1/ India imported 31% more from China so far in 2022 while exporting 36% less.
Chinese economy is so structurally distorted, it can only produce and not consume. As a recent example, they ran factories during lockdowns but closed shopping malls.
What can India do?
Chinese economy is so structurally distorted, it can only produce and not consume. As a recent example, they ran factories during lockdowns but closed shopping malls.
What can India do?
https://twitter.com/michaelxpettis/status/1587837616808132609
2/ If India passively accepts China's structural distortion, we risk heavily distorting our own economy to consume without producing and that would change our jobs mix towards token distribution jobs whose purpose is to create income to consume imported goods.
We must resist.
We must resist.
3/ Economists like Prof Panagariya believe in what I call "naive free trade theory" that simply is not even aware that there is such a thing called structural distortion because it is not part of their toy models.
Warren Buffet proposed a simple and elegant solution.
Warren Buffet proposed a simple and elegant solution.
4/ Buffet's solution is to balance trade by requiring importers to buy import credits in the market from exporters. Singapore does this for "certificates of entitlement" (CoE) for cars, where you first acquire the CoE from the market (freely trade in CoEs) and then buy a car.
5/ Government can simply auction more import credits at current market prices too, if needed. This will make sure our we external trade balances or at least deficits are manageable.
If we don't so this, we are letting China determine our deficit & thereby our economic structure.
If we don't so this, we are letting China determine our deficit & thereby our economic structure.
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