1/20
The views of Maurice Obstfeld (and other American economists) on the relationship between the internal and external accounts of the US are finally starting to evolve.

brookings.edu/wp-content/upl… 2/20
From insisting that the the US external account is wholly driven by domestic imbalances, and that the only sustainable way the US can reduce its trade deficit is by reducing the fiscal deficit, he now accepts that the reality is "more nuanced".

1/6
According to SCMP, China's Economic Daily, a state-owned newspaper, is warning that "Inefficient investments continue to be a drain on...
scmp.com/economy/china-… 2/6
China’s economy, and debt-laden local governments need to ensure that the projects they back are actually needed in their communities. Over the decades, local governments have relied on big construction projects to drive...

1/14
Barry Eichengreen: "Ultimately, the fate of the dollar will turn on the willingness of America’s leaders to uphold the rule of law, respect the separation of powers and honour the country’s commitments to its foreign partners."

via @ftft.com/content/8a71dc… 2/14
He's right, of course, that financial sanctions, taxes on capital inflows, proposals to restructure foreign ownership of US government bonds, and other restrictions on capital inflows will almost certainly undermine the global role of the US dollar.

1/9
In what may be an important article, Lingling Wei of the WSJ suggests that Beijing may be considering limiting Chinese exports to the US as a concession to the Trump administration.

via @WSJwsj.com/economy/trade/… 2/9
For those in the administration who see bilateral trade imbalances as the main problem (anyone, for example, who thinks tariffs on Canada and Mexico are good ways to reduce US trade imbalances), this may seem like a victory on trade, but in fact it doesn't change much.

1/6
I think it no longer makes sense to talk about "China’s property sector" without recognizing in fact that there are at least two very different property sectors in China, and John Lam, who is cited in this article, recognizes the distinction.
bloomberg.com/news/articles/… 2/6
As I have been saying for nearly a year, following a presentation made late last summer by Chen Long, head of Plenum China, property prices may indeed be bottoming out in the richer 6-7 eastern provinces and municipalities.

1/4
Bloomberg: "The US is starting to look a lot like China. And China is starting to look a lot like the US. The result is convergence."

This may be a clever journalistic conceit, but that's all it is. They aren't converging in any meaningful sense.

bloomberg.com/news/newslette… 2/4
The US share of global consumption is far higher than its share of global GDP, while China's share of global consumption is far lower than its share of global GDP. Each country's imbalance is the opposite of the other's.

1/6
Interesting Bloomberg article on how US tariff policies that shift Chinese exports from the US to the rest of the world has been painful for other counties.

via @BWbloomberg.com/news/features/… 2/6
I'd add, however, that the real pain is likely to come in the future if the US were ever to get a rational trade policy. For now, bilateral tariffs are pretty useless in resolving the US imbalance. The US trade deficit is likely to be at least as high in 2025 as in 2024.

1/7
Good Martin Wolf article on Stephen Miran's proposal to restructure the global trading system. My only criticism is his conflating of declining manufacturing employment with declining manufacturing.

via @ftft.com/content/9fa4a7… 2/7
He notes that "the US is far from the only high-income country with falling shares of employment in manufacturing".

He's right, but the problem facing US manufacturing is not the falling employment share. That's actually a good thing.

1/8
Bloomberg: "Chinese banks are slashing rates on consumer loans to record lows as policymakers ramp up stimulus to stabilize growth and counter US President Donald Trump’s tariffs."
via @economicsbloomberg.com/news/articles/… 2/8
This could be quite important. Chinese regulators have put pressure on banks to increase consumer lending. If they succeed, this is certainly one way to reduce the excessively-high household savings rates that is part of China's weak consumption story.

1/5
Xinhua: "Previous consumption policies primarily focused on the supply side, emphasizing that supply drives demand creation. However, the latest policies also prioritize the demand side, aiming to boost household incomes and ease financial burdens."

english.news.cn/20250317/b6509… 2/5
Supply can indeed drive demand creation when there are enough productive investment opportunities that all income generated by the spending can be directed either towards consumption or (in the form of savings) towards productive investment.

1/5
Yicai: "China will promote reasonable salary growth by strengthening employment support in response to economic conditions and improving minimum wage adjustment mechanisms."

yicaiglobal.com/news/china-lay… 2/5
Over the long term, and if implemented in a meaningful ways that truly closes the gap between wages and productivity, this may end up being the most important measure proposed by Beijing.

But it is important to understand why it won't be easy to implement.

1/11
Good article by @KeithBradsher: " The Chinese government and the Communist Party jointly issued a lengthy list of planned initiatives on Sunday to get people to spend more, including larger pensions, better medical benefits and higher wages."

nytimes.com/2025/03/16/bus… 2/11
"But," he continues, "it assigned many of these tasks to the country’s local governments, many of which are struggling under enormous debts and plummeting revenues from the sale of state land."

This is the problem with every attempt to boost the consumption share of GDP.

1/4
The PBoC-owned Financial News notes that "monetary easing does not necessarily translate to credit easing, as financial stimulus alone does not lead to a sustainable boom in consumption."

reuters.com/world/china/ch… 2/4
I've long argued against the widespread claim that lower interest rates will boost consumption in China. In economies like China (or Japan in the 1990s), with high household savings in the form of deposits and bonds, and where...

1/8
Debt is still rising quickly in China. In February, total social financing (TSF) grew a less-than-expected but still large RMB 2.23 trillion. The outstanding amount at the end of the month was RMB 417.29 trillion, or 309% of...

chinadaily.com.cn/a/202503/14/WS… 2/8
last year's GDP, versus 303% at the end of 2024. While it is worth noting that in China, debt always grows most quickly at the beginning of the year, with nearly one-quarter of annual growth in outstanding debt occurring in the first two months, this is still a big increase.

1/6
There is too much focus on tariffs as the sole tool of trade intervention when, in reality, there are many ways countries can intervene in trade, and often far more effectively.
via @ftft.com/content/32bdf0… 2/6
These include subsidizing credit, rebating taxes, suppressing wage growth, depreciating the currency, subsidizing infrastructure spending. Anything that taxes consumption to subsidize production is a form of trade intervention. One likely consequence of all the focus...

1/8
Bloomberg: "China’s intensifying deflationary pressure threatens to persist long after seasonal distortions fade away, unless the government drains excess capacity in the economy that’s putting pressure on prices."

via @economicsbloomberg.com/news/articles/… 2/8
Bloomberg continues: "Key officials who spoke last week on the sidelines of the annual legislative session already hinted at plans to push for “inefficient capacity” to exit the market."

1/9
Caixin: "China will increase policy support for foreign trade and take further measures to stabilize exports, Commerce Minister Wang Wentao said Thursday, as tensions between Beijing and Washington escalate over new tariffs."

caixinglobal.com/2025-03-07/two… 2/9
It's important to recognize the two very different dimensions that are involved in the global trade conflict. One is the issue of bilateral trade, in which China can respond to US tariffs simply by shifting its trade to other countries, as it has been doing.

1/6
Caixin: "With mounting debt, slowing economic growth and an outdated fiscal structure, experts warn that without substantial reform, local governments may face a more severe financial crisis in the years ahead."

caixinglobal.com/2025-03-10/cov… 2/6
In order to meet GDP targets, China has had to shift economic activity from the private sector to government and other sectors not constrained by hard budgets. For over ten years this has also involved Beijing's increasing centralization of credit allocation and...

1/7
In January, China's CPI saw 0.7% month-on-month inflation (0.5% year on year) in a partial revival of inflation that suggested there might have been a stronger-than-expected rise in consumer demand.

english.news.cn/20250309/5dcd7… 2/7
But these hopes have been reversed in February, with month-on-month prices down 0.2% (down 0.7% year on year). PPI inflation of course continues to be negative, down 0.1% month on month and 2.2% year on year.

1/6
Good Bloomberg article on why China needs to raise the consumption share of GDP and how Beijing has become increasingly aware of the need to do just that.

But for all the rising awareness, it will not be any easier than it has in the past.

bloomberg.com/news/features/… 2/6
We might get a 2-3 percentage point rise in the consumption share of GDP if there is a revival of household confidence, and Beijing is certainly betting on reviving household confidence, but I'd argue that any such revival...

1/8
SCMP: "Premier Li Qiang vowed to launch a “comprehensive crackdown on neijuan” – the first time the premier has mentioned the concept in his agenda-setting annual address."

via @scmpnewssc.mp/qr8dy?utm_sour… 2/8
SCMP explains: "The term neijuan, or “involutionary competition”, refers to a self-defeating cycle of excessive competition in which companies are forced to invest ever greater resources without generating proportional returns."