Huge story. Fascinating to work through how much trade Saudi Arabia can actually conduct in yuan, before running into China's highly restrictive capital account.

Back-of-envelope *maximalist* estimates here: shift could be substantial at first, but soon enough hit limits. (1/9)

https://twitter.com/JChengWSJ/status/1503733001892470798

A quick caveat before getting into this. I'm not looking at implications for the riyal USD peg or at Saudi Arabia's need for oil hedging. Both of these will impose additional limits on its use of yuan. What I'm interested in is: how much yuan can it absorb & put to work? (2/9)

One of the things that the nerd in me will miss the most about covering China's economy is having a go at hot takes based on a misreading of its economic data.

So for old time's sake, since I see this one getting traction, here's some Friday afternoon fun...

https://twitter.com/PPGMacro/status/1421061834359123970

Yes, that chart does look alarming. Passenger traffic on its highways is down about 25% compared with the same time last year. So much for the recovery! The data don't lie! Well, not quite.

What's really going on?

I always find it a bit odd to see analyses of the great big bubble in Chinese property without reference to basic price/income ratios. The latter make the market appear, well, somewhat reasonable--shocking as that might sound. (1/x) It's also useful to compare housing prices across most of China (excluding its four biggest cities) with the risk-free rate of return. Is speculative excess driving the market? If so, investors sure don't have much to show for it. (2/x)

A look at China's digital yuan, in which I argue that on the spectrum from grand monetary revolution to big nothing-burger, it's a lot closer to the latter.

There are three bold claims about the eCNY, but none stand up to scrutiny--at least not yet. (1/x) economist.com/finance-and-ec… The three claims are that it will dramatically enhance China’s surveillance capabilities; that it will allow the state to wield far more control over money; and that digitisation will help the yuan challenge the dollar for global prominence. (2/x)

A short thread with updated charts tracking China's debt dynamics.

Last year was a big one: second-biggest debt increase as share of GDP, up to 292%. But many other countries had similar surges amid covid, and China's leverage has edged down in the past two quarters. (1/5) It's also notable that in absolute terms, the increase in China's outstanding debt was, by its recent standards, quite modest. Up 12% last year, a far cry from its post-GFC stimulus. It was the collapse in nominal growth that so pushed up its debt-to-GDP ratio. (2/5)

It's well known that US financial sanctions affect business globally thanks to the dollar's centrality. But one thing I learned in reporting on China's latest consumer boycotts is how the US ban on Xinjiang cotton also has extra-territorial reach. (1/x) economist.com/business/2021/… I was told that US customs has halted a major shipment of garments from Bangladesh. Clothing firms in Bangladesh source lots of their textiles from China. And the US agents have now asked the company (a US brand) to prove that its cotton contains no Xinjiang fibre. (2/x)

A long read this week about the opening of China's financial markets: a "coupling" trend that cuts sharply against the push for decoupling, but that also has inherent limits given China's economic model. Written w @donweinland

A short thread... (1/)
economist.com/finance-and-ec… Starting point is a simple but striking fact: the remarkable growth of China's markets. Stockmarket has gone from 2% of global market cap in 2000 to 17% now; bond market from 1% of global bonds outstanding to 15% now. (2/)

A slightly wonky thread about China's digital currency. There's lots of focus on how it'll let the government monitor all transactions in real time. But it's easy to overstate what that means--because of both limits on the digital currency & existing surveillance abilities. (1/x) Start with the key point: China has been clear that the digital yuan will only replace M0 (physical cash). That matters because almost all digital payments today involve the remainder of M1 (demand deposits at banks). That segment of money supply is much, much bigger. (2/x)

The Shaolin monastery abbot has long appeared in headlines as the "CEO monk". Who could resist it? On his watch Shaolin has made films and IPO plans. But I spent time there & came away with a v different conclusion.

A long-ish read & short thread (1/x) economist.com/christmas-spec… Founded 1,500 years ago, Shaolin is the cradle of both kung fu and Zen Buddhism. Thanks not least to Wu-Tang Clan, it is one of the best-known Buddhist monasteries in the world. All that has made it a huge tourist attraction. (2/x)

This week I look at China's Belt & Road lending. One common criticism is that China is trapping weaker countries in debt so as to gain leverage over them. That misses the point: the real danger is ineptitude and arrogance, not a grand evil plan. (1/) economist.com/china/2019/04/… The "debt trap" narrative doesn't hold up to scrutiny. Very hard for China to grab assets overseas when governments default. If it pushes too hard it stokes antipathy. So, like other creditors, it often ends up relieving debts: more than 80 times since 2000. (2/)

In the eternal debate about the validity of China's economic data, this is an interesting new development. For years the sum of provincial GDP exceeded national GDP by a big margin--indicative of falsification. But look at the newest data: the gap was nearly gone last year. (1/) To make that clearer, here's the GDP gap in percentage terms. From 2005-2017, the sum of provincial GDP was, on average, more than 5% bigger than China's national GDP. Last year, it was just 1.6% bigger. (2/)

1. This is a good piece, and it's a fair bet that China will, eventually, be the world's biggest economy at market exchange rates. But I'd raise two quibbles. First, as others have noted, it seems more likely that the yuan will weaken if/when China lowers capital controls....

https://twitter.com/Noahpinion/status/1075089001252499456

2. The magnitude of the resulting net capital outflows and where the exchange rate then settles are anyone's guess. The IMF took a stab in 2013; it estimated that net outflows could be as much as 18% of Chinese GDP.
imf.org/en/Publication…

Thread for China fintwit on PBOC. Latest I'm hearing is that Liu He will not be the next central bank governor. Formal requirements of the role, especially protocol of regular international meetings, would be too much for his very crowded agenda as vice premier for economy. Who might succeed Zhou? Most talk still focuses on Guo Shuqing or Jiang Chaoliang as frontrunners. But Yi Gang is, I'm told, now in frame. He was previously a dark-horse: not full member of CCP central committee and, many assumed, limited by extensive international experience.