1/8
Robert Skidelsky, who has written great books on Keynes' life and work, wrote (with Vijay Joshi) a really good essay—way back in 2010—on the problems of unbalanced trade, and why Keynes' bancor proposal at Bretton Woods made so much sense.
@RSkidelsky
robertskidelsky.com/2010/06/23/key… 2/8
As the revival of interest in Keynes' bancor proposal gathers pace, it is worth pointing out the similarities to his proposal and to more recent proposals in the US and elsewhere that deficit countries place a kind of Tobin tax on all capital inflows.

1/6
Reuters: "Chinese government advisers are stepping up calls to make the household sector's contribution to broader economic growth a top priority at Beijing's upcoming five-year policy plan."

reuters.com/business/finan… 2/6
Reuters continues: "Household consumption currently accounts for 40% of gross domestic product - some advisers propose China should aim for 50% over the next two five-year cycles."

1/6
Good Caixin article on developer debt resolution: "As China’s real estate slump drags on with no recovery in sight, distressed developers are shifting toward more aggressive debt restructuring for survival, forcing creditors to swallow deep losses."

caixinglobal.com/2025-07-07/cov… 2/6
"For three years," Caixin continues, "developers relied on an “extend and pretend” approach, rolling over debt in hopes of a market rebound. But home sales have collapsed, worsening property companies’ finances."

1/12
A Tsinghua-related think tanks argues that "China should issue 30 trillion yuan in treasury bonds to swap local governments’ hidden liabilities to re-energise growth momentum and cut off financial risks at their root."
via @scmpnewssc.mp/gz8bj?utm_sour… 2/12
This would help in two ways, according to the report. It would transfer debt from local government balance sheets to the central government balance sheet, giving them more breathing space to prop up the economy, and it would reduce interest payments.

1/8
A China Finance 40 Forum research piece by Yu Fei and Guo Kai argues that when adjusted for purchasing power and for volumes, Chinese consumption is much higher than the current consensus.
pekingnology.com/p/chinas-consu… 2/8
They are probably right, although I would caution that using purchasing power adjustments in a system in which producer prices are highly subsidized by households is likely to substantially overstate the real extent of the purchasing power adjustment.

1/6
A decision by China to offer more debt relief could be a “game changer for the poor and the system,” said Kevin Gallagher, the director of the Boston University Global Development Policy Center. “It’s really in China’s strategic interest to do that.”

nytimes.com/2025/07/01/bus… 2/6
Ironically, debt relief is also in the economic interest of creditor countries, especially if, as in the case of China, the economy is highly dependent on export surpluses.

That's because capital flows are just the reverse of trade flows.

1/8
The euro is up 14% against the dollar this year, as well as against the yuan (11%) and the yen (4%), driven by financial inflows rather than by economic fundamentals (i.e. higher relative productivity grown).

bloomberg.com/news/articles/… 2/8
If sustained, it will almost certainly have an adverse impact on EU manufacturing. In that case ECB rate cuts may keep unemployment from rising (by boosting domestic consumption), but they won't prevent the EU economy from shifting out of manufacturing towards services.

1/4
I just finished Martin Daunton's excellent survey and analysis of the last 100 years of globalization. There is an enormous amount of material here (nearly 900 pages) and it may not be an easy read for those who aren't already very familiar with much of this history. 2/4
But for those who are, or who want to be, it's well worth the effort. While the book is ostensibly about the process of globalization, and the role of government and government institutions in that process, especially in pivotal periods during the 1930-40s, the 1970s and...

1/4
Good John Authers article on business profits in the US: "After-tax profits account for an unprecedented 10.7% of gross domestic product, when in the last 50 years of the 20th century, they never exceeded 8%."
@johnauthers_
bloomberg.com/opinion/articl… 2/4
"The only time approaching their current share of the economy was in 1929 on the eve of the Great Crash. If the nation is to deal with inequality, money must be redistributed from somewhere; corporate profits are an obvious source of funds."

1/4
Caixin: "China is in dire need of more domestic consumption as global uncertainties hamper external demand. Key to this is increasing incomes, a Chinese economics professor said at the Summer Davos Forum in Tianjin on Thursday."

caixinglobal.com/2025-06-26/inc… 2/4
It's good that there is finally a consensus that low consumption is China's most serious economic problem, and the main cause of its other problems (soaring debt, deflation, overinvestment in infrastructure and manufacturing, over-reliance on a rising trade surplus).

1/15
Kenneth Rogoff says: "There is, for example, a terrific chapter in which Ray Dalio brutally critiques Japanese policymakers for failing to force debt writedowns after the country’s early 1990s financial crisis.'

via @ftft.com/content/e1b99a… 2/15
"Instead," he continues, "they allowed debt overhang to hamstring the financial system and sap two decades of growth."

I haven't read Dalio's book, but this is an extremely important point, and one that Beijing should note.

1/6
FT: "The value of Chinese exports to Europe in May climbed 12 per cent from a year earlier, with shipments to Germany up 22 per cent. Exports to south-east Asian countries rose 15 per cent."

ft.com/content/2bd9cc… 2/6
The world is already complaining about the disruptions caused by this flood of Chinese exports away from the US to the rest of the world, especially to Europe. But this so far has been the easy part of the global trade adjustment. It will get much worse.

1/7
SCMP: "Hunan has become the first province in China to use the proceeds of special-purpose bonds to guarantee government payments to...
scmp.com/economy/china-… 2/7
enterprises, with 20 billion yuan allocated for this year. This marks the first time the bonds – typically earmarked for revenue-generating construction projects – will be used to cover government arrears."

1/7
This ECB report says that what constrains EU investment is not scarce capital but rather "weakness in demand": "Net responses indicate expectations of near stagnation in euro area business investment over the next three years, but increasing investment outside the...

https://twitter.com/NicolasGoetzman/status/1935996876966281559

2/7
outside the euro area, especially in non-EU advanced economies and emerging markets."

I'm sure they're right, but consider what would happen if, as Christine Lagarde and other EU bankers hope, global investors were to begin acquiring EU debt as they shift out of US debt.

1/14
This article is a very good illustration of how, in a hyperglobalized world, countries that choose to control their domestic economies—which, among other things, means controlling their capital and trade accounts—can impose...
reuters.com/business/finan… 2/14
their domestic imbalances on those of their trade partners that have chosen to accept less control over their capital and trade accounts. In that sense the former absorb (in reverse) the industrial policies of the latter.
carnegieendowment.org/china-financia…

1/8
Pan Gongsheng is right to warn of the dangers to the global economy posed by fiscal and regulatory problems in the country issuing the world’s main currency, but the two ways for China to protect itself from running those risks are pretty obvious.
nytimes.com/2025/06/18/bus… 2/8
One way would be to rebalance domestic demand by increasing the share of GDP that is directed to China's household sector. In that case China's trade surplus would decline, and China would no longer need to acquire huge amounts of US assets to balance weak domestic demand.

1/6
Martin Wolf's “pluto-populism”: the rich receive most of the goodies; the poor become poorer; and the fiscal deficit stays huge.

The "supply-side" argument in favor of income inequality is that because the rich save more of their income than do...
ft.com/content/31f40b… 2/6
ordinary people, who consume more of their income, a rise in income inequality pushes up total savings, which in turn pushes up investment, which in turn pushes up economic growth, whose benefits then "trickle down" to the poor, leaving everyone better off.

1/7
Caixin: "Once limited to funding new infrastructure projects, local government special bonds are increasingly being used to supplement local government budgets, repay overdue private contractors, and even to support struggling legacy PPP projects."
caixinglobal.com/2025-06-18/chi… 2/7
According to Caixin, this shift in the use of special bonds "signals a growing recognition that China’s legacy public-private partnership model — once a darling of infrastructure financing — has become a fiscal burden as local governments fall behind on payments."

1/4
Yicai: "Many of China’s small and medium-sized banks can no longer afford to offer interest rates that are higher than the big state-owned lenders, a strategy they used to adopt to attract more deposits."

yicaiglobal.com/news/smaller-c… 2/4
Instead, Yicai continues, "they are slashing yields to below that of the big banks as they focus on staying afloat." The article goes on to say that "many of these banks are no longer focused on growing and are instead focused on surviving."

1/5
According to Xinhua, "sales of household appliances, audio-visual equipment, communication devices, cultural and office supplies and furniture surged by as much as 53 percent year on year in May, contributing 1.9 percentage points to the increase."
english.news.cn/20250616/fe31b… 2/5
This suggests that the 6.4% year-on-year jump in retail sales was led by trade-in goods. In March Beijing announced a RMB 300 billion voucher program to support trade-ins, equal to roughly 0.2% of China's expected GDP in 2025.

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.