Thread by @fallund

#China's GDP (in nominal terms) will never surpass the #US GDP.

For a long time, I have been sceptical of the forecasts that have predicted otherwise. I have been open to the possibility of a short-term situation in the mid-2030s, where it was temporarily higher.

#macro

Now, I do not even believe that anymore.

Some months ago, the Japan Center for Economic Research (JCER) predicted that it will not happen at all. Why? Simply because nothing grows forever.

#china #us #macro

#China has at least three major issues that will slow down its growth to a very low level. Two of these are domestic, but only one is "possible" to address properly. The last one is more international.

#macro #growth

The first issue is huge imbalances in the domestic economy, caused by a number of different factors. But, these can be addressed and probably fixed even though it will not be easy.

https://twitter.com/michaelxpettis/status/1644185257783222274?s=20

The second is a very unfavourable demographic situation. This has been caused by rapid urbanisation and growth and a one-child policy. This will be so unfavourable that it is actually difficult to see how China can counter this.

https://twitter.com/TheEconomist/status/1657580812097798144?s=20

The third is that the world is #deglobalizing. There is no country that globalization has favoured more than #China. Their whole business model is built on importing raw materials and components, putting things together, and exporting as much as possible.

All this while protecting their home market. This model will never survive the next decade.

A more #multipolar world will lead to #Dedollarization

https://twitter.com/fallund/status/1650789696060923904?s=20

Although, a popular concept, the main effect of #Dedollarization is that a single country cannot run a huge trade surplus simply because there is no counter position.

For China, this will further undermine the current business model.

https://twitter.com/michaelxpettis/status/1651789674426535938?s=20