Forward Guidance

China Is Exporting Unemployment | Michael Pettis on Global Trade Imbalances, American Capital Controls, and the End of The Chinese Growth Miracle

Jul 18, 2024

Michael Pettis, financial expert, discusses China's investment-driven growth model, challenges in increasing consumption, comparisons to Japan's economic decline, impact of trade surpluses on deficit countries, and the fallacy of 'trade is always good' mindset among economists.

01:31:40

Episode guests

Michael Pettis

AI Summary

Highlights

AI Chapters

Episode notes

Podcast summary created with Snipd AI

Quick takeaways

China's investment-driven growth poses risks with rising debt and unproductive investments.

Transition to consumption-driven model in China necessitates boosting household income for sustainable consumption.

Global trade dynamics influenced by industrial policies, currency devaluation, and trade imbalances lead to interconnected economies.

Deep dives

Impact of Investment-Driven Growth Model on Chinese Economy

China's investment-driven growth model has led to non-productive investments and rising debt outpacing GDP growth since 2007-2008. In 2021, constraints were placed on the real estate sector, which accounted for a significant portion of China's investment. As China shifted investment from property to manufacturing in 2022, challenges arose due to the global impact of its high manufacturing and trade surpluses.

Impact of China's Trade Imbalances on Global Economies

04:06

Analyzing Global Trade Imbalances and Their Effects on Employment and Demand

04:42

Analyzing China's Growth Model and Economic Challenges

02:14

China's Dilemma: Boosting Domestic Demand vs. Export Subsidies

03:30

Intro

3min

Challenges in Rebalancing China's Economy

22min

Impact of China's Trade Imbalances on Global Economies

10min

Exploring Global Trade Imbalances and Economic Interventions

16min

Analyzing China's Subsidies to Manufacturers and the US Response

2min

Debating Industrial Policy and Global Trade Interdependencies

23min

China's Banking System and Economic Stability

10min

Impact of Falling Real Estate Prices on Economy

7min

Forward Guidance is sponsored by VanEck. Learn more about the VanEck Morningstar Wide MOAT ETF (MOAT) at https://vaneck.com/MOATFG.

Follow Michael Pettis on Twitter https://x.com/michaelxpettis

Follow VanEck on Twitter https://x.com/vaneck_us

Follow Jack Farley on Twitter https://twitter.com/JackFarley96

Follow Forward Guidance on Twitter https://twitter.com/ForwardGuidance

Follow Blockworks on Twitter https://twitter.com/Blockworks_

Recent writings by Michael Pettis:

“Which Country Should Design U.S. Industrial Policy?”: https://carnegieendowment.org/china-financial-markets/2024/07/which-country-should-design-us-industrial-policy?lang=en

“Trade and the Manufacturing Share”: https://www.phenomenalworld.org/analysis/trade-and-the-manufacturing-share/

“Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace”: https://www.amazon.com/Trade-Wars-Are-Class-International/dp/0300244177

Timestamps:

(00:00) Introduction

(01:18) The Problem With China's Investment-Driven Growth Model

(09:52) Why Increasing China's Consumption Is So Hard

(17:36) China's Plan To Reignite Economic Growth In China

(20:43) Why China Will Follow Similar Path To Japan In Its Economic Decline In 1990s

(24:03) Impact That Trade Surplus Countries (China, Germany, etc.) Have on Trade Deficit Countries (U.S., U.K., etc.)

(28:06) VanEck Ad

(28:46) Interview Continues

(36:59) The Fall of The "Trade Is Always Good" Consensus Among Economists

(49:58) Permissionless Ad

(50:57) Is China "Cheating At Trade"?

(57:19) The Three Things The U.S. Can Do To Respond To Its Role As "Global Consumer Of Last Resort"

(01:01:53) Why U.S. Capital Controls Are Necessary To Truly Fix The American Trade Deficit

(01:06:35) Both Trump and Biden Factions Are Determined To Resolve U.S.' Trade Imbalances

(01:08:36) China's Move From Real Estate To Manufacturing Is Exacerbating Its Trade Surplus With The Rest Of The World

(01:14:53) Chinese Real Estate Crisis Unlikely To Imperil The Chinese Banking System, Argues Pettis (Because The Government Is In Control)

(01:18:58) What About The Chinese Shadow Banking System?

(01:21:13) How Pettis Sees This All Playing Out

(01:25:09) How Falling Real Estate Prices (And Stock Markets) Impact Sentiment In China

Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.

Get the Snipd
podcast app

Unlock the knowledge in podcasts with the podcast player of the future.

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Share
& Export

Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Forward Guidance

China Is Exporting Unemployment | Michael Pettis on Global Trade Imbalances, American Capital Controls, and the End of The Chinese Growth Miracle

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Impact of Investment-Driven Growth Model on Chinese Economy

Challenges in Transitioning to Consumption-Driven Model

Global Implications of China's Economic Policies

Impact of Industrial Policies on Manufacturing Sector in Surplus and Trade Deficit Countries

Options for US Policy Response to Global Imbalances

Impact of China's Trade Imbalances on Global Economies

Analyzing Global Trade Imbalances and Their Effects on Employment and Demand

Analyzing China's Growth Model and Economic Challenges

China's Dilemma: Boosting Domestic Demand vs. Export Subsidies

Get the Snipd
podcast app

AI-powered
podcast player

Discover
highlights

Save any
moment

Share
& Export

AI-powered
podcast player

Discover
highlights

Forward Guidance

China Is Exporting Unemployment | Michael Pettis on Global Trade Imbalances, American Capital Controls, and the End of The Chinese Growth Miracle

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Impact of Investment-Driven Growth Model on Chinese Economy

Challenges in Transitioning to Consumption-Driven Model

Global Implications of China's Economic Policies

Impact of Industrial Policies on Manufacturing Sector in Surplus and Trade Deficit Countries

Options for US Policy Response to Global Imbalances

Impact of China's Trade Imbalances on Global Economies

Analyzing Global Trade Imbalances and Their Effects on Employment and Demand

Analyzing China's Growth Model and Economic Challenges

China's Dilemma: Boosting Domestic Demand vs. Export Subsidies

Get the Snipdpodcast app

AI-poweredpodcast player

Discoverhighlights

Save anymoment

Share& Export

AI-poweredpodcast player

Discoverhighlights

Get the Snipd
podcast app

AI-powered
podcast player

Discover
highlights

Save any
moment

Share
& Export

AI-powered
podcast player

Discover
highlights