Not all trade stories should be viewed through a Trump lens -- Chinese steel exports (in tons) are at record levels, and they aren't going to the US.

1/x What's more, China's investment in new steel capacity -- which did fall from 2014 to 2017 -- has stayed near its 2021 highs even with the collapse in real estate demand

2/

A new Trump administration will have to figure out how it balances its broader policy agenda with its undeniable desire for balance in trade.

1/x

https://twitter.com/petereharrell/status/1854220119372697632

A strong domestic economy will naturally pull in imports, the currently strong US dollar is already weighing on exports -- even without new tax cuts the trade deficit is set to continue to widen

2/

A bit of pre-election counterprogramming ... just in case some folks have a bit of time to kill before Tuesday night.

A deep dive into changes in the US investment income balance, and decline in the United States' exorbitant privilege

1/ The basic issue is that the U.S. investment income account looks to be (finally) heading toward a deficit ...

2/

The Iowa Selzer poll is probably a bit of an outlier (time will tell), but Iowa -- with its peerless bean and corn land -- does have reason to worry about a new trade war with China.

1/

https://twitter.com/conorsen/status/1853052866279202843

In the 3ms after a typical harvest, the US tends to ship out somewhere between $12 and $16b of beans, with about 2/3rds going to China.

This year looks safe (the harvest ships by the end of January), but during the last trade way China's state importers boycotted US beans.

2/

I don't share Louis-Vincent Gave's politics, but I certainly found this an interesting and provocative read

1/

research.gavekal.com/article/prejud… Gavekal certainly has insights into the shifting views of CEOs passing through Beijing that a balance of payments grunt doesn't. That is part of what makes this an interesting essay.

2/

Japan's balance of payments is rather interesting, but it seems to confuse many --

The current account surplus is back at record levels (close to 4.5% of GDP) -- well above the reported Chinese surplus (whether that's an accurate number is another question!)

1/ Japan of course now runs a deficit in goods (and goods and services) trade -- the current account surplus is all investment income ($100b in interest, $150b in profits on foreign direct investment)

2/

I obviously disagree with Glenn.

And more importantly, I don't think he has proved his case (the case that SAFE has improved China's BoP data with its new & untransparent methodology)

1/x

https://twitter.com/GlennLuk/status/1851055952306254127

The essential argument that China made to the IMF relayed in an appendix to the 2024 staff report is that Chinese customs data had an inflated price for goods like iPhones that are produced in bonded zones & thus it overstated China's exports and China's true trade surplus

2/

Indeed.

Excellent reporting from the China team of the Financial Times on why Xi seems to have agreed to a bit of fiscal stimulus

1/ So far it is a stimulus with a lot of Chinese characteristics -- refinancing existing debt isn't usually considered a stimulus (China is changing how the debt if financed tho), and buying up existing property is a bit of a bailout ...

2/

One of the unexpected results of China's domestic shift to EVs has been China's emergence as a huge exporter of traditional (ICE) autos --

China's domestic EV sales should top 10m this year ...

1/x As a result, domestic ICE sales are 10m cars or so below their pre-COVID peak, and falling fast --

2/

Year to date (compared to the same period of the previous year) domestic demand has contributed 3.65 pp to China's growth -- so the only reason why China is close to its 5% target is the 1.15 pp contribution from net exports.

1/x China calculates this number a bit strangely (and it doesn't report the underlying GDP numbers in levels) but my own tracking if anything suggests a bigger net export contribution -- the YTD difference in goods export and import volume growth is over 10 pp

2/

Excellent reporting from @Lingling_Wei, highlighting the reasons for Beijing's policy shift, & the limits on that policy shift.

Xi seems to have pivoted in part because he had no real choice; the fiscal troubles of local governments were becoming an independent economic drag

1/ Wei believes Xi supports propping up asset markets (what I have called asset priced based stimulus) and avoiding an immediate crisis in local government finance -- but not a broader shift in economic policy direction

2/

The IMF - at least the fiscal side of the house - likes to lump the US and China together: "global public debt edged up again in 2023 ... with the world’s two largest economies, China and the United States, largely driving the increase"

1/ The IMF wants a rather massive global fiscal consolidation ("fiscal adjustment of 3.0–4.5 percent of GDP, on average") and the IMF's eyes both the US and China (the two bad children, fiscally speaking) need to do more ...

2/

imf.org/en/Publication…

China's vehicle exports, in billions of dollars --

Still a remarkable chart

1/ Germany's exports to China (measured using the Chinese import data) as a share of German GDP --

Rather remarkable fall since the end of 2022 (about half a point of German GDP)

2/

One of China's intervention proxies was released today -- the change in the foreign assets held by the PBOC on its balance sheet. They fell, which would be strange given the CNY's appreciation during September.

But the bigger move was over at the state banks

1/ Between the PBOC and the State commercial banks, total foreign asset rose by $20b in September (following a bigger increase in August). And over the last 12ms of data, the combined foreign portfolio of the PBOC and the state banks is up $130b or so ...

2/

One chart that shows how little the world has deglobalized (and how little it has fragmented) --

Over time, Asia's good surplus has essentially become a Chinese surplus ... but that surplus equally isn't absorbed in east or southeast Asia

1/ And it just happens to be the case that for the last 4 or 5 years the China-driven rise in Asia's combined surplus perfectly maps to the US deficit --

(the fit is more likely now that the US isn't a net oil importer)

2/

Put the (revised) bond restructuring terms for Sri Lanka into a spreadsheet --

Sure looks like the bond holders out-negotiated Sri Lanka's previous government, and gamed the IMF and the official creditors ...

1/ A bit of background --

The IMF put Sri Lanka in a bad negotiating position, with a program that low balled dollar GDP and a debt sustainability analysis that allowed a high level of public debt to GDP

2/

I plead guilty in part -- I thought China's internal imbalances (low consumption, crazy high level of investment) would catch up to China before they did.

That said, it would be a mistake to ignore the very real signs that China's economy is now in a real pickle.

1/x

https://twitter.com/TheStalwart/status/1842380858696626203

The real estate downturn now is shockingly big (see the fall in starts and sales form the peak) and shows no real sign of stabilizing --

2/

A number of long-standing defaults look set to be resolved -- Ghana's bond holders approved its proposed restructuring, and Sri Lanka appears to be going forward with its deal ...

1/x Some have argued that the completion of deals is a sign of the success of the common framework and common framework adjacent cases. But that sets too low a bar -- the goal has to be new agreed terms that provide a path to sustainability

2/

Beijing has plenty of fiscal space. DC (including 19th street) should start encouraging China to use it.

A new and potentially controversial blog

1/

cfr.org/blog/beijing-s… I argue that the IMF (and many others) should stop lumping all of China’s debt together in the “augmented” fiscal balance and augmented debt – and instead treat LGFV debt as SoE debt that generates a contingent fiscal liability for the central and provincial governments

2/

For the reasons outlined on my blog, I don't trust China's reported current account surplus.

My estimate of the true surplus puts it just under $700b (v $210b reported)

1/ This is for two reasons:

a) I think China's investment income earnings on its $6 trillion plus in foreign assets (loans and bonds only) + its offshore equity should be more like $400b not $200b

2/

China's detailed balance of payments data for q2 is now out, and it describes the old world -- one where the CNY was under depreciation pressure, one where China's economy was showing signs of slowing but well before any policy reaction. the data is a bit, well, strange

1/ On a trailing 4q basis, China's basic balance (reported current account surplus plus net FDI flows) has disappeared -- and so to have both large state bank and reserve inflows and outflows. Everything was, well, stable --

2/