1/10

The latest IMF report on China was released yesterday and provides a lot of good information and intelligent insight on the Chinese economy. The IMF’s measure of China’s adjusted fiscal deficit (including estimated off-budget

1/16

It is a little frustrating to see the response many analysts had to the GDP growth data Chinese released today. These numbers aren’t especially good, and they certainly shouldn’t have been surprising. Back in April and May, when most

2/16

were projecting negative or barely positive GDP growth for China in 2020 (the OECD, for example, expected China’s GDP to contract by 3.7%), I insisted that GDP growth for 2020 would be positive, and probably between 2% and 3%.

Today, it was reported as 2.3%. How did...

3/16

I know? Because I knew that while most of the healthy sources of Chinese growth would contract (except for exports, which would expand given Beijing’s intense supply-side response to the impact of Covid-19), Beijing was going to respond to a significant...

4/16

worsening of the healthy parts of its economy by unleashing enough of the unhealthy, non-productive growth it has long tried to constrain – basically real estate and infrastructure investment – in order to achieve as much economic activity as it...

5/16

needed for domestic political ends.

And that’s exactly what happened. While GDP grew by 6.5% in the fourth quarter, even with substantial tailwinds its retail sales measure – a proxy for consumption – was only up 4.6%, and it was down 3.9% overall in 2020.

1/9

Good article. But while growing international criticism and rising trade tensions may have had some impact, as the article suggests, I don’t think they really explain the great reversal in BRI lending of the past few years.

2/9

As I have been writing since 2011, China’s development lending was always likely to follow the pattern of other countries when they first “went out” (e.g. the US in the 1920s, USSR in the 1950s, Japan in the late 1970s). Because of little historical...

3/9

knowledge and no previous experience, an early rapid rise in development lending would be driven mainly by underestimating risk and an overestimation of their own business "success" in making loans, and would of course be further supported by geopolitical ambitions.

4/9

This combination would inevitably lead to bad lending decisions, followed just as inevitably by debt restructuring, loan losses, and a contraction in development lending. In the 1920s, for example, the US set off quite explicitly and aggressively to displace England in...

5/9

Latin America, and American businesses and banks assumed they “understood” Latin America much better than the English did, in spite of the vast English experience there, but their early displacement of British lending only resulted in the huge loan losses of the 1930s.

1/9

China is aging so rapidly that it urgently needs to address the problem of a rapidly declining work force in a slowly declining population. To give an idea of relative population changes among the three most populous countries, today

2/9

are 4.3 Chinese for every American and 4.7 Chinese of working age (ages 15-64), while there is just over 1 Chinese for every Indian and 1.1 Chinese of working age.

By the end of the century, however, there are expected to be 2.5 Chinese for every American and...

3/9

just 2.4 Chinese of working age, while there will be 1.4 Indians for every Chinese and 1.5 Indians of working age. Over the rest of this century, in other words, while China’s population declines quite rapidly relative to that of the two other most populous countries, it...

4/9

also switches from having a much better dependency ratio than either to having a worse one than either, with far more of its dependents being the elderly rather than children. In effect its working age population will drop by half relative to those of the other two.

5/9

This is going to be a very tough problem to resolve, although to the extent China succeeds, it will be very useful as an example for other countries. I am not sure they are going about it the right way, however. Making seniors make better use of smart technology sounds...

1/10

This is a really tough problem to resolve, especially if the massive increase in inflows from the trade and financial accounts are sustained, as I expect they will be well into 2021.

Clearly the PBoC would like to see the RMB gradually...

2/10

strengthen. This would keep financial markets stable and promote rebalancing, but the RMB has already strengthened a lot, and this puts unwanted pressure on exporters and “international circulation”.

Although PBoC reserves have been flat, other state-controlled Chinese...

3/10

banks have bought large amounts of dollars, but this is expensive. If these banks have half a trillion dollars of exposure, for example, they are losing at least $15-17 billion annually on negative carry, plus another $20-30 billion just this year from the rise of the RMB.

4/10

Beijing seems also to be trying other measures to slow the rise. The regulators are relaxing capital controls on outflows. In mid October the PBoC cut to zero the reserve requirement ratio for banks doing FX forward trading. This requirement was created in 2018 to reduce...

5/10

downward pressure on the RMB. In late October it suspended the counter-cyclical factor in RMB fixing, which was introduced in 2017 also to reduce downward currency pressure. But in both cases while the RMB dropped a few pips on the news, it quickly resumed its upward climb.

1/11

An article worth thinking about: “As changes to the world structure accelerate, China’s rule is in sharp contrast with the turmoil in the West,” says Beijing.

I agree, but I draw a different conclusion. The world is certainly currently

2/11

through "a period of turbulent change", in Beijing’s words, and great structural adjustments, but usually when that happens, what matters in the long run is not how stable a system seems but rather how successfully political, economic and social institutions adjust to...

3/11

the new conditions. In the past these adjustments have almost always been messy, chaotic, and disheartening to most, but ultimately they were necessary even if we were unable to judge them so at the time.

I would argue that the world today is undergoing both a reversal...

4/11

and rejection of the current model of globalization and an urgent need for most countries in the world, including China, to initiate a major rebalancing of the way income and wealth (and ultimately political power) is distributed, but there are few if any historical...

5/11

precedents in which this level of restructuring and rebalancing have been neat or orderly.

Beijing's response, which is to do whatever it takes to maintain stability, may look good in the short term, as this strategy always does, but if it prevents the necessary...

12 January 2020 #MAGAanalysis #EO13959

Did We Declare War Against China In November?

I was tagged on a video that's going round this morning. It's got our new, very strange friend Simon Parks, Charlie Ward, and a gal, don't know her last name, named Danielle.

THREAD

1)
#Iran’s regime has a network of apologists/lobbyists in the US influencing foreign policymakers.

Kaveh Afrasiabi was recently arrested for acting as an agent of #Iran's regime.
https://t.co/fJq6jRtBha

There are more.

cc: @TheJusticeDept

(1/11) This term, I’ve taught a seminar @IslamicSt_UniFR called “Little Ice Ages and Mighty Microbes. What Environmental History Can Tell Us about the #MiddleEast”. These are some of the things that I’ve learned. A thread. #twitterstorians #environmentalhistory

(2/11) The Arab invasion of #Iran led to a cotton boom – until the 11th century. Then a “big chill” made agriculture detract. Leading Sunni scholars moved elsewhere &bimportant madrasas closed. This helped to eventually convert Iran into Shi’i-majority lands in the 16th century.

(3/11) The “golden age” of the Ottoman Empire saw the conquest of Egypt. With grain (incl. rats/fleas) now being shipped in huge quantities from Alexandria to #Istanbul, the capital became a constant “plague hub” (which, in turn, dramatically increased Ottoman medical knowledge).

(4/11) At the same time, several #Ottoman provinces were already operating at the ecological limit while still being forced to provide Istanbul with animals. When the Little Ice Age hit these semiarid areas in the late 16th century, significant rebellions & crises ensued.

(5/11) Not only humans suffered but animals, too. Epizootics killed livestock in 18th century #Egypt, which made peasants become more dependent on large landholders. Consequently, “changes in nature of rural labor degraded the lives of both beast and man.”

Why should we be careful when talking about a “jobs bounce-back” in South Africa? - A THREAD.

You don’t get better labour market economists in South Africa than the @NIDS_CRAM team, but the main finding of an “employment bounce-back” seems counterintuitive. What’s going on? 1/n

NIDS-CRAM does NOT show a rebound to pre-COVID employment levels. They report 700,000 job lost between Feb and Oct 2020, this is massive = 3.85% fall (broad definition). The authors of the employment paper say this could be as high as 5.3% or 960,000 jobs.

The authors @joshbudlender @ihsaanbassier (+ Rocco) also show that Oct employment is normally higher than Feb employment, super roughly Oct is plausibly around 102% of Feb. This means it’s plausible 360,000 jobs would have been gained between Feb-Oct *anyway*.

This would mean - within the study parameters - it’s possible COVID has caused up to (an outer outer limit) of 1.32 million job losses when comparing Oct 2020 with what we would have expected it to be in normal times. This is a total disaster in the context of the SA economy.

This is roughly what we should expect from the StatsSA QLFS. This showed 2.2 million jobs lost in first half of 2020, and 543,000 regained in Q3, meaning a loss of just under 1.7 million jobs in first 9 months. We’d definitely expect some more jobs regained in Oct-Dec.