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Michael Pettis

@michaelpettis.bsky.social

12K followers 98 following 4.6K posts

Senior Fellow at Carnegie China. For speaking engagements, please write to [email protected]

Michael Pettis is an American professor of finance at Guanghua School of Management at Peking University in Beijing and a nonresident senior fellow at the Carnegie Endowment for International Peace. He was founder and co-owner of punk-rock nightclub D22 in Beijing, which closed in January 2012. .. more

Economics 76%

Political science 11%

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Michael Pettis @michaelpettis.bsky.social · 8h

8/8
For me these are the two key questions for China: first, when will the US succeed in cutting its trade deficits, and second, will the EU be able to prevent itself from replacing US deficits? China must rebalance before these two things happen.

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Michael Pettis @michaelpettis.bsky.social · 8h

7/8
The other way is for some other country (and this basically means the EU) to provide the deficits that replace US deficits, and this is something that the EU wants to avoid at all costs. Whether or not they are able to do so is still up for debate.

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Michael Pettis @michaelpettis.bsky.social · 8h

6/8
But that is the wrong way to think about it. If the US succeeds in cutting its deficit, there are only two ways the world can respond. One is for surplus countries to cut their surpluses, which will be extremely painful if they cannot count on domestic demand.

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Michael Pettis @michaelpettis.bsky.social · 8h

5/8
Because many analysts seem to think that what matters in the trade dispute is the bilateral Chinese surplus with the US, rather than the overall US trade deficit, they speak of China's growing surpluses with the rest of the world as an indication of export "resilience".

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Michael Pettis @michaelpettis.bsky.social · 8h

4/8
To the extent that Washington understands this, my guess is that it can afford to be accommodative on bilateral discussions, but will increasingly focus on cutting the overall trade deficit. This will inevitably mean a change in the current trade policies.

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Michael Pettis @michaelpettis.bsky.social · 8h

3/8
Although it is the growing US trade deficit that accommodates the growing Chinese surplus, I suspect many in Beijing think that it is the bilateral surplus with the US that matters, which is why it believed it needed to "win" the trade discussions as quickly as possible.

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Michael Pettis @michaelpettis.bsky.social · 8h

2/8
This is also the impression I got from my meetings last week. There is a sense that Beijing overplayed its hand, perhaps because until China is able to boost domestic demand (something that will be extremely difficult), it is still very vulnerable to a trade contraction.

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Michael Pettis @michaelpettis.bsky.social · 8h

1/8
WSJ: "President Trump is trying to publicly de-escalate tensions with China to soothe markets while privately keeping up pressure on Beijing—a difficult balancing act that is being closely watched by Wall Street."
www.wsj.com/world/china/...

U.S., China Aim for a Delicate Balancing Act on Trade

Beijing is eager to save Trump-Xi summit, and Washington wants to stem stock-market losses

www.wsj.com

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Michael Pettis @michaelpettis.bsky.social · 14h

2/2
Here is Joyside performing in D22, one of our favorite bands.

Michael Pettis @michaelpettis.bsky.social · 14h

1/2
A friend just sent me this picture I had to share. It is of when I had dinner, about 12 years ago with the New York Doll's David Johansen and Sylvain Sylvain and Joyside's Bian Yuan.

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Michael Pettis @michaelpettis.bsky.social · 14h

2/2
He makes six proposals, all of which except the last involve significant fiscal expansion and more debt. The last, more support for the export sector, recommends among other things that exporters be given easier access to credit.

Michael Pettis @michaelpettis.bsky.social · 14h

1/2
Interesting article by Lian Ping, director of the China Chief Economist Forum, who argues that "China continues to face risks and perils on multiple fronts, all of which threaten to undermine its economic growth prospects."
www.chinabankingnews.com/p/the-six-po...

The six-point plan to save China's economy from "landslide" decline

Lian Ping says China's economic woes are far from over...

www.chinabankingnews.com

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Michael Pettis @michaelpettis.bsky.social · 14h

4/4
respond to the claims of ordinary Americans, ensuring that capitalism’s benefits are shared more broadly, it not only strengthens democracy—it’s good for business, too."

This, by the way, is the same argument Marriner Eccles – FDR's Fed chairman – used to make.

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Michael Pettis @michaelpettis.bsky.social · 14h

3/4
They also always result in predictions of societal collapse, but in fact they may just be the way in which political and economic systems adjust to changed conditions, a process that is never pleasant. Levy concludes: "History shows that when those in power are forced to...

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Michael Pettis @michaelpettis.bsky.social · 14h

2/4
These periodic "Jacksonian" revolts, as I think of them, seem to occur whenever income inequality is extremely high, for example in the 1830s, the 1890s, or the 1930s. They're never pretty, as Levy notes, and tend to generate intense political polarization and the breaking up of institutions.

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Michael Pettis @michaelpettis.bsky.social · 14h

1/4
Interesting piece by Jonathan Levy, who argues that the current "polarization" in American politics, in which capitalism and democracy have seemed at cross purposes for over a decade, is neither new nor necessarily a bad thing.
@_jonlevy
www.wsj.com/politics/uni...

Capitalism and Democracy Often Clash in America. They Usually End Up Better for It.

Economic booms sparked by capitalism can lead to inequality and then political upheaval. Democracy and capitalism, however, tend to improve as a result.

www.wsj.com

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Michael Pettis @michaelpettis.bsky.social · 18h

According to Yicai, spending this year during the Golden Week holiday was up 15% compared to last year, although at least part of this can be attributed to this year's holiday extending to 8 days rather than 7 days last year.
www.yicaiglobal.com/news/chinas-...

China’s Golden Week Holiday Spending Jumps 15% to USD114.5 Billion

www.yicaiglobal.com

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Reposted by Iikka Korhonen

Michael Pettis @michaelpettis.bsky.social · 19h

4/4
As long as Beijing is willing to tolerate extremely rapid rises in debt, GDP growth doesn't tell us much about the health of the economy. What matters is the components of growth and how growth was achieved.
carnegieendowment.org/posts/2025/0...

How to Predict China’s Economic Performance for 2025: A Sectoral Approach

GDP growth means something fundamentally different in China than in most countries.

carnegieendowment.org

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Michael Pettis @michaelpettis.bsky.social · 19h

3/4
That's because the GDP growth target was not a prediction of what Beijing thought the Chinese economy might achieve, but an actual target which local governments were required to meet. This can only happen in an economy that operates mostly under soft budget constraints.

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Michael Pettis @michaelpettis.bsky.social · 19h

2/4
Back in May I wrote that while most analysts were forecasting Chinese GDP growth rates for 2025 well below the 5% GDP growth target, by the end of the year all the forecasts would converge to 5%.

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Michael Pettis @michaelpettis.bsky.social · 19h

1/4
Yicai: "China is expected to achieve GDP growth of 4.8 percent in 2025 and 4.2 percent in 2026, up from the previously forecasted 4.0 percent for both years in April, according to the World Bank."
www.yicaiglobal.com/news/china-t...

China to Grow 4.8% in 2025 Amid Regional Slowdown: World Bank

www.yicaiglobal.com

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Michael Pettis @michaelpettis.bsky.social · 19h

Good Caixin story on the bankruptcy process: "For Beijing, this is about more than paperwork. As debt piles up and growth slows, China needs a functioning exit valve — one that can unwind failed firms without triggering social unrest or financial contagion."
www.caixinglobal.com/2025-10-13/c...

Cover Story: China Rewrites the Rules of Financial Failure

Beijing’s draft bankruptcy law revision widens the state’s role, expands creditor protection and introduces paths for reorganization and limited personal debt relief

www.caixinglobal.com

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Reposted by Michael Pettis

Reposted by Michael Pettis, Peter J. Boettke, Andrea Presbitero , and 1 more Michael Pettis, Peter J. Boettke, Andrea Presbitero, Timur Kuran

Michael Pettis @michaelpettis.bsky.social · 1d

2/2
weaknesses in its economy, this would require costly adjustments that would create new winners and losers domestically and painful tensions with them." China cannot rebalance domestic demand, in other words, with undermining its strength in technology and manufacturing.

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Michael Pettis @michaelpettis.bsky.social · 1d

1/2
Good Scott Kennedy and Scott Rozelle piece on how China's strength in technology and manufacturing and its weak domestic demand are two sides of the same coin. They note that "No reform is costless. If China sought to address the structural...
foreignpolicy.com/2025/10/10/c...

China’s Tech Obsession Is Weighing Down Its Economy

A decade of cutting-edge investment hasn’t translated into growth.

foreignpolicy.com

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