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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

1/11

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

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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...

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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...

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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...

1/9

While debt-to-GDP ratios already have a limited but very misunderstood use, it seems economists are finding bright new ways of misunderstanding them. Now we say that when nominal interest rates are lower than nominal growth rates, the

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downward pressure on the debt-to-GDP ratio makes rising government debt and larger government deficits more sustainable and more easily justified.

This is totally confused. When the nominal interest rate is lower than the nominal GDP growth rate, it only means that net...

3/9

borrowers are getting a disproportionate share of growth relative to net lenders. This in and of itself changes the comparability of the debt-to-GDP ratio, so the fact that the ratio may decline tells us nothing about its sustainability which, I'm glad to say, isn't...

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a mistake Olivier Blanchard makes in this article.

At least three things matter. First, whether or not rising debt is sustainable depends almost wholly on underlying conditions in the real economy, and only trivially on the arithmetical relationship between...

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the interest rate and the growth rate. Second, this approach simply assumes away financial distress costs, in which case debt capacity is infinite anyway and the interest rate becomes irrelevant. And third, it assumes that the nominal debt level matters independently...

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

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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...

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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.

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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...

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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.

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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...

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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.

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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

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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...

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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...

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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.

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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...

🔴🔴Syria's Kurds ready to get in bed with their worst

Last week, SDC's rep. Sihanouk Dibo stated that they would announce the signing of a new memorandum of understanding with a Syrian opposition party. Yesterday, Ilham Ahmed said that they are planning to hold a national conference for all Syrian opposition forces this year...

These rapprochements might be applauded by Western powers that advocate for regime change, but are disturbing for people in the region. After all, these are the same forces the Kurds have been fighting off for years, and that have taken large swats from the lands they held.

Areas such as Ras al-Ayn, Afrin, Tal Abyad and Suluk, which were previously under Kurdish control, have been violently taken and occupied by the same ‘Syrian opposition’ the SDC now wants to cooperate with.

Dozens – if not hundreds – of civilians and Kurdish fighters were killed in these clashes, and I can only imagine how the families of the victims of these radical groups will feel about the prospect of cooperation with their killers.

In keeping with year-end tradition, I wanted to share the best books I read in 2020 – a year unlike any other - with a list of reads heavily influenced by global events including…

…Race and social justice. While not a planned reading theme as I started the year, social injustices that have plagued our nation for centuries rose up in a jolting manner. May we pass on to our children and grandchildren a more socially just world than we received.

Frederick Douglass, David Blight

Douglass was a self-educated slave who freed himself to become a tireless speaker, political leader & passionate reformer. Even reading his speeches today, you feel drawn to the power, drama & personal suffering of this great man.

Bonhoeffer, Eric Metaxas & Timothy Keller

Theologian, Pastor, Church Leader & spy/traitor. Quite a resume for an influential young German aristocrat. Details the rise of Hitler & pure evil unleashed in the face of the pure good of Christ as seen through Bonhoeffer’s eyes.

So You Want To Talk About Race, Ijeoma Oluo

Jarring. We have so far to go as we confront the realities of systemic racism. Since reading I've sought out reverse mentors to try and learn more. Get comfortable with being uncomfortable. (Much profanity for those sensitive to such)

#Navalny is facing TWO court hearings today; one is happening now. I'm listening to his speech. He's trying to explain: he was not hiding from the court; he was in a coma. The whole thing is so absurd that it is impossible to comment. In a nutshell: they just want him locked up.

It is clear that the verdict will not be overturned. He will go to serve 2.8 years or more in a penal colony. His allies are locked up under home arrests w/o the Internet. People are silenced. Honest and brave people have lost again.

Navalny's last word #1: "I give the last word so frequently. This trial will end now; there will be the second [today]. And there, too, I will say my last word. If someone decides to publish my last words, it will be a thick book..."

"Probably, this is a sign the power sends me, “Look, we can turn this judicial system any way we want. What are you doing? I'm not the only one who sees this and... people imagine that it can happen to them, too..."

Navalny speaks of his newly found faith and says that he experiences "satisfaction" and doesn't regret returning to Russia." He did the right thing and followed the commandment "blessed are those hungry for righteousness, for they will be satisfied"