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Glenn Luk Profile picture
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Feb 3 • 8 tweets • 3 min read
Recommended watch list for #ChineseSpyBalloon and preparedness response planning

1 - Waterworld
2 - Don’t Look Up
3 - Balloon Boy
Hear me out, the Boxer Rebellion but balloons instead of fists.

There’s major spin-off potential here for Hot Dog Fingers world.
Asymmetrical warfare 101:

Fighters cost $30K/hour of flight time

China banking on this response when they launched the balloon filled with 50 yuan worth of helium

Grandmaster level 4D chess going on here folks
So much for “good guy with a gun” hypothesis

If we can’t even stop a balloon …
Actually maybe not a joke
BREAKING: Using state-of-the-art techniques I learned from Hollywood movies, I was able to extract high-res images of #ChineseSpyBalloon and holy mackeral look what I found ... before/after parody
TMD是我命令的！!
In an alternate universe, Donald Trump is still president and watching him respond to The Balloon would be just simply … exquisite. The Last of Us wouldn’t stand a chance.

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More from @GlennLuk

Glenn Luk Profile picture
Feb 3
The preference for labor is driven by really basic economic fundamentals - China’s persistent surplus of labor over capital, a state which, until urbanization reaches “fully developed East Asia levels” at a minimum, will continue to persist to some degree.
Interestingly, this labor surplus argument is probably a better way to argue that China needs less machinery relative to labor than developed economies - and support a key idea in the over-investment thesis that China is investing ahead of its stage of development.
However, it fails to do so given the focus on “investment as a % of GDP” as the headline KPI of the thesis.

“Investment” in that context does not distinguish between labor and capital (machinery) inputs. A lot of housing and infrastructure “investment” is labor.
Read 9 tweets
Glenn Luk Profile picture
Feb 2
The data in this table is not 🍎-🍎 and exaggerates the difference

✅China reached 393 GW of nameplate solar capacity by the end of 2022
❌China generated ~400 TWh from solar in 2022, not 229
I assume the 229 TWh figure comes from here: spglobal.com/commodityinsig…

... which is from NBS data that "covers only large-scale power plants with annual revenue of Yuan 20M" ... I suspect it excludes many solar projects, which tend to be below that 20M threshold
Moreover, to calculate capacity factor / efficiency, one should really use average installed capacity during the year, not EOY capacity.

This matters if capacity is growing quickly, as is the case in China.
Read 8 tweets
Glenn Luk Profile picture
Feb 1
The dirty little secret is that Taiwan is probably the most mercantilist economy on the planet

This makes it very difficult to separate "friends" and "foes" with consistent policy (wrt China)
This is mainly through FX intervention (direct and indirect), buoyed by a persistently low exchange rate. And as someone who has spent a third of my time living here the past decade, something I experience on a daily basis.
That said I am going to have to differ with @Brad_Setser on what explains the ongoing competitive advantage Taiwan has in semiconductor manufacturing

Read 13 tweets
Glenn Luk Profile picture
Feb 1
There’s a reasonable argument to be made that economies that skew socialist are in an advantaged position handle technology-induced disruption given their ideological bent towards distributive policies.
Add to this population decline - elevated LT economic growth sustainable only via productivity improvements + improved capital & resource allocation.

The only way China can reach OECD living standards (>.900 HDI) is by embracing tech.
This is more of a LT perspective. In the ST to MT (the next decade) there is still additional urbanization.

China is currently at 65% urbanization rate and if you compare to Japan/Taiwan/SK, 75% was the threshold where urbanization slowed down.
Read 8 tweets
Glenn Luk Profile picture
Jan 31
1/ One issue I have with the China over-investment hypothesis is how the household “class” often is conflated with “household consumption” and gov’t/business “class” (“elites”) often is conflated with “investment / gross capital formation”

amazon.com/Trade-Wars-Are…
2/ To refresh, the main crux of the hypothesis is that economic policy squeezes the household sector by subsidizing "investment" to an extreme degree. The main evidentiary support is low household consumption / high investment as a % of GDP.
3/ But they are not 1:1 relationships.

One is an imprecisely defined socio/economic/political class distinction and the other is a precisely defined (and sometimes arbitrary) macro-economic categorization used to calculate GDP through the expenditures approach.
Read 25 tweets
Glenn Luk Profile picture
Jan 28
RE (esp. residential) is intrinsically a higher ICOR (lower cap rate, longer duration) asset class compared to business investment

Similarly infra. investment also a relatively high ICOR asset class (vs. biz). Also J-curve effects (and COVID!) suppressing near-term ROI
So as investment mix shifted in favor of RE/infrastructure (starting in the early 2000s), simple math says ICOR is going to rise.

But ICOR rising in aggregate does necessarily equate to overall less efficient investment - must analyze ROI trends of each asset class individually.
The other implication, to directly address @audeldscire, is that as RE/infrastructure investment wanes relative to overall GCF, ICOR should decline again as lower ICOR (higher ROI) business investment mix rises.
Read 9 tweets

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