rather a rising gap between savings and investment.
5/7
What really seems to be happening, in other words, is that while domestic demand is surging in the US, mainly because household income is surging, it is declining in China, mainly because the growth in household income has lagged GDP growth.
What really seems to be happening, in other words, is that while domestic demand is surging in the US, mainly because household income is surging, it is declining in China, mainly because the growth in household income has lagged GDP growth.
6/7
China's surging trade surplus and the surging American trade deficit together reflect the gap between growth in US household income and growth in Chinese household income – relative to their respective GDPs.
China's surging trade surplus and the surging American trade deficit together reflect the gap between growth in US household income and growth in Chinese household income – relative to their respective GDPs.
7/7
Put another way, rising demand in the US is partially balanced by a rising demand deficiency in China, and this manifests itself as rising trade imbalances in both countries.
Put another way, rising demand in the US is partially balanced by a rising demand deficiency in China, and this manifests itself as rising trade imbalances in both countries.
Zhou Xin's proposal would help rebalance demand, but it's unlikely to be implemented.
scmp.com/comment/opinio…
scmp.com/comment/opinio…
• • •
Missing some Tweet in this thread? You can try to
force a refresh
