Both of which are a continuation of the theme for this week.
The thread:
This thread answers the question about whether China finds itself in a liquidity trap. In English, it would seem that no matter what levels of interest rates in the economy, Chinese businesses prefer to save rather than invest.
You may agree or disagree with the conclusion (I most certainly agree), but the data is instructive. Please read the article linked in the first tweet.
The essay:
Any economy broadly speaking has only three sources of demand that can drive growth: consumption, investment, and trade surpluses. For that reason, there are basically five paths that China’s economy could take going forward.
China can stay on its current path and keep letting large amounts of nonproductive investment continue driving the country’s debt burden up indefinitely
The Only Five Paths China’s Economy Can Follow
China can reduce the large amount of nonproductive investment on which it relies to drive growth and replace it with productive investment in forms like new technology
China can reduce the large amount of nonproductive investment on which it relies to drive growth and replace it with rising consumption
China can reduce the large amount of nonproductive investment on which it relies to drive growth and replace it with a growing trade surplus
China can reduce the large amount of nonproductive investment on which it relies to drive growth and replace it with nothing, in which case growth would necessarily slow sharply
Quick note: Blogging may be sporadic and light in the coming days.