Michael Pettis

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Michael Pettis
About the author:

Senior Associate at the Carnegie Endowment for International Peace and a finance professor at Peking University’s Guanghua School of Management.

China's Unruly Debt Woes: Michael Pettis

Date: 29 August 2012

What is the biggest fear hanging over China? Slowing external demand? Could it be the imbalances in its domestic economy? Or the country’s real estate bubble? While these threats are real and challenging nonetheless, debt is China’s most worrying, not to mention understated, problem. As we saw very clearly in the last two years in Europe, debt crises are often downplayed and sneak up on us when we least expect it.  

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Fixing China’s Economic Imbalances: Michael Pettis

Date: 21 August 2012

Recent economic data has shown that China is slowing down. The question is: Should we attempt to revive growth in the world’s second largest economy? Perhaps not. As it is, China bulls have been late in recognising the unhealthy implications of China’s imbalances and, more often than not, have failed to understand that rebalancing cannot occur unless accompanied by a rise in real interest rates and a subsequent fall in investment and growth levels. 

 

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China Sceptics on the Rise: Michael Pettis

Date: 5 July 2012

In the seven years since Beijing promised with increasing urgency to rebalance its economy, China has unfortunately managed to rebalance externally without rebalancing internally. China’s growth has been propelled by state-driven domestic investment, rather than consumption, and despite the availability of cheap capital and socialised credit risks, loan demand and investment levels remain low. Is it any wonder the number of China sceptics is on the rise? 

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Volatile Growth in a Globalised Economy: Michael Pettis

Date: 21 June 2012

Globalisation was the buzzword for several years before the global economic crisis hit. Globalisation brought about promises of increased connectivity, growth, greater transfer of knowledge and wealth. Yet, recent economic drama shows that the process of globalisation brings about higher volatility, making the world economy a lot more vulnerable to contagion and external shocks. Have we been wrong? Will globalisation go bankrupt? 

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Spain in Pain: Why Leaving the Euro Is The Lesser of Two Evils: Michael Pettis

Date: 28 May 2012

As recently as six months ago, one didn’t discuss in polite company in Madrid the possibility that Spain would leave the euro and restructure its debt.  The prospect was unthinkable and like many unthinkable things it could not be discussed. But perhaps things have changed.  If responsible policymakers, advisors, the press, and public intellectuals are indeed discussing and debating the future of the euro now, a real and open debate about Spain’s prospects will quickly move the consensus towards abandoning the euro.

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12 Predictions for the Chinese Economy: Michael Pettis

Date: 15 May 2012

The future of the global economy remains shrouded in mystery. Whether the crises in the United States and the eurozone will improve remains to be seen. While the latest economic data from China largely points to a soft landing, until the Chinese economy rebalances, it will not emerge from its own domestic crisis. In fact, China will be the last major economy to emerge from the global crisis.  

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How China Can Rebalance Its Economy: Michael Pettis

Date: 12 April 2012

China’s economy is grossly imbalanced, and for years many academics have been talking about an imminent rebalancing. For now, it is clear is that China’s rebalancing act will not be automatic. Rich as China may be, weaknesses in China’s economic model will constrain the options Beijing can take. But the bigger question is, does China have the political will to address this problem? 

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The World Bank, Debt, and The Middle Kingdom’s Middle-Income Trap: Michael Pettis

Date: 16 March 2012

China’s woes do not stem directly from the fact that its local governments are struggling to repay its bank loans. After all, it has been correctly argued that the Chinese government can afford to, and will most likely allow the debt to ‘roll over’ to the country’s main balance sheet. But the key problem here is two-fold: China’s debt is rising and it will eventually blow up. Secondly, China needs to identify and ensure that its long-run engine of growth works, given the weak links that exist in China’s socio-economic model. 

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With Her Debt in Tow, Where is China Heading? : Michael Pettis

Date: 27 January 2012

China’s success story is one that would certainly go down the chapters of economic history. While the West firefights its debt crisis, many fail to realize that China too has her own fair share of debt. The overinvestment theory has gained greater attention from academics and politicians alike, and China is now looking to boost internal consumption as its engine of growth. However, unless Beijing has new tricks to cover its losses, her bad debt will put downward pressure on consumption growth. 

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