1/4
According to Reuters, domestic car sales in China were down 21.6% year on year in April, even as car exports surged 80.2%. Everyone knows that domestic demand remains incredibly sluggish in China, but such sharp drops in domestic car...
reuters.com/business/autos… 2/4
sales in the past seven months should still seem surprising, until we remember that much of the consumer-voucher programs of earlier years were directed at car purchases. This meant that Chinese households who had planned to buy cars anyway just accelerated their purchases.

1/7
Bloomberg: "China pledged to step up efforts to defuse local government debt risk while supporting growth, as the State Council called for stronger policy execution in a challenging global environment."
bloomberg.com/news/articles/… 2/7
Every few months for the past 4-5 years we have seen similar promises to get debt under control while maintaining high GDP growth rates, and every time I have the same response: China cannot do both, because the determination to maintain high GDP growth rates is...

1/6
SCMP: "The EU’s top trade official used her departing appearance at the EU Parliament to pour cold water on the prospect of an investment deal with China, hinting that new weapons for dealing with Chinese “macroeconomic imbalances” could be on the way."
sc.mp/6ku4s?utm_sour… 2/6
Sabine Weyand said: “I’m not talking about a cyclical imbalance in trade, I’m talking about structural macroeconomic imbalances or what the IMF calls macro-industrial policy, which really suppresses domestic demand and creates durable imbalances in the relationship.”

1/4
Caixin: "The results underscore how China’s leading bad-debt managers are leaning on accounting gains linked to state-backed bank stakes to offset the effects of the prolonged property slump and broader economic slowdown."
caixinglobal.com/2026-05-06/chi… 2/4
Caixin produces yet another very good article, this time about the surging losses at the AMC's (China's "bad banks", created in the 2000s to offload bad loans at the Big Four banks), and how these losses have been covered by what is an old accounting trick.

1/9
Brilliant article by Martin Wolf on global imbalances. Wolf is one of the few economists who have an intuitive sense of the global economy as an economic system, which means he is also one of the few who understands how global imbalances work.
ft.com/content/72ab51… 2/9
He notes in this piece that "the domestic counterpart of its external deficits today is borrowing by the US government."

Many economists find this almost impossible to understand. They do not see how net capital inflows can contribute to rising US debt.

1/4
Brad Setser explains why China didn’t truly de-dollarize—it just shifted its dollar holdings from official reserves at SAFE to less transparent state entities like banks and investment funds.
@Brad_Setser
cfr.org/articles/china… 2/4
But his explanations will probably continue to be ignored in favor of much more exciting stories about the collapse of USD as a reserve currency. That's because as long as the PBoC shifts out of its direct holdings of US Treasuries (mainly, it seems, into indirect...

1/9
Interesting SCMP article: "China’s top market regulator is intensifying its crackdown on debt-laden “zombie companies” – rolling out a pilot programme in seven economic hubs to facilitate the forced exit of unprofitable firms."
sc.mp/q2aq0?utm_sour… 2/9
Developing a robust bankruptcy framework in China is among the most important steps Beijing can take to reduce the role of non-productive investment in driving the economy. Hard budget constraints are what force economic activity to remain economic value creating.

1/8
Brendan Greeley on the development of the eurodollar. If Beijing truly wants CNY to be more widely used in international finance, the eurodollar market provides one potentially useful model to show how that might happen.
ft.com/content/be3459… 2/8
From the 1960s through the early 1980s, the eurodollar was a separate offshore dollar market and not simply an extension of the onshore USD markets. it was a way for dollars to circulate outside US regulation and US control. Its separation was created by...

1/5
It's true that China was able to withstand the effects of the Iran war better than many other countries because it had stockpiled commodities. But it is a little silly, perhaps even a little orientalist, to say that it did so because of strategic thinking.
bloomberg.com/news/features/… 2/5
We forget that Japan also stockpiled massive amounts of commodities in the late 1980s, and given the subsequent fall in commodity prices (driven in part by ja[an's own economic slowdown), this later turned out to be an additonal drag on economic performance.

1/6
Good Steven Barnett piece. He points out that "targeting growth rates inconsistent with productivity trends leads to distortive policies", and argues instead for a "dramatic, permanent payroll tax cut" to boost consumption.
ft.com/content/d078c7… 2/6
This would certainly work, as would any other policy that increases the disposable income of average Chinese households relative to GDP. China's extraordinarily low consumption share of GDP is mainly a consequence of the low household income share.

1/4
Several people have asked for more information about the Maekawa Commission report and its reception. There is a wide variety of sources, but I am attaching three memoranda on the topic written by the CIA in 1986. I find these especially helpful in illustrating perceptions at the time.

https://x.com/michaelxpettis/status/2045851009017119077

2/4
From the summary of the April 9 memo: "A United States request that Japan alter its macroeconomic structure to reduce its propensity to run ever larger trade surpluses will probably bring a claim from Japanese officials that the country has already embarked on a process of structural change. Despite the nod this week's Maekawa Commission report gives to structural adjustment, Tokyo would probably resist major adjustments in savings, consumption, and investment incentives that did not also serve its industrial policy goals. Only the prospect of closed foreign markets or deep recession at home, neither of which Tokyo believes likely in the near term, would change this view."
cia.gov/readingroom/do…

1/9
The Economist discusses the determination of South Korea's president, Lee Jae Myung, to expand RoK industrial policy aggressively. "His plan involves diverting capital from the housing market to...
economist.com/finance-and-ec… 2/9
industry, especially chipmakers instrumental to the global artificial-intelligence boom, and supplementing this with government cash."

The Economist describes these industrial policies as "trade-distorting intervention", and wonders how successful they will be.

1/8
China’s first-quarter GDP grew by 5.0%, faster than the 4.8-4.9% most polls suggested, but the composition of the growth was more unbalanced than ever, especially in March.
ft.com/content/f2b53a… 2/8
Retail sales were up a very disappointing 1.7% in March and up 2.4% for the first three months of 2026. As always, industrial activity was the bright spot, rising 5.7% year-on-year in March, and 6.1% for the first three months.

1/5
China's March trade numbers were a big surprise, with exports up less than expected and imports way up. Given how volatile things have been, we don't want to read too much into one month's numbers, but if they reflect a new reality, they matter.
english.news.cn/20260414/f5b3a… 2/5
Exports were up a measly 2.5% year on year in March, well below the 21.8% surge in the first two months of the year. Imports, driven mainly by higher commodity prices, were up an astonishing 27.8% in March, versus an already high 19.8% in the first two months of the year.

1/9
Very good FT article on why overcapacity is structurally embedded into the Chinese economy. It quotes one (anonymous, of course) investor who notes that "Officials are scared of missing their GDP targets. Nobody is scared of overcapacity."
via @ftft.com/content/7d51a6… 2/9
I was nonetheless impressed by the number of Chinese who spoke openly about the difficulties created by the current growth model. This didn't use to be the case, but the fact that we're seeing more and more of this suggests that we may finally be seeing a change in the way policymakers think.

1/15
IMF: "If coordination proves difficult, the best course of action for each country is clear: start addressing domestic imbalances now, regardless of what others do."

This is one of several discordant lines in an otherwise interesting paper.

imf.org/en/blogs/artic… 2/15
It is good that the IMF (along with others) increasingly recognizes the adverse consequences of persistent trade imbalances, and recognizes that "the relevant metric is the overall position of a country against the rest of the world, not bilateral or sectoral balances."

1/7
Martin Wolf, in an important piece on unsustainable current account imbalances, makes a point that most American economists miss: "the counterpart of external deficits tends to be unsustainable domestic borrowing."
via @ftft.com/content/49e38e… 2/7
He goes on to say: "The Keynesian hypothesis looks right: the inflow of net foreign savings, shown in capital account surpluses made big fiscal deficits necessary, because domestic demand in the US would otherwise have been chronically inadequate."

1/12
Bloomberg: "Canada pitched expanding its financial services presence in the Chinese market as the northern nation aims to increase exports to its second-largest trading partner in a push to diversify from the US." bloomberg.com/news/articles/… 2/12
The article continues: "Expanding Canadian financial services activity in China is key to achieving the government’s goal of increasing exports by 50% by 2030, according to Finance Minister Francois-Philippe Champagne."

1/12
Caixin: "For the first time, China has embedded a dedicated plan to raise household incomes into a top-level national policy document, signaling a change in priorities as policymakers grapple with persistently weak consumer spending."
caixinglobal.com/2026-03-30/cov… 2/12
"The diagnosis is widely shared," the article notes, as it quotes Yang Weimin, a former deputy director of the CFEAC, that “The reason for China’s low share of consumption in total demand is mainly the low share of residents’ income in national income.”

1/6
FT editorial: "Other governments have not done much to play the role the US once did of seeking to anchor the world trading system. Mark Carney, Canada’s prime minister, and others have been talking about an alliance of middle powers seeking to save...
ft.com/content/0ed61c… 2/6
multilateral trade. So far, this has mainly been conspicuous by its absence."

Of course it has. That's because for all the huffing and puffing, "the world" is not looking for someone to bring order to the world trading system.

1/12
On the centennial of Britain's 1926 general strike, the FT reviews three new books that discuss and explain the events that year. I haven't read them (although I'd love to do so), but it is worth noting what those events tell us about current conditions.
ft.com/content/ab0875… 2/12
Although most stories of the general strike discuss it in terms of good guys and bad guys (mine owners or workers, depending on your political preferences), in fact both sides were caught up in a structural trap that neither could resolve.