The Year of the Dragon is supposed to be a good year

CHINA FINANCIAL - Report 12 Feb 2024 by Michael Pettis

Special points to highlight in this report:

* One of the key issues in the Year of the Dragon is likely to be how seriously Beijing is about reining in non-productive infrastructure spending among its more highly-indebted provinces. In an announcement last month— that didn’t get as much attention as it should have—Beijing ordered several overly-indebted provinces to cut back on infrastructure spending.

* Another key issue is likely to be how quickly global trade tensions will accelerate, and what impact this acceleration might have on China’s ability to manage its domestic demand deficiencies. China has responded to the property sector crisis by doubling down on investment in the manufacturing sector rather than by shifting resources towards consumption, but this strategy can only work if the rest of the world agrees to accommodate it.

* Finally, Xi Jinping seems to have personally committed himself to a rise in the Chinese stock markets. That potentially means a lot of firing power.

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