1/4
Things may indeed look bad in Europe, but we shouldn't overdo the pessimism. Europe must make a number of important changes, and that has long been understood. The "problem" with Europe may be precisely that is now forced to make these changes.

nytimes.com/2024/12/22/opi… 2/4
As in the 1930s, or the 1970s, the global economy today is going through major shifts, and every country must adjust to these shifts. The good news is that, like every robust democracy, Europe is adjusting, even if that means a breakdown of existing institutions.

1/6
This may be a tad optimistic: "Just as a single decisive move can energize a chess game, China's latest initiative to address local government debt risks marks a crucial step in revitalizing the growth prospects."

chinadaily.com.cn/a/202412/20/WS… 2/6
The article argues that the debt-relief package announced in November will transform the growth prospects of the economy by allowing local governments the fiscal space "to sustain a steady and robust recovery."

1/8
Yicai: "Non-tax income has soared since the start of the year, mainly because local governments made efforts to dispose of idle assets and increase the vitality of resources and assets. However, according to data from...

yicaiglobal.com/news/china-to-… 2/8
some provinces, income from fines and confiscations in these regions also maintained double-digit growth."

This article is interesting for at least two reasons. The first is its reference to "abnormality and law enforcement actions".

1/7
China Daily says that now that last week's "Central Economic Work Conference identified the 'vigorous promotion of consumption' as the top priority for 2025", Beijing will "roll out an array of targeted measures to...

chinadaily.com.cn/a/202412/20/WS… 2/7
boost consumption", mainly, it seems, expanding the scope and coverage of the the "trade-in" programs, in which Chinese households are given subsidies to trade in their home appliances, home furnishings and automobiles for new ones.

1/9
Lizzi Lee notes that requiring technology transfers and local production in exchange for market access is a way to protect strategically important industries.

She's right, but this only addresses one of the two very different trade-related problems.

ft.com/content/4b1b72… 2/9
The first problem is that in a globalized world, economies with open capital and trade accounts automatically import their industrial policies as the obverse of the industrial policies of their more aggressively interventionist trade partners.

carnegieendowment.org/china-financia…

1/9
David Fishman notes that "Chinese total exports to "the West" are now smaller than its exports to "not the West", but we have to be careful how we read that. What matters to Chinese surpluses is where the corresponding deficits are located.

https://twitter.com/pretentiouswhat/status/1868798013256454277

2/9
That's because trade clears systemically, not bilaterally. If China runs surpluses with "not the West", there are only two ways to balance these surpluses. One way is that "not the West" in turn runs surpluses with "the West" in order to pay for net Chinese imports.

1/8
Shuli Ren: "Boosting domestic demand is now seen as the only viable way to offset Trump’s tariff blow to exports, the one bright spot in an otherwise anemic economy. In an extreme scenario, if trade tensions...

via @opinionbloomberg.com/opinion/articl… 2/8
escalate and wipe out all Chinese exports to the US, which currently account for 3% of gross domestic product, Beijing will have no choice but to get people to spend to meet its growth ambition."

1/9
China's aggregate financing rose by RMB 2.34 trillion in November, up 7.8% year on year. While some analysts note than this is a record low rate of growth, it must be compared with nominal GDP growth, which is also at a record low rate.
english.news.cn/20241213/00da0… 2/9
The country's debt burden continues to rise rapidly, in other words. By the end of November, the outstanding amount of aggregate financing was RMB 405.6 trillion, or approximately 309% of China's annual GDP. At the end of last year it amounted to 300% of China's GDP.

1/10
Important article by Greg Jensen: "Modern mercantilism today is built on four tenets: First, the state has a large role in orchestrating the economy to increase national wealth and strength. Second, trade balances are...

wsj.com/opinion/we-are… 2/10
an important determinant of national wealth and strength, and trade deficits should be avoided. Third, industrial policy is used to promote self-reliance and defense. Fourth, national corporate champions are protected."

1/9
Many of the responses to my recent FT article claim that it ignores the possibility of retaliation, but this claim just reinforces my main point, which is that mainstream discussions about trade are incredibly confused.

ft.com/content/3c95a4… 2/9
I agree that in a well-functioning global environment, in which each country trades according to comparative advantage, and the purpose of exports is to maximize imports, a unilateral decision by the US to impose tariffs would reduce global production.

1/8
There are many reasons to be concerned about Trump's trade policies, but to worry that Trump will usher in a new era of protectionism either reflects enormous confusion about trade or assumes that only the US has agency.

via @ftft.com/content/66d9bb… 2/8
In either case it makes little sense. As we used to know, beggar-thy-neighbor trade policies work by boosting competitiveness at the expense of domestic demand, and running trade surpluses to force the costs of weak domestic demand onto trade partners.

1/4
China's November trade data were once again disappointing. Exports were up a brisk 6.7% year on year, below expectations of 9%, but the real problem, of course, is that imports were down once again, this time by 3.9%.

english.news.cn/20241210/77300… 2/4
It's great that economists and policymakers in Beijing are all discussing how important stronger consumption is to China's economy, but this still isn't showing up anywhere, not in the inflation data and certainly not in the trade data.

1/6
Either the consensus has become nearly unanimous, or the media are freezing out alternative views, but what some of us were arguing over a decade ago seems to have taken a firm hold of much of the economic reform discussion.

yicaiglobal.com/news/china-nee… 2/6
From Yicai: "China must urgently build a comprehensive policy system to expand domestic demand, addressing external economic challenges and diminishing returns on its traditional investment-driven growth model, according to Teng Tai, head of a private think tank."

1/6
A major article in both Xinhua and People's Daily discusses what is most likely to be the focus of the December work conference. Not surprisingly, the need to boost consumption seems to be at its center.

english.news.cn/20241209/1de15… 2/6
Much of the enthusiasm continues to center on the trade-in program, which offers replacement subsidies on automobiles and home appliances.

Unfortunately they overstate the benefits by claiming the total purchases of subsidized goods as increases in total consumption.

1/9
FT: "China’s leaders have changed their stance on monetary policy to “moderately loose” from “prudent” for the first time in 14 years, sending asset prices higher as investors bet policymakers were taking the economic situation more seriously."
ft.com/content/7a9c96… 2/9
There may be a lot of excitement about this seeming change in policy, but given how PBoC policy has accommodated one of the fastest debt increases in history, unlike the PBoC I would not have described Chinese monetary policy over the past 10-15 years as "prudent".

1/5
We couldn’t have asked for much worse inflation data for November. CPI inflation was up a very disappointing 0.2% year on year, versus a 0.3% rise in October and well under expectations of a 0.5% rise.
english.news.cn/20241209/3ca93… 2/5
Year to date, CPI inflation was up 0.3% from the first 11 months of 2023. Far more important, in my view, was November's 0.6% decline in month-on-month CPI inflation, the worst we’ve seen since March.

1/9
People's Daily cautions against the danger of "worshipping" faster growth. According to Bloomberg, "Chinese state media warned against blindly chasing faster growth and signaled more focus on boosting consumption."

bloomberg.com/news/articles/… 2/9
People's Daily notes that "If we do not get rid of the ‘worship of speed’ mindset and are addicted to building more projects, even if we can temporarily lift the pace of the growth, we will be taking an overdraft from the future."

1/5
Alan Beattie is right: import tariffs are not a panacea, especially bilateral import tariffs, which are almost useless. Tariffs are simply a form (one of many) of industrial policy that works through income transfers.
ft.com/content/c5b448… 2/5
That means they mainly affect the specific sectors which are taxed and subsidized, shifting the relationship between consumption and production in ways that can boost total production in some cases and reduce total consumption in others.

1/4
This WSJ article lays out what is in effect an intractable problem of simple arithmetic. China represents 17% of global GDP and 30% of global manufacturing. Its current growth model requires that it increases its share further.

via @WSJwsj.com/world/china/ch… 2/4
The US represents 23% of global GDP and only 17% of global manufacturing. Like other advanced economies with persistent deficits, its share of global manufacturing has declined. That's why it is taking steps to reverse this decline and raise its manufacturing share of GDP.

1/7
Very good piece by Richard Koo on the relationship between foreign inflows, US trade deficits and the weakness of US manufacturing: "This strength in the dollar began with major changes in the participants of...
@INETeconomics
#inetineteconomics.org/perspectives/b… 2/7
the foreign exchange market resulting from the developed economies’ decision to allow the liberalization of cross-border capital flows starting in 1980. Prior to that, the main participants in this market were importers and exporters.

1/4
Interesting post. The chief economist of Bank of China says that it was China's focus on production over consumption, and the aggressive trade and industrial policies implemented by Beijing, that resulted in China's overwhelming manufacturing competitiveness.

https://twitter.com/CBankingEditor/status/1863069442252652947

2/4
He says China should effectively double down on the policies that got it there.

With the opposite view in the US, it probably shouldn't surprise that the US problem is that it produces far less than it consumes, while China's is that it consumes far less than it produces.