» michael pettis

In 2006 I started making a number of predictions based on what I thought was the necessary and logical development of China’s growth model. Some of these predictions seemed fairly outlandish, especially to China analysts – Chinese and foreign – who had very little knowledge of economic hist...

No matter how sincere its intentions, what Beijing says it will do over the next few years is meaningful only if its policies are both internally consistent and do not violate external constraints. As I proposed two weeks ago, in this post I will try to lay out as logically as possible the economic...

Contrary to some recent research reports cited in the press I do not think we have seen any substantial rebalancing of the economy towards consumption in 2011.  This is largely an argument being made by economists who did not see why Chinese consumption repression was all along at the heart of t...

This posting is from the January 30 issue of my newsletter, and so ignores recent events in Chongqing, but of course those events make my discussion of the political debate  entry all the more relevant, I think.  Before getting to the policy debate, I want to mention that in late January Caixi...

Before starting on the subject of debt I wanted to make a quick reference to something sent to me by Charles Horner, a senior fellow at the Hudson Institute.  I am glad to say that the overinvestment thesis is much more widely acknowledged today than it was even two or three years ago, but one m...

Europe’s underlying problem is not budget deficits or even unsustainable debt.  These are mainly symptoms.  The real problem with Europe is the huge divergence in costs between the core and the periphery – in the past decade costs between Germany and some of the peripheral countries have di...

Two weeks ago on Wednesday night, after the Chinese markets closed, the People’s Bank of China announced that it had cut the minimum reserve requirement by 50 basis points to 21% for the large banks, and lower for the smaller banks.  With the announcement coming just hours before announcements...

For years I have been arguing that the Achilles heel of the Chinese growth model is the unsustainable rise in debt that comes as a necessary consequence of capital misallocation fueled by bank lending.  Capital misallocation, I argued, was the nearly inevitable consequence of high investment gro...

Much of the latest issue of the newsletter, sent out two weeks ago, was on disaggregating the trading performance of the RMB to separate market sentiment from PBoC actions, but since this was pretty technical stuff I am not including it in this blog entry.  This means that once again most of the...

I have already discussed last month why I think the desperate attempts by Europe to get China and other Asian and BRIC countries to bail out the weak sovereign borrowers is absurd, but the topic has become so important in the past two weeks, at least judging by the number of calls I have received...

Last week’s Senate bill on Chinese currency intervention predictably enough brought out all the same old arguments about international trade, and just as predictably has hardened the opposing positions in the debate.  Unfortunately the difference between a good outcome, intelligently negotiate...

My friend Mark Williams sent me last week a reference to a very interesting paper written by Malhar Nabar, an economist at the IMF.  The paper is called “Targets, Interest Rates, and Household Saving in Urban China” and in it Nabar tries to measure the impact of changes in the real deposit...