This is a great quote from a Chinese official, who’s offering the West a lecture in trade theory and competitive advantage. The trouble is, as you might guess, it’s totally blowing smoke to deflect criticism 1/5

https://twitter.com/jchengwsj/status/1785519766351851659

If you want to frame this all in comp advantage, look only to Adam Smith, arch free trade guy, who was well aware of the virtues of trade. He also despised mercantilism viscerally, if countries earning exp surpluses didn’t use their comp advantage to also then boost imports 2/5

For 1st time in almost 30 years, China’s GDP in $ fell in 2023 to about $17.5trn, while U.S. gdp rise 6% to about $27trn. The gap widened by about $2trn. And China’s share of world GDP slipped to just under 17%. How meaningful is this? 1/4 To the extent that the yuan dropped sharply, not very. Exch rates jump around all the time. But… in yuan terms, nominal GDP rose barely more than 4.5%, and this is more set than surprise, reflecting weak demand and incipient deflationary pressures. 2/4

What's in store for China this year, and beyond? In this piece, I look at several of the things that have combined and coalesced to create China's systemic headwinds 1/6 | George Magnus theguardian.com/business/2024/… It's against this backdrop that Xi's China is said to be treading a tightrope between security and the economy. This isn't wrong, but real issue is how and if to reform the economic development model so that this choice doesn't have to be made. The focus then is on policy. 2/6

In this piece, I wanted to shine a light on China’s >21% youth unemployment rate because it’s economically structural, socially corrosive and curious for a rapidly ageing nation 1/4 China cannot allow jobless young to ‘lie flat’ via @FT
on.ft.com/3KaMJl3 The ‘lie flat’, and ‘let it rot’ movements and the tendency of young to live at home and be paid by patents for work are all indicative of degrees of pessimism about jobs, expectations and social mobility. But overlaid is hysteresis risk, which is esp awful for the young 2/4

‘Turn that frown upside down’ says @FTAlphaville as they kindly publish my De-Dollarisation rebuttal. Some of this takes issue with a recent paper by Stephen Jen which FTA covered earlier this week. Some is more general 1/3 Dollar :-) via @FT
on.ft.com/41qO5ip Big shout to @Brad_Setser and @sobel_mark who are must read thinkers on this, incl on Twitter. The assertion that central banks were big sellers of USD reserves last year, more than the IMF reports, doesn’t pass muster and is anyway accounted for by bond valuation changes 2/4

Current FA with good pieces on eg India, Asia, Africa, and a gr8 front cover tease ‘The West, the Rest and the new Global Disorder’. Well noted, cos 4 some of the biggest protagonists, China, Russia, Iran, multipolar is a polite word for shaping the world to suit autocracy 1/4 One of the essays is The Myth of Multipolarity. Authors acknowledge US/USSR bipolarity -> unipolar US world, but now at best bipolar w/ China,but even then not quite. However, US hegemonic position clearly less and it’s behaviour has to recognise that 2/4 foreignaffairs.com/united-states/…

We have our own bank regulatory mess but don’t forget China has its own. The new regulator and its political overlords make China’s system even more very centralised, politicised, and Minsky-ish 1/3 The risks of China’s regulatory shake-up via @FT
on.ft.com/3ZqFYjY While a new state regulator will absorb existing ones, the PBoC will be weakened as its Federal type regional offices become provincial political control centres, and some of it brief is taken over. 2/4

I was a big fan of Fareed’s interview of @MrKRudd recently. But this is arrant nonsense, and poorly informed. The lack of understanding of int’l monetary system is stunning. See @michaelxpettis @RobinBrooksIIF for example

https://twitter.com/fareedzakaria/status/1640058728752840707

First look at the $ narrow trade weighted index DXY. It’s been soft but still a lot higher than 2-3 years ago 2/6

This is an interesting theme that merits a bit of delving, as I shall do now. There are close similarities, several differences, same ending? 1/10 China’s economy is looking at a new wave of Japanification ft.com/content/ee9ef5… Japan offers a useful, if inexact, template for modern China. Both feature a similar development model, systemic bop surpluses, property boom and bust, and a growth to debt transition. 2/10

This is an interesting set of recommendations from 6 prominent Chinese economists, that’s both hit and miss. Here’s a couple of thoughts 1/5

https://twitter.com/zichenwanghere/status/1599000126152118273

They think the gdp target should be set at 5% or higher next year. Well if you believe in the practice - which many economists don’t - then to be fair, it’s do-able beating in mind China’s 2020 and our own 2021 covid bounces. Esp as q4 this year will be another negative 2/5

China's Q2 GDP officially rose 0.4% y/y after 4.8% in Q1 with a June post lockdown rebound and some massaging of data. The q/q decline of 2.6% at least had the right sign, but the annual change was much more likely -1.5 to -2%. More details and implications in this thread 1/6 The numbers for June saw a double digit bounce in retail sales, as the economy re-opened, but output rose 3.6% and and there was a further modest rise in investment. There's little in these bounces that's sustainable and the property investment cycle looks awful still 2/6

Pretty impressive > 4% fall in yuan over last few weeks,which is a lot, given tight mgt range. Here are some thoughts about Yuan depreciation building on ⁦@FT⁩ story /1. Renminbi on course for steepest monthly fall as China’s economy slows via @FT
on.ft.com/3vOPlwZ First, look how chinas bop has evolved, esp net errors and omissions. This is a sort of catch/all in Chinas bop for unrecorded capital outflows. Normally, net outflows. 2015-16 surge had never quite disappeared except for covid 2020, and still pretty high. /2

Shanghai’s Covid lockdown is causing untold problems for China/beyond. Here is a story about the port and ship pile up going on which’ll take ages to work thru: /1 Supply-Chain: China Port Congestion Worsens as 477 Bulk Ships Waiting to Berth - Bloomberg bloomberg.com/news/articles/… At home, as @doumenzi says ‘Shanghai is the most visible of locked-down cities, but currently about half of China’s population is locked down, almost 90% of the most populous cities and most of its coastal highways are closed’. See forbes.com/sites/annestev… /2

When is a tactical retreat a structural problem? When it’s Xi Jinping dealing with Common Prosperity., now elbowed /1. China Sets Aside Push to Spread Wealth in Pivotal Year for Xi - The New York Times nytimes.com/2022/04/12/bus… This year, ‘stability’ is so important, the economy so enfeebled, and covid so problematic, that the national political campaign, Common Prosperity, entailing communal material and spiritual prosperity is in effect suspended. /2

Thoughts about China sitting atop a barbed wire Ukraine fence. I’ll say straight off Putin is prob not toxic enough yet for China not to see mileage for itself by supporting him. Quite the opp. If Putin were humiliated or deposed, Xi would be in trouble /1 nytimes.com/2022/03/18/wor… So this leads to the main issue in the Biden-Xi convo yesterday, whether China would react to US warnings of secondary sanctions. The China read of the meeting was predictably abrasive/defiant. This then begs the q if US/EU would take econ warfare v Russia to China too? /2

Can’t believe how many times we have to counter this flawed thinking that ppl have been spouting for so long. Short explainer here /1. How the Ukraine war could boost China’s global finance ambitions via @FT
on.ft.com/3sSgpLq To have a truly international currency, you have to allow foreigners to accumulate claims on you. There are only 2 ways of doing this. Run current account deficits in perpetuity, or open your capital account to free, outward movement. China will do neither /2

It’s out. Li Keqiang’s keynote opener to the twin sessions. It’s 37pp in English are more tedious to read than having root canal treatment but it’s an important doc. Key takeaways follow /1 Growth target is 5.5% which is going to need some pretty decent heavy lifting given the carry over trajectory of gdp growth is appreciably lower. The fiscal deficit target 2.8% GDP is of course a huge understatement of the gen gov fiscal balance but is a bit lower than 2021 /2

This week Chinese new year and Winter Olympics. But the econ grind goes on and Jan isn't off to a great start as you can see from todays release of Jan PMI's. Check out the ff charts, and look at the employment components especially 1/4 Here's the official PMI, just hovering above 50. Production and new orders have slipped away fro last quarter buoyancy, employment component still firmly <50. 2/4

One for ppl already in China's long grass - the IMF's Article IV rpt. Usual stuff, but as always, interesting IMF perspectives contrasted with views of Chinese govt. officials. Screenshot is IMF polite lingo on China's structural challenges 1/4
imf.org/-/media/Files/… They c 4.8% GDP growth in '22 and @ 5% pa thru '26 but this is almost the least interesting part of the rpt. They wont say so but nb the potential torpedo effect of either zero covid on the economy, maybe on more, of having to keep omicron suppressed, or of abandoning it 2/4

My China timeline is full of latest fertility and population data, and as far as I can tell only @michaelxpettis and I have tweeted on GDP. Far more important. Nothing new in the demographics data, honest. Nothing to see you hadn't seen before. Read on 1/7 reuters.com/markets/asia/c… With fertility below 1.3, which we knew from census and demographers last year, quite clear China's pop is peaking, and will start dropping. But while the effects are important, especially via working age pop and old age dependency, they're glacial and cumulative. 2/7

How China sees South China Sea. Different perspectives here from traditional N/S map. See China's fear of containment, Taiwan/Japan/Korea, Malacca Straits choke point, 2 island chains, contested islands Rykuku, Spratly, Paracel, US Pacific fleet and more.Imagine 9-dash line 1/4 As a pal of mine in HK says, China wants the SCS to be a Chinese lake, not a Chinese prison, and this E/W perspective helps to contextualise. But you can also see the US, Japan, Taiwan and Asian security perspectives better this way too., and why ... 2/4