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Glenn Profile picture
Glenn
@GlennLuk
Co-founder/BoD @HealthCareInc | Previously @Catalyte_io | VC/PE @Investcorp Technology Partners — Tech | Econ Development | Investing | China/APAC
17 subscribers
Oct 1 • 32 tweets • 9 min read
Professor Setser's contention here is that China's errors & omissions (E&O) are "implausibly" low.

He also believes that declining E&O in response to a change in statistical methodology that explicitly aims to address statistical mismeasurement doesn't make sense and instead offers his own speculative theory.

The former is wrong. The latter is absurd. First some background. There are two categories of E&O:

▪️ Statistical mismeasurement, reporting errors, timing mismatches

▪️ Real capital inflows/outflows that purposely evade official reporting for various reasons (e.g. illicit flows, tax evasion, trade misreporting etc.)
Sep 27 • 16 tweets • 6 min read
I hear over and over again how there are "100-150" Chinese EV firms and "only a handful are profitable".

This is BS and highly misleading.

The people who cite these figures can never seem to name even a fraction of these firms ...

... because they are mindless parrots who are unwilling or incapable of doing their own work to check out basic, factual claims or provide highly relevant context.https://www.ft.com/content/0b32d65b-6963-4e07-bb75-648ff8652a55 This number (which tends to range from 100 to 150) is actually derived from brands — ostensibly pulled out of the CAAM** database. Depending on how high the number is, it could include defunct, retired brands.

It is definitely not "firms".

Just like most large foreign automakers, Chinese ones often have multiple brands under the holdco umbrellas, so they too can target differentiated consumer market segments.

e.g. GM has Buick, Cadillac, Chevrolet and GMC. Stellantis has Alfa Romeo, Chrysler, Citroen, Dodge, Fiat, Jeep, Lancia, Maserati, Peugeot and others.

This distinction is relevant here because — at least as non-insiders — we can only effectively observe profitability at the firm level, not the brand level.

** China Association of Automobile Manufacturers, the standard industry body.Image
Image
Sep 26 • 8 tweets • 3 min read
Historians will look back and identify the Meng arrest in 2018 as a critical turning point by making it "personal" for Huawei, which gets first pick on elite technical talent across multiple engineering disciplines in the world's largest STEM workforce. Up to this point, China's semiconductor progress was halting, at best.

Reality is that (i) SMIC is mediocre and (ii) there was very little financial incentive for the domestic chip ecosystem to move off Western SME and Taiwan foundries.

Sep 20 • 24 tweets • 7 min read
"Involution" (卷) is a complex word.

Perhaps not surprisingly, a certain group of thinktank-adjacent pundits are once again trying to co-opt the meaning of a Chinese word to fit into pre-existing, oversimplified narratives ...

vs.

... really trying to understand its nuances and how Chinese policymakers think — which will help one predict how they will act. Modern Chinese policymakers believe in the idea that competition drives innovation and productivity improvement that sits at the core of economic development.

Too little competition is bad. Hence Chinese policymakers' heavy anti-monopoly bent and allergic reaction to rent-seeking behavior in the private sector.

But too much competition can also be bad if it leads to market behavior that has negative societal externalities.

The goal for policymakers is to find the right balance. And every sector is different, so there is not a one-size-fits-all approach.
Sep 12 • 22 tweets • 8 min read
China's Finance Ministry reviews the 14th 5YP (2021-25) and looks ahead to the 15th (2026-2030).

Source transcript here: mof.gov.cn/zhengwuxinxi/c… x.com/Sino_Market/st… Fiscal revenue grew ~19% in the 2021-25 period compared to the 2016-2020 period (~3.5% nominal growth).

Note: IIRC fiscal revenue excludes categories like land sales, which are part of an auxiliary budget. Image
Aug 31 • 5 tweets • 2 min read
Scholars once worried that China's gender ratio imbalance would lead to a generation of surplus men, fueling crime, chaos, and even war.

What we got instead was ... this. Certain China watchers busy penning missives on how this Paw-temkin Village is merely the latest example of the country's addiction to construction, penchant for capital misallocation and "politically entrenched elites" blocking efforts at structural reforms.
Aug 24 • 10 tweets • 3 min read
Productivity is what ultimately drives per-capita economic growth and increases in living standards over the long run. This concept is one of the pillars of developmental economics.

I’ve come to realize one of the the fundamental issues with Pettis/Setser economic framing is misplaced reliance on accounting identities with little to no consideration of productivity effects.

To wit: nowhere in this thread is there any mention or consideration of how this sectoral shift impacts productivity. In the short to medium run, there can certainly be supply-demand disequilibrium where “weak demand” is an issue.

e.g. in this 🧵 from a year ago I tried to quantify the headwinds from reverse wealth effect impact of the policy-driven pivot away from real estate to manufacturing since 2020 and how they could offset wage growth driven by underlying productivity growth enabled by sectoral shift.
Aug 24 • 22 tweets • 7 min read
In January, I speculated how "the most impactful outcome from DeepSeek's rise may ultimately be closer collaboration with Huawei and other chip designers".

We now have direct evidence of this collaboration, with potential standardization around UE8M0 the first major tangible result.

While some may dismiss this as technical or esoteric jargon relevant only to AI, computer science, or math enthusiasts ... I will try to explain here in plain language some key market and geopolitical implications of this development. First I want to acknowledge others who are much closer to DeepSeek and AI for both raising, highlighting and explaining these recent developments, particularly @teortaxesTex @zephyr_z9 and @Compute_King

In this 🧵 I am merely synthesizing the insights and knowledge gained from following their timelines and trying to add value by layering on market and geopolitical insights.
Aug 21 • 11 tweets • 4 min read
About a year ago, ahead of "Two Sessions", I performed a deep dive into China's economic transition (away from real estate).

Five years since "Three Red Lines", China is now entering the "late innings" of that transition.

▪️ Exogenous macro risks ↘️
▪️ Real estate ↔️ and no longer a major headwind.
▪️ "Animal spirits" ↗️ Exogeneous macro risks are lower than a year ago:

▪️ Trade war-related risk/uncertainty largely cleared w/ better-than-expected outcomes.

▪️ China progressing in broad tech war. It is decisiveley leading renewables & EVs + closed gap in AI & chips.

Aug 12 • 5 tweets • 2 min read
> “The state cannot allocate capital more efficiently than the market.”

An oft-repeated axiom chanted like a religious mantra and accepted by many as a universal truth.

But one that can be easily debunked with a straightforward contra-example from one of the most capital-intensive industries of them all: passenger rail. China Railway (SOE) vs. Brightline (private)

CR HSR:
▪️ 48,000 km of greenfield track, predominantly elevated on viaducts
▪️ Serves 3.6B passengers annually
▪️ ¥550B of revenue on ¥5T of capital investment (9 years revenue payback)
▪️ 42 fatalities over 17+ years and 23B passenger rides

Brightline Florida:
▪️ 376 km of refurbished at-grade track
▪️ Serves 2.8M passengers per year
▪️ $187M revenue on at least $5.5B capital investment (29 years revenue payback)
▪️ Caused 182 fatalities in two-plus years of operation (hint: maybe you shouldn’t run fast trains over at-grade crossings).

Did the private company really do a better job allocating capital here? (rhetorical)
Aug 9 • 12 tweets • 4 min read
Re-invigoration of biking culture in China and the relentless expansion of dedicated biking lanes today can really be traced to the invention and proliferation of dockless bike-share systems starting around a decade ago. Like many emerging industries in China, dockless bike-sharing got off to a chaotic start but within a few years settled into a stable equilibrium.

Jul 23 • 7 tweets • 2 min read
If you ever played Civilization, 👇 is the equivalent of discovering tech that allows you to upgrade a desert tile into an energy-producing one.

Affordable solar PV production has the same effect as discovering oil in the Middle East and then multiplying it by 10x. Image ~830B barrels of proven reserves in the Middle East has effective energy equivalent of around 11,300 GW of solar PV that produce over a 25-year useful life.

At 14 km2/GW, this would take up desert space of ~158,200 km2, which is less than a quarter of China’s portion of the Gobi Desert.

Moreover, regular maintenance and replacement means this infrastructure would produce energy in perpetuity, while the Middle East oil fields run out or become more costly/difficult to extract (even with improved extraction technology).
Jul 23 • 5 tweets • 2 min read
Pettis’ theories and models have a clumsy track record of falling apart upon closer inspection by trained specialists in their fields of study. The above is an example from economics.

He also did it here with misapplication of “inclusive-extractive” framework.
Jul 21 • 9 tweets • 3 min read
I think foreigners — especially Americans — do not fully appreciate China's predilection for large, capital-intensive infrastructure projects because most do not know what it was like to live in a place starved of God-given natural endowments. While we marvel at the economic benefits of a navigable Mississippi River system, bountiful arable land enabling "amber waves of grain", and "purple mountain majesties above the fruited plain" and rich stores of oil & gas + other useful commodities ...

readwriteinvest.com/p/america-the-…
Jul 11 • 13 tweets • 4 min read
It just dawned on me how China’s rare earths restrictions against Japan in 2010 may have indirectly contributed to Japan Inc. prioritizing hydrogen / fuel cell cars over electric vehicles powered by electric motors. https://www.questmetals.com/blog/how-japan-solved-its-rare-earth-minerals-dependency-issue-and-what-the-usa-can-learn As EVs have decisively won the next-generation powertrain competition, this rare earths feint that inadvertently pushed Japanese automakers into investing behind the wrong technology paradigm could be responsible for Japanese automakers falling from a dominant leading position to also-rans in two decades.
Jul 5 • 10 tweets • 4 min read
I had written a deep dive on known issues in the measurement of China’s GDP and how misleading it was to frame the discussion around the GDP accounting identity, especially if the way those numbers are calculated differed wildly from country to country.

In light of the recent discussion of China’s under-counted consumption 👇, it was worth re-upping these pieces. Part I provided relevant background on the technicalities of GDP measurement and the historical development of Pettis’ “Over-investment Thesis” and the critical role of the GDP accounting identity on determining “imbalances” in China’s economy.

readwriteinvest.com/p/tyranny-of-t…
Jul 3 • 9 tweets • 3 min read
Essentially, the key takeaway of this study is something many have already long known/suspected:

China’s per capita consumption of real goods and services is very much in line with countries at a similar level of per capita GDP + the reason why it is low as a % of GDP is because it is measured more conservatively.

(This is also suggests that China’s overall GDP is also under-counted, in direct contradiction to what many believe) Even though Chinese households are verifiably consuming everything from food to cars to education services in real per capita terms at or higher to comparable economies like Mexico + sometimes close to or even exceeding fully developed economies like Japan, cultists will insist that consumption is lagging on the basis of flimsy accounting identities.
Jun 21 • 13 tweets • 6 min read
Others have now raised this topic a few times, so allow me to share some thoughts on the BYD (and broader) supply chain financing story:

1⃣ BYD's high payables number actually reflects the strength of its underlying business model and market dominance for two key reasons (ability to extract favorable supplier terms; how that number is driven in part by rapid expansion in production capacity)

2⃣ Establishing industry norms that forces larger players like BYD to adhere to standard payment terms (voluntarily or involuntarily) is a positive step forward for the whole industry, leading to more efficient overall financing approach.

3⃣ BYD and other market leaders that also run large negative working capital balances are generally not a risk of insolvency by adhering to new industry norms as they are generally under-leveraged (with traditional debt financing) and will simply plug the financing hole with more traditional debt and equity financing. In BYD's case, I expect all or most of it to be to replaced with debt (long-term bonds).https://www.ft.com/content/e6ae000d-d506-4a21-898e-213002234ee2 1⃣ BYD's high payables figure reflects strength of its underlying business model and is in part a reflection of its rapid growth in production capacity

While the high payables figure has been portrayed as a potential weakness (with some even raising the idea that BYD is insolvent), actually it reflects the opposite.
Jun 19 • 35 tweets • 12 min read
People have a tendency to compress complex, multi-decade stories into simple narratives that follow cause-and-effect storylines, often ones that tie into pre-existing narratives. This creates the risk of dangerous over-simplification.

In this case, the prevailing narrative goes something like this:
▪️ "China failed to build a competitive auto industry for decades."
▪️ "Then Tesla entered the market and became the magic fix that enabled China to develop a globally competitive car industry."
▪️ "Therefore, we should apply the same magic fix to our own industry."

In my view, this is a dangerous over-simplification. Reducing the story to a simple cause-and-effect narrative often leads to blissfully naive solution sets that fail to address the core issue: how do we re-industrialize America?

Believing that simply inviting Chinese car companies into the U.S. will serve as a "magic fix" — just as Tesla supposedly was for China — misses the mark, for two key reasons:

1. The "magic fix" narrative is a gross oversimplification of five decades of development in China's auto and broader industrial/manufacturing sectors.

2. The fundamental challenges China faced over those decades are very different from the ones the U.S. faces today.

None of this is to say that inviting Chinese automakers to invest FDI in the U.S. cannot be part of a LT solution**. But it must be done thoughtfully — and only in tandem with addressing core domestic issues — if the goal is truly to re-industrialize this country in a meaningful way.

** Of course, all of this assumes they even find the risk/reward decision to commit long-term capital to the U.S. in today’s geopolitical climate remotely attractive compared to FDI opportunities elsewhere. 1⃣ First, let me go through several points that were brought up in the excerpted sections of the interview as well as the post to show how reality was much more complex than presented**

** I full interview is not out and I haven't seen it, so perhaps there will be more nuance there; this is mainly a reaction to how the narrative on the rise of China's auto industry has been grossly oversimplified and in certain cases, simply wrong.
May 31 • 8 tweets • 3 min read
This popped up on my timeline and was just a reminder of some of the sillier narrative framing of Chinese EVs just a year and a half ago. Since this post in January 2024, Chinese NEV production has increased from a ~10-11 million run rate to ~>16 million as of mid-2025 and virtually ALL of the increase has been absorbed by the Chinese market …
May 31 • 11 tweets • 3 min read
Chinese chip designers finding workarounds for EDA software is roughly the same degree of difficulty / switching cost as moving away from CUDA/nVidia.

This is an effort measured in months, not years.

eetimes.com/u-s-restricts-… By comparison the advanced lithography ban was an OoM more complex/difficult and the switching cost process measured in years, not months.

That was the largest source of leverage in the American tech/economic dominance toolkit and it was played early.