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Leslie's avatar

I'm going to have to reread this a few times as I can't fully grasp it. It's certainly something I am interested in understanding and you've done a great job at summarizing some complex issues. I've not seen anything like it. I've a basic working knowledge of economics but not much more.

I think what you're saying is China's economy generates a massive trade surplus which is in a sense 'real' money as a large portion comes from outside the country. It invests this surplus internally via a centralised system within the country in 'real' investments in RMB (factories, railways, apartments and other stuff) and this over investment in some industries generates deflation and consequently eventually bad loans. But it doesn't really matter if you write all the internal loans off because the bridges and factories etc etc and other productive stuff still actually exist and contribute to a surplus? But only provided the surplus can be sold outside China?

It plays into what Donald is doing re Tariffs which obviously throws a spanner in China's works and suggests the rest of the world is going to continue to be flooded with even more excess Chinese production and this will help to keep the lid on inflationary pressures in countries like Australia?

It's sort of a form of economic warfare really. I've added that book you mention Trade Wars are Really Class Wars to my reading list

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AlonsoQuijano's avatar

As a Chinese, I read your piece for the first time today. I would say that the last two or three years of economic slowdown or even crisis comes from the lack of social safe net which should provide by the government. The fiscal policy is not in, and the monetary policy comes only after the Fed's first cut last September. We should also notice that the decades-long real estate boom ends finally, and when it coincides with the slowing down of export, the main engine, things would be ugly and that's the time the government should shoulder the economy, but the fact is that the bureaucracy seems still complacency and inexperienced to tackle the deflation problem. The equity market recovered a bit because of Deepseek and biotechs, however, it still don't break the expectations of last September, and the economy still needs a transfer to a less production-export-central one, if not, it would jeopardize even the local companies of developing countries. The crisis is not over yet, Chinese people still wait for the backing of the central government.

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