In the 2010s, #China growth model created both a driver and a drag for DMs. Great report from @freyabeamish access it here hub.tslombard.com/report/the-vie…
A thread 🧵
A thread 🧵
1. 2010s driver: China’s contribution to global growth in the 2010s was to internalize the deficit that previously was run by the rest of the world, notably the US household sector. As willing foreign borrowers dwindled, the #RMB appreciated and Chinese policymakers chose to
prop up growth by borrowing through the corporate sector, with the private sector following suit, most notably in the real estate sector. By around 2016, the corporate sector was saturated and households took over, blowing the final air into the bubble that is the Chinese
property market – the largest sector in the world. Those DMs that were integrated into the export machine or China’s domestic investment, especially in real estate, received a boost. This driver added an impulse to growth for export-oriented economies, notably the EA, primarily
through #Germany , without any inflationary impulse. So, in the 2010s, China’s role for many EMs and the EA was found in the third quadrant (positive growth impulse but negative inflation impulse). In the 2020s, the growth element of that is evaporating and China remains a
disinflationary force, meaning China gravity for these regions in the 2020s will shift to the second quadrant.
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