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Is Beijing backsliding on rebalancing?
CHINA FINANCIAL · In Brief · 18 May 2015

Yes and no. The PBoC cut lending and deposit rates May 10, but raised the deposit ceiling and pressured banks to maintain deposit rates. They’re trying to rebalance but it's tough. Growth was probably unexpectedly low, but for the past 3-4 years I've said growth must grind lower because Beijing c...

Monetary policy confusion
CHINA FINANCIAL · Report · 30 Apr 2015

Special points to highlight in this issue: There have been a number of announcements by the PBoC and other Beijing officials referring to changes and innovations in the way China will conduct monetary policy. Most of these have to do with improving the transmission of monetary policy and credit a...

The absurd theater of the AIIB
CHINA FINANCIAL · Report · 06 Apr 2015

Special points to highlight in this issue: Investors seem to be increasingly acknowledging that the world suffers from a structural excess of savings over desired private investment, and it is this excess that was responsible for the excess consumption during the bubble years and the weak demand ...

Predictions, Predictions
CHINA FINANCIAL · Report · 19 Feb 2015

Special Points To Highlight In This Issue: China continues along the path of weak economic data followed by strong expansionary reactions from Beijing, but with the economy bouncing about in an overall downward trajectory. Until the middle or end of this year I do not expect any clear signs that ...

Even With Reforms, Debt Will Constrain Global Growth
CHINA FINANCIAL · Report · 14 Jan 2015

Special Points To Highlight In This Issue:In spite of overwhelming historical evidence, and a sophisticated understanding of the mechanics of financial distress in finance theory, one of the most consistent mistakes macroeconomists make is their failure to recognize the growth constraints that em...

Taking Stock of China’s Transition
CHINA FINANCIAL · Report · 10 Dec 2014

Special points to highlight in this issue:While policymakers almost certainly understand that the interest rate cuts announced by the PBoC two weeks ago will slow the pace of rebalancing, the asymmetry of the change in rates was designed to minimize the adverse impact on rebalancing, and indicate...

The Global Savings Constraint
CHINA FINANCIAL · Report · 05 Nov 2014

Special points to highlight in this issue:China, and probably Japan, exist in a “neo-Fisherian” world in which, contrary to conventional thinking, lower interest rates and a depreciating currency are disinflationary, not inflationary. In economies in which most lending goes into production and mo...

The Exorbitant Burden and The Scariest Graph in The World
CHINA FINANCIAL · Report · 17 Oct 2014

Last year I presented in this newsletter what I called “the scariest graph in the world”. It showed how some EU policymakers were expecting Europe to rebalance demand. The graph showed Europe’s current account surplus surging to 2-6% of Europe’s GDP. In the newsletter I argued that this “solution...

Don’t Expect The Reform Process To Be Linear
CHINA FINANCIAL · Report · 01 Oct 2014

• Recent rumors that Zhou Xiaochuan will retire as governor of the PBoC should not be interpreted as an indication that Beijing has changed its mind about the urgency of reform. Given Zhou’s age, it was unlikely that he would remain in his seat for very long, and in fact if these rumors are true,...

How Might A China Slowdown Affect The World?
CHINA FINANCIAL · Report · 11 Sep 2014

Executive Summary Recent statements by Li Keqiang, China’s Premier, suggest that lower GDP growth will not cause Beijing the kind of anxiety it has in the past, and that the leadership is willing to tolerate it as long as they believe unemployment is manageable. The market seems to be interpretin...

Slower Growth and Provincial Growth Disparities
CHINA FINANCIAL · Report · 31 Aug 2014

Executive Summary Over the past few decades as China’s economy has grown rapidly, there have been significant disparities in the growth rates among different Chinese provinces. I expect that disparities will remain even as the economy continues to slow.While the very different growth rates among ...

The Politics of Growth Targeting
CHINA FINANCIAL · Report · 04 Aug 2014

Executive SummaryThe investigation into Zhou Yongkang, announced last week but expected for months, is the most important political event in China since the related Bo Xilai scandal in 2012. It may confirm that President Xi Jinping and his followers have managed to centralize power far more than ...

What Does A “Good” Chinese Transition Look Like?
CHINA FINANCIAL · Report · 24 Jun 2014

Executive Summary Any plausible definition of an orderly Chinese rebalancing during President Xi Jinping’s administration must include much lower GDP growth for many years. How quickly Beijing is able to rein in credit growth is the main variable determining whether or not the adjustment will be ...

The Rise Of External Debt?
CHINA FINANCIAL · Report · 22 May 2014

Executive Summary There have been cases in recent history in which a country experiencing “miracle” growth – driven by domestic investment that, in late stages, tends increasingly to misallocation – has reached domestic debt capacity constraints, only to replace domestic funding with external fun...

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