1/17
I'm all in favor of myth-busting but this article seems to miss the point. To my knowledge, and contrary to Sharma's claim, no one has ever argued that the consumption share of China's GDP is low because consumption has grown slowly.
ft.com/content/bf1e87… 2/17
The argument has always been that consumption and household income have grown much more slowly than GDP because of a series of explicit and implicit transfers from households that subsidized growth in investment, especially investment in manufacturing and infrastructure.

1/4
Bloomberg: China’s new-home prices fell the most in seven months in May, with new-home prices dropping 0.22% from April, when they slid 0.12%. Values of used homes fell 0.5%, the sharpest decline in eight months.

bloomberg.com/news/articles/… 2/4
On Friday, Premier Li Qiang promised at a State Council meeting to stop the decline in house prices, probably in the hopes of boosting household confidence and, with it, household consumption. I am not sure this will be easy, especially away from the top-tier cities.

1/5
While the market seems to have focused more on the weaker-than-expected rise in industrial production, the important news today is that growth in consumption was much stronger than anyone expected, and the highest growth rate in well over a year.
english.news.cn/20250616/2b409… 2/5
Industrial output in China rose by 5.8%, which is lower than expected given Beijing’s intense focus on boosting production at all costs. Meanwhile retail sales were up an impressive 6.4%, the first time since early 2024 that it grew faster than industrial output.

1/5
China's aggregate financing in May rose 8.7% year on year, in line with expectations. It reached a total of RMB 426.16 trillion by the end of the month, or 308% of GDP, up from 303% at the end of 2024.
english.news.cn/20250613/1a07e… 2/5
Year to date, financing rose by RMB 18.63 trillion, equal to 34% of the period's GDP. If roughly RMB 4-5 trillion of this increase represents the rolling over of interest, this suggests that it takes around RMB 6-7 in new financing to generate each RMB 1 in GDP growth.

1/6
According to Bloomberg, Chinese government officials are going to great lengths to protect jobs even as worsening profitability across companies has reached the highest level in over two decades.
bloomberg.com/news/features/… 2/6
"The new reality has saddled China with the most loss-making industrial companies since 2001, the tail end of that earlier period of reform. Local leaders are rolling out tax breaks and subsidies for companies, in a bid to stave off job and revenue losses."

1/8
In a piece for Caixin, Wu Ge, chief economist at Changjiang Securities, writes: "The economic fallout from the real estate slump has been masked in part by strong overseas demand for Chinese goods."

caixinglobal.com/2025-05-29/com… 2/8
"If foreign demand takes a turn for the worse," he continues, "it will become clear just how important real estate is to stabilizing China’s economy."

He's right, and he makes a very important point.

1/7
Very good FT article on how China achieved its dominance in manufacturing, along with the cost both to China and to its trading partners: "Using a unique combination of industrial policy, subsidies and other state-support coupled with private sector...
ft.com/content/724431… 2/7
entrepreneurialism and ferocious competition in China’s vast market, the country was able to sharply increase the share of Chinese producers domestically and internationally in many of the sectors, in some cases matching or exceeding foreign competitors’ technology."

1/4
SCMP: "China has become the leading debt collector of developing countries, shifting from a net capital provider, “as bills coming due from its belt and road lending surge in the 2010s now far outstrip new loan disbursements”."

via @scmpnewssc.mp/gtrfe?utm_sour… 2/4
It may not seem so at first, but this has trade implications. Some analysts have argued that if the US is successful in reducing its trade deficit, China can manage the process by redirecting its exports to developing countries.

1/7
SCMP: "Xu Lin, who helped draft Beijing’s five-year plan for decades while an official at the National Development and Reform Commission, has called...
scmp.com/economy/china-… 2/7
for China’s annual growth target to be lowered for the next five years to 4%, factoring in the likelihood of a protracted rivalry with the United States and the need to solve deep-rooted structural problems in China."

1/12
This Liberty Street account of trade makes the same mistakes most mainstream American economists make when it comes to explaining the US trade deficit.

libertystreeteconomics.newyorkfed.org/2025/05/why-do… 2/12
Thomas Klitgaard notes, correctly, that by definition the US current account is equal to the excess of US investment over US savings.

But then he insists that causality can only run in one direction: from the internal account to the external account.

1/9
Martin Wolf says the world has three options in considering the future of the hegemonic role of the dollar. One is "continued domination by the dollar". Another is that some other currency, perhaps the euro or even the renminbi, replace it as hegemon.

ft.com/content/d96568… 2/9
And the third is "a world with two or three competing currencies, each dominant in different regions."

The first option means maintaining the existing system, with all it problems, but I suspect that this may be much easier said than done.

1/8
In what has become a pattern, China showed stronger-than-expected growth in industrial output in April and weaker-then-expected growth in retail sales. The former was up 6.1% while the latter was up 5.1%.english.news.cn/20250519/9d382… 2/8
This suggests that for all the talk, it is still proving very difficult for China to increase consumption in line with production, which is why China must continue to expand investment (with much of it directed into manufacturing) and run massive trade surpluses.

1/9
Bloomberg reports EU economy chief Valdis Dombrovskis as saying: “At this stage it’s important that China is showing some self restraint in terms of this...
bloomberg.com/news/articles/… 2/9
trade diversion, because if it will start flooding other markets, that would mean that we would also need to protect our market, our companies, our jobs.”

But what is "self restraint" in this context?

1/11
SCMP: "Beijing is doubling down on efforts to create a stronger domestic market, as it focuses on reducing China’s vulnerability to external tariff shocks. Premier Li Qiang said on Thursday that...
scmp.com/economy?module… 2/11
China would continue to anchor its development strategy in bolstering “domestic circulation” – a concept that refers to strengthening the country’s economic self-reliance by creating a robust, unified domestic market"

1/4
Total social finance grew in April by RMB 1.16 trillion, a little less than expected. Some analysts suggest that this is because of a weak economy, but it could also reflect higher-quality growth, i.e. one driven less by non-productive investment.
english.news.cn/20250514/ff688… 2/4
Overall debt numbers still remain very worrying. Total TSF grew by RMB 16.3 trillion in the first four months of 2025, which suggests that it required an increase in debt equal to 35% of GDP to boost nominal GDP growth by 4%. Of course debt increases in the first four...

1/10
There will be a rush to declare yesterday's trade agreement a total success or an abject failure, but its main consequence will be to partially reopen the trade conduits without changing underlying dynamics much.
caixinglobal.com/2025-05-12/chi… 2/10
The fact is that as long as China is unable to substantially raise the consumption share of GDP, reluctant to raise the investment share, and continues to pour support into production, it will have to continue running massive trade surpluses.

1/4
In a new piece published today, I argue that the reasons Keynes and other prominent economists opposed the unfettered flow of international capital are just as valid today as they were when he was alive.

commonplace.org/2025/05/12/why… 2/4
For every country, external and internal imbalances are always aligned, just as every country's eternal imbalance are always aligned with the imbalances of the rest of the world. Because—except in the starry-eyed world of "Econ 101"—international capital doesn't...

1/6
As one of Beijing's main policies to boost domestic consumption has been to force banks, since earlier this year, to increase their consumer lending, this very interesting investigative report in Caixin is especially timely.

caixinglobal.com/2025-05-09/in-… 2/6
"China’s personal lending market," Caixin writes, "is under mounting pressure. What began as a slow-burning concern in early 2024 has become an acute worry in 2025. Housing mortgages, consumer loans, credit card...

1/9
FT: "China’s exports growth showed resilience in April, defying expectations that the effects of a trade war with the US would start to bite."

There's that word "resilience" again. We'll see it a lot this year in reference to China's exports.

ft.com/content/fd98d3… 2/9
It's also the word the SCMP used, and several other newspapers. Since March I've argued that the word will be trotted out every month in relation to Chinese exports, mainly because unless the US is able to reduce its trade deficit sharply this...
scmp.com/economy/china-…

1/8
A translation (by Fred Gao) of a very interesting recent speech by Liu Shijin, a former Deputy Director of the Development Research Center of the State Council. Liu begins by acknowledging how astonishingly low China's consumption share of GDP is.

fredgao.com/p/liu-shijins-… 2/8
"I want to emphasize a concept here." Liu says. "China's insufficient consumption is not an acceptable deviation from international average levels, but a significant gap of 20 percentage points, which can be described as a "structural deviation.""

1/8
As always, a very interesting article by Martin Wolf. I think, however, that he underestimates how difficult it will be for China to raise domestic demand (I agree with Matthew Klein here).

via @ftft.com/content/49e38e… 2/8
There are two ways for China to raise domestic demand. One way, of course, is to increase domestic investment, although in an earlier piece Wolf noted that the fact that China invests 43% of GDP and is...