Rising U.S. Debt Is the Mirror of Rising Chinese Debt
Carnegie Endowment » China Financial Markets
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8M ago
Both Washington and Beijing treat rising debt as a consequence of irresponsible behavior by local institutions. But in China and the United States, rising debt is spurred by policies that have encouraged distortions in the distribution of domestic income. Until these distortions are addressed, both countries must choose between rising debt and rising unemployment ..read more
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Can China's Long-Term Growth Rate Exceed 2–3 Percent?
Carnegie Endowment » China Financial Markets
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1y ago
Beijing's economic policymakers largely accept that China must rebalance its economy so that growth is driven more by domestic consumption and less by investment. But once China begins to take seriously the need to rebalance its economy, China's annual GDP growth is unlikely to exceed 2–3 percent for many years, unless there is a substantial increase in the growth rate of consumption ..read more
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How China Would Respond to Lower Exports
Carnegie Endowment » China Financial Markets
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1y ago
China's large structural trade surpluses are the consequence of internal economic imbalances, which means that any external pressure that results in a contraction of its trade surplus must be accommodated by shifts in these internal imbalances ..read more
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China's Overextended Real Estate Sector Is a Systemic Problem
Carnegie Endowment » China Financial Markets
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1y ago
In the first half of this two-part blog post, I discussed the problems affecting four rural banks in Henan and the subsequent mortgage boycott in parts of China. In the second half, I argue that these crises need to be seen not as isolated events but rather as signs of systemic problems that reveal a great deal about China's finances and balance sheet ..read more
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What's in Store for China's Mortgage Market?
Carnegie Endowment » China Financial Markets
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1y ago
The Chinese economy has been wracked by rural bank defaults and boycotts over mortgage payments. In the first half of this two-part blog post, I will explain these events and what they reveal about the health of Chinese markets. In the second part, I will discuss some of the crisis's systemic implications ..read more
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The Only Five Paths China's Economy Can Follow
Carnegie Endowment » China Financial Markets
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2y ago
There is increasingly a consensus in Beijing that China's excessive reliance on surging debt in recent years has made the country's growth model unsustainable. Aside from the economy's current path, there are only four other paths China can follow, each with its own requirements and constraints ..read more
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Changing the Top Global Currency Means Changing the Patterns of Global Trade
Carnegie Endowment » China Financial Markets
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2y ago
Giving up use of the U.S. dollar for global trade and reserve accumulation would be very difficult for U.S. adversaries and would require major economic adjustments, though it would be in the best long-term interests of the United States for the global use of the dollar to be more constrained ..read more
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How Does Excessive Debt Hurt an Economy?
Carnegie Endowment » China Financial Markets
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2y ago
Most economists have trouble understanding why too much debt may harm an economy, let alone how much debt counts as too much. To make matters worse, the common practice of comparing vastly different countries' debt-to-GDP levels is not a useful tool for gauging how a particular economy is likely to manage its debt burden ..read more
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Will China's Common Prosperity Upgrade Dual Circulation?
Carnegie Endowment » China Financial Markets
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2y ago
Chinese leaders know that they want to discontinue the country's existing growth model, but they haven't yet landed on what the sustainable alternatives are. Beijing's new common prosperity policy will only help shift domestic demand at the margins, but a full-fledged rebalancing will require a more radical transformation ..read more
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What Does Evergrande Meltdown Mean for China?
Carnegie Endowment » China Financial Markets
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2y ago
The impact of Evergrande has caused financial distress to spread faster and more forcefully than Beijing's financial regulators expected, putting pressure on them to move quickly to stop the contagion. But they cannot rescue Evergrande's creditors without also undermining their fight against bad debt ..read more
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