1/7
Interesting Caixin article: "China’s construction industry is reeling from a wave of defaults and financial turmoil as delayed payments and rising bad debts cascade through the sector."

caixinglobal.com/2024-09-27/in-… 2/7
The problems are especially severe for private construction firms, who are less likely to have access to credit than state-owned firms. This is another example of how soft-budget constrained parts of the economy are crowding out the hard-budget constrained.

1/9
Sometimes you just have to trust the arithmetic. Since March I have argued that Beijing had little choice but to engineer a large demand-side stimulus of at least RMB 1 trillion before the end of...

nytimes.com/2024/09/27/bus… 2/9
the year because – given trade and domestic investment constraints – more of the supply-side spending it had long favored wouldn’t allow it to achieve the 2024 GDP growth target.

1/7
Amy Kapczynski argues that "everywhere you look in Washington today, there are signs that industrial policy is back. The presidential election is a fight not over whether we will have industrial policy, but over what kind we should have."

democracyjournal.org/arguments/indu… 2/7
I would put it a little differently. Industrial policy has been especially powerful in driving the US economy in recent decades, but this industrial policy was mostly designed abroad. What's new is that the US is determined to regain control over how this policy is designed.

1/4
Bloomberg "China said it will give one-off cash handouts to people in extreme poverty before Tuesday, in a rare announcement of direct aid just a day after unveiling a sweeping program to stimulate the world’s second-largest economy."

via @marketsbloomberg.com/news/articles/… 2/4
These are just the kinds of fiscal transfers that will boost consumption spending in the short term. The problem is that the amounts are likely to be too small to matter and, more importantly, that these are one-off fiscal transfers that don't really address the underlying...

1/8
An interesting debate between Elizabeth Pancotti, Todd N. Tucker and Matthew Yglesias on the pros and cons of tariffs. The problem I have with most debates over tariffs is that they often proceed as if tariffs were…

democracyjournal.org/magazine/74/ar… 2/8
a unique (and often uniquely dangerous) form of trade policy. In fact tariffs are just like many other trade and industrial policies that operate through transfers from one sector of the economy (usually households) to another (usually manufacturers or other producers).

1/10
Good IMF blog that reminds us that trade imbalances are largely driven by domestic macro forces rather than by incremental price effects. It notes that China’s growing trade surpluses were driven by a rise in Chinese savings caused both by the...

imf.org/en/Blogs/Artic… 2/10
weak household income share of GDP and the rise in precautionary savings as property prices crashed and economic uncertainty rose, while US deficits are caused by fiscal policies that drove down US savings.

1/8
China' private secret is suffering. Among other things, "“China used to be the best VC destination in the world after the US,” says one Beijing-based executive, but “the industry has just died before our eyes. The entrepreneurial spirit is dead.”

ft.com/content/1e9e75… 2/8
The article goes on to note that "in 2018, at the height of VC investment, 51,302 start-ups were founded in China, according to data provider IT Judi. By 2023, that figure had collapsed to 1,202 and is on track to be even lower this year."

1/5
This is almost a textbook example of why most discussions of tariffs and inflation completely miss the point. The discussion assumes that a tariff raises the price of the tariffed product (of course it does) but has no other impact on the overall economy.

https://twitter.com/danneidle/status/1833791922281857398

2/5
The discussion assumes, among other things, that tariffs have no impact on tax collection or profits, when clearly they do. Much more importantly, it assumes tariffs have no impact on demand for non-tariffed goods or (most astonishingly) on total domestic production.

1/6
FT: "China is facing a wave of tariffs in developing economies aimed at countering its export boom, complicating Beijing’s quest to cultivate markets outside an increasingly hostile west."

This, of course, was totally expected.

via @ftft.com/content/1196fa… 2/6
Once the US decides it no longer wants to play the role of accommodating the huge demand deficiencies and expanding manufacturing sectors of China and other surplus countries, it’s obvious that the rest of the world cannot replace the US.

1/9
We sometimes hear analysts propose that the reason China will not replicate Japan's difficult adjustment over the past three decades, even though it suffers from similar but much deeper imbalances and an even greater reliance on a surging debt...

nytimes.com/2024/09/06/bus… 2/9
burden to generate economic activity, is that (unlike Japan in the 1980s), Beijing's focus on promoting advanced technology will eventually set off such a surge in productivity that this surge in productivity will fully absorb the adjustments costs.

carnegieendowment.org/posts/2024/08/…

1/4
"“These are difficult times for globalization,” said Ralph Ossa, the WTO’s chief economist. “What is really important to do is change the narrative.”"

This is the kind of argument that makes it difficult to take the WTO position on trade very seriously.

wsj.com/economy/global… 2/4
What needs to be changed is not the "narrative". The problem is that for decades the global trading system has been characterized by deep trade imbalances which are, in turn, driven by industrial and trade policies that seek to make the economies that implement them...

1/5
While I agree with Eric Zolt that the US urgently needs tax reform, and probably even more urgently than it needs trade reform, I think he is very confused about trade issues, and dismisses them far too glibly.

via @ftft.com/content/419048… 2/5
Part of the reason is that he, like too many Americans, is unable to distinguish between trade issues and China issues, and so he thinks that because the decline in US manufacturing predates the rise of China, the former can have nothing to do with problems in global trade.

1/6
Shekhar Aiyar is worried that the global environment has become less friendly for developing countries "now that Western countries are turning increasingly protectionist."

This makes little sense. Global trade has been protectionist for decades.

nytimes.com/2024/08/30/opi… 2/6
Some countries, both Western and developing, have long relied for growth on aggressive beggar-thy-neighbor trade and industrial policies. These policies reduce global demand (as Keynes explained in the 1940s), distorting global trade and sharply reducing the global benefits of comparative advantage.

1/9
This is very important stuff. According to Reuters, "China's central bank wants to shift its policy framework to target the cost of credit rather than its size, but liquidity risks and uncooperative markets are making it difficult to transition...

reuters.com/world/china/ch… 2/9
the economy away from state-directed bank lending. In recent months, the PBOC has taken steps towards creating a more market-driven interest rate curve, and it is expected to make further changes so that credit demand is more responsive to monetary policy moves."

1/7
Interesting article. According to Reuters, local governments are under increasing pressure to rein in wasteful infrastructure spending: "A source in the Beijing municipal...
reuters.com/markets/asia/i… 2/7
government said 'in the past, it was easier to apply for funds. When anyone applied for projects they would ask for as much as possible.' Now 'we need to figure out why the project must be done. They say every project is a cost.'"

1/9
Very good WSJ article, and this is the key point: "The bedrock principle behind trade is comparative advantage: countries specialize in what they do best and then export it in exchange for imports."

@greg_ip
via WSJwsj.com/economy/global… 2/9
When economies invest or consume an amount equal to what they produce, they and their trade partners maximize production in order to satisfy their own or each other's needs.

When, instead, economies try to produce more by repressing consumption, and so produce more than...

1/8
As far as I know, Nerys, there haven't been any attempts (or large-scale attempts, anyway) to sell assets except land, and of course since 2021 buyers for land have been scarce. There are however plenty of buyers for other assets, depending on the assets.

https://twitter.com/nerysinchina/status/1829040570947207297

2/8
It isn't hard, for example, to sell hotels, restaurants, shareholdings in private companies, convention centers, municipal facilities, liquor companies, apartment and office buildings, cement and steel factories, car companies, banks, fund managers, mines, and so on.

1/9
This could be important if it spreads. According to Caixing, "Chinese local governments are desperately seeking new revenue streams by leveraging government-owned assets to address mounting debt pressures and dwindling coffers."

caixinglobal.com/2024-08-29/chi… 2/9
The article goes on to say that certain local-government districts are looking for ways to "revitalize and monetize assets" while stepping up asset disposals to pay off debt. One district has even created the slogan “Sell Everything to Save the Day”.

1/4
NYT: "In Africa, a continent pulsating with potential and peril, debt overshadows nearly everything that happens. [Debt repayment] leaves less money for investments that could create jobs for what is the youngest, fastest-growing population on...

nytimes.com/2024/08/28/bus… 2/4
the planet; less money to manage potential pandemics like Covid or mpox; less money to feed, house and educate people; less money to combat the devastating effects of climate change, which threaten to make swaths of land uninhabitable and force people to migrate."

1/4
Bloomberg: "No other European country has an agency quite like Bpifrance: a for-profit, state-owned merchant bank with a mandate to foster national champions."

France is using Bpifrance to implement a production-oriented industrial policy.

bloomberg.com/news/articles/… 2/4
This makes sense. Countries that explicitly support their manufacturing sectors have certainly seen the manufacturing share of their economies grow relative to that of their trade partners. What's more, in a hyper-globalized world, countries with...

phenomenalworld.org/analysis/trade…

1/9
It is indeed a great explanation, but only if Argentina exists in the world of Econ 101, where capital is scarce and always flows to its most productive use, foreign and domestic governments are unable to distort the economy, and trade always balances...
ht @jorge_guajardo

https://twitter.com/DrEliDavid/status/1826938987329561062

2/9
according to comparative advantage. That's when cheaper textiles from Pakistan would allow Argentina to relocate workers into sectors in which it has a comparative advantage. In that world, both Argentina and Pakistan are better off because Argentina can sell to Pakistan.