1/4
WSJ: "The number of ride-hailing drivers in China tripled to 7.5 million in the four years to 2024, even though the number of rides grew only by about 60% during the same period, government data shows."
wsj.com/world/asia/14-… 2/4
By shifting into the gig economy, workers reduce overall unemployment numbers without increasing the the total amount of wages workers receive. This is one of the reasons consumption growth has been so weak.

To boost consumption growth, Beijing must figure out how to...

1/10
President Macron says "We must acknowledge that these imbalances are both the result of weak EU productivity and China’s policy of export-driven growth."

The first part of that statement is technically not true.
via @ftft.com/content/c8fdf1… 2/10
Countries don't run trade deficits because of low productivity, any more than they run surpluses because of high productivity. That is not at all what global trade imbalances around the world tell us, and that is not why countries have lower or higher saving rates.

1/8
It's hard to find anything good in the November economic data for China, just as it is hard to find anything new to say. All the important indicators continue to weaken, as they have throughout the year, in some cases even decelerating further.
english.news.cn/20251215/a5915… 2/8
Retail sales, for example, were expected to grow a very disappointing 2.9% year on year in November. In fact they only grew 1.3%.

For all the talk of a greater role for consumption in driving growth, in the first 11 months of the year, retail sales were up just 4.0%.

1/8
Caixin: "While concerns about weak demand and external uncertainties persist, this year's Central Economic Work Conference, which concluded on Thursday, marked a shift in tone. The official readout framed China's core economic challenge as...
caixinglobal.com/2025-12-12/chi… 2/8
a “prominent contradiction between strong supply and weak demand” — a structural issue rather than just insufficient consumption."

"The change" Caixin writes, "suggests Beijing sees supply-side imbalances, not just inadequate consumption, as a constraint."

1/4
WSJ: "President Trump’s barrage of tariff increases threatened to chill global trade flows, but commercial exchanges continued to increase as most of the international commerce system functions as it did before the onslaught."
via @WSJwsj.com/economy/trade/… 2/4
Contrary to what WSJ says, Trump's tariffs never really threatened to "chill global trade flows" except in the view of those (including far too many economists) who mistakenly thought of trade in incremental terms rather than in systemic terms.

1/4
The IMF formally recognizes that it is a depreciating RMB, not rising manufacturing efficiency, that drives China's growing trade surplus.
ft.com/content/9c92aa… 2/4
That's because a depreciating currency is both a subsidy for manufacturing (and tradable goods) and a tax on consumption. It works by reducing the household share of GDP, especially when reinforced by other production subsidies paid for directly or indirectly by households.

1/4
China's CPI was up 0.7& year on year in November, the biggest monthly increase in nearly two years, but those who see this as a revival of inflation are getting it wrong. On the contrary, after four months of flat to positive month-on-...
english.news.cn/20251210/cd188… 2/4
month changes, CPI prices were actually down 0.1% month on month in November. Even that was flattered by higher food prices caused by bad weather and a surge in gold prices that drove the “miscellaneous goods and services” category up by more than 14%.

1/10
Keith Bradsher: "A growing number of economists and business leaders, including former senior officials at China’s own central bank, are calling on Beijing to let the renminbi increase in value against the dollar and other currencies."
nytimes.com/2025/12/07/bus… 2/10
He adds: "For China, a stronger RMB would make foreign goods cheaper to import. Savings on such purchases would leave China’s households with more money to spend on Chinese goods and services. Reviving consumer spending in China is one of the top goals of Beijing leaders."

1/6
China’s exports in November rose 5.9% year on year, leading to a $111.7 monthly trade surplus. A few years ago, a monthly trade surplus of over $100 billion would have seemed almost inconceivable, but so far this year it has happened six times

bloomberg.com/news/articles/… 2/6
While exports to the US in November were down 29% year on year, according to Bloomberg, "Exports to the EU expanded almost 15% last month. Shipments to Africa surged nearly 28%, while those to the 10-nation Southeast Asian trading bloc gained only 8.4%."

1/6
Emmanuel Macron: "Today, we are caught between the US and China and it is a matter of life or death for the European industry. We have become the adjustment market and this is the worst-case scenario."

He is absolutely right.
reuters.com/world/china/fr… 2/6
This is the point I have been making again and again over the years. The global economy is a closed system, and it must balance. This means that domestic imbalances created by countries that control their external accounts must...

1/10
WSJ: "What saves American finance is the dollar’s status as the must-have global asset and trading currency. Both roles face challenges, though, and the more the U.S. exploits foreigners, the higher the risk they look elsewhere."

via @WSJwsj.com/finance/invest… 2/10
While this is widely believed, it isn't true. Foreign capital inflows don't fund fiscal deficits. They fund current account deficits, and they must be matched domestically either by higher US investment, higher US unemployment, or higher US household and fiscal debt.

1/12
Weijian Shan is right: China does need to let the renminbi rise, and substantially. An appreciating currency would "subsidize" imports and "tax" exports – the opposite of what tariffs are supposed to do. Given that households are net importers...
ft.com/content/5bb8ed… 2/12
and manufacturers are net exporters, an appreciating currency is effectively an income transfer from manufacturers to households.

This, as former PBoC governor Zhou Xiaochuan explained many years ago, would be a very effective part of the income rebalancing process.

1/8
Xinhua: "China aims to "achieve a notable increase in household consumption as a share of GDP," and to increase the role of domestic demand as the principal engine of economic growth over the next five years, according to the new MIIT plan".
english.news.cn/20251127/5539c… 2/8
But while everyone in government now acknowledges the urgent need to raise the consumption share of GDP, and wants to be seen doing something to achieve the goal, it isn't clear that they know what to do. This new "comprehensive" plan "to improve the alignment of...

1/18
Martin Wolf wonders whether the US or China will be the first to abandon its current follies on trade imbalances, but I don't think this is the right way to understand the current "fracturing" of globalization.
via @ft@ftft.com/content/b5157c… 2/18
As I see it, everyone (even Europe, eventually) is relearning what we used to know: a highly globalized trading regime can only work when all major economies choose more or less the same tradeoff between global integration and economic sovereignty.

1/7
Good FT article on declining investment growth in China: "A sharp decline in reported investment in China suggests President Xi Jinping’s campaign against excessive industrial competition may be having an impact on the Chinese economy."

via @ftft.com/content/008738… 2/7
While some of the decline may reflect “a statistical correction of previously over-reported data”, as Goldman suggests, at least part of it shows that Beijing's battle against involution is working.

1/14
This very good Robin Harding article points out that the purpose of trade should be the exchange of goods, and not the mercantilist accumulation of assets abroad.
ft.com/content/f294be… 2/14
However he makes a mistake when he says: "There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to."

1/4
Increasing the share of total wealth retained by the rich – for example by cutting their taxes – will benefit the poor, according to trickle-down theory. By shifting income from those who consume a larger share of their income to those who consume a lower share (and so save more), it increases total saving, which in turn increases investment (in a closed economy, saving is always equal to investment). Because more (productive) investment leads to faster growth, the higher saving of the rich ultimately benefit the poor by increasing jobs and wages.

But this is no more necessarily true than it is necessarily false. In fact trickle-down theory can work under certain conditions and fail under others. The point that is often skipped over by both proponents and opponents of trickle down is that while policies that transfer income to the rich do indeed increase the saving of the rich, the key is whether they also increase total saving and total investment. It turns out that this depends on underlying conditions in the economy.

In a country with very high investment needs and insufficient domestic saving to fund them all, rising income inequality can indeed benefit the poor by increasing investment – if there are mechanisms that direct the higher saving of the rich into productive investment. In that case, higher GDP growth rates can more than make up for the declining share of GDP retained by ordinary households.

https://x.com/michaelxpettis/status/1986754737551577245

2/4
This is basically what happened in China in the 1990s and 2000s. In that case the share of GDP retained by ordinary Chinese household dropped at some of the fastest rates in history, as a very large share of their income was transferred to the rich, to businesses and to the government (all of whom consume a much lower share of their income than do ordinary households), leaving ordinary Chinese households with the lowest share of GDP perhaps ever recorded.

But were ordinary Chinese worse off during this period? Clearly not. Even as their share of GDP dropped sharply, their overall income rose at a very high 6-8% every year. It was able to do this because the corresponding high investment growth led to Chinese GDP growth rates of 10-12%.

But this is no longer the case in China. In fact for the past decade Beijing has been struggling to redistribute income to ordinary households, precisely in order to reduce unwanted saving and increase much needed consumption. Weak consumption is, now, creating a drag in the economy by limiting the need for investment.
carnegieendowment.org/china-financia…

1/5
Caixin: "By the end of September, Chinese mills had produced 746 million tons of crude steel, down 2.9% from a year earlier. But domestic consumption slumped 5.7% to just under 649 million tons, a much steeper decline."
caixinglobal.com/2025-11-21/in-… 2/5
Caixin continues: "The imbalance sent a clear message: the core problem isn’t output. It’s overcapacity, with too few buyers at home to absorb what’s being produced. To fill the widening gap, Chinese steelmakers are aggressively pivoting to export markets."

1/13
It is helpful to think about Taisu Zhang's list of the EU's perceived weaknesses in the context of global trade, and especially in the context of a global trading system that exhibits the beggar-thy-neighbor characteristics that Joan Robinson warned about.

https://twitter.com/ZhangTaisu/status/1990883427218862491

2/13
To take the first, the EU's lack of political unity means that it cannot respond unilaterally in a world in which its major trading partners (China, Japan, India and, increasingly, the US) are determined to control their external accounts and are able unilaterally to do so.

1/8
SCMP: "China should add a quantitative target for consumption growth as part of its long-term modernisation goals to help sustain growth momentum as the country’s population declines, a prominent Chinese economist said."
via @scmpnewssc.mp/qmm5m?utm_sour… 2/8
The article continues: "Currently, household consumption accounts for about 39% of China’s GDP, according to Cai Fang, an academician at CASS. Over the next decade it should rise to around 61% as China strives to become a “moderately-developed” country by 2035."

1/8
NYT: "The biggest recipient of Chinese financing over the past two decades has been the United States, where Chinese banks have extended $200 billion in financial support to American companies and projects."
nytimes.com/2025/11/18/bus… 2/8
This shouldn't surprise us, even if it seems to go against what we've been reading in headlines in recent years. China is the largest net export of capital in the world, which is just the flip side of its running the biggest trade surpluses in the world.