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...

1/14
Joe Nocera's piece on the backlash against our current form of globalization properly credits Dani Rodrik with being the first serious economist, and still the most important, to question the "quasi-theological" beliefs of neoliberal globalists.

thefp.com/p/the-intellec… 2/14
"Why were we so quick", Nocera asks, "to label anyone who even flirted with the idea that maybe the U.S. should be protecting its industrial base, just as other countries did, as a Pat Buchanan-like fool?"

1/7
“We are now going from a predictable trade regime to what is going to be a new equilibrium,” IMF Managing Director Kristalina Georgieva said. “The way from here to there, very uncertain.”
via @businessbloomberg.com/news/articles/… 2/7
I think this is the right way to understand what we are going through. Trade disruption did not start in 2018. In my 2013 book I argued that given huge and growing trade imbalances, the world was headed inevitably towards trade conflict.

1/8
Andrés Velasco argues that the US benefits from the exorbitant privilege of USD dominance but while he acknowledges concerns that a strong dollar makes American industry uncompetitive, he dismisses this concern as irrelevant.

project-syndicate.org/commentary/glo… 2/8
Instead, he gives the standard two reasons why the US benefits. First he notes that foreigners hold US dollars as a form of savings. The Federal Reserve, he claims, estimates that foreigners hold more than $1 trillion, or 45% of the total currency in circulation.

1/4
Bloomberg argues that "President Xi Jinping’s government is showing signs of increased sophistication when it comes to geo-economic strategy" in its dealings with the EU, and this is probably true.

via @economicsbloomberg.com/news/newslette… 2/4
But it may miss the point. This really isn't about better manners and friendlier gestures. The problem is that China's growth strategy is built around growing its share of global manufacturing, which requires huge...

1/6
As always, the idea that countries like Japan can use their massive holdings of US Treasuries as "leverage" in trade talks is a fantasy. For decades we have heard similar warnings from other countries, and yet no one ever uses this leverage.

via @ftft.com/content/912f86… 2/6
This suggests that either participants in global trade conflicts are much nicer than we thought, or that countries with huge amounts of US Treasury bonds don't have the leverage they think they do.

1/14
This article by Tim Harford is useful because it shows some of the partial thinking that often distorts discussions about trade. One area of confusion is when he discusses how comparative advantage works.

via @ftft.com/content/21a78e… 2/14
As he discusses the arithmetic of comparative advantage, he fails to emphasize that it is able to maximize total production only because each side exports the goods and services in which it has a comparative production advantage in order to import those in which it doesn't.

1/8
Good Keith Bradsher article on the extent of automation in the car industry: "China’s secret weapon in the trade war is an army of factory robots, powered by artificial intelligence, that have revolutionized manufacturing."

nytimes.com/2025/04/23/bus… 2/8
"As a result," he continues, "China’s factories will be able to keep the price of many of its exports lower, giving it an advantage in fighting the trade war."

But it is more complicated than that. Automation increases the productivity of workers.