In Restructuring the Chinese Economy, Michael Pettis outlines six paths that China can follow—the only logical paths that lead ultimately to. Avoiding the Fall: China’s Economic Restructuring. MICHAEL PETTIS. Copyright Date: Published by: Carnegie Endowment for International Peace. Avoiding the Fall has 98 ratings and 6 reviews. The days of rapid economic growth in China are over. Mounting debt and rising internal distortions mean t.
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Avoiding the Fall: China’s Economic Restructuring by Michael Pettis
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China’s Economic Restructuring by Michael Pettis. The days of rapid economic growth in China are over. Mounting debt and rising internal distortions mean that rebalancing is inevitable. Beijing has no choice but to take significant steps to restructure its economy. The only question is how to proceed. Michael Pettis debunks the lingering bullish expectations for China’s economic rise and details Beijing’s options. The urge The days of rapid economic growth in China are over.
The urgent task of shifting toward greater domestic consumption will come with political costs, but Beijing must increase household income and reduce its reliance on investment to avoid a fall. To see what your friends thought of this book, please sign up. To ask other readers questions about Avoiding the Fallplease sign up.
Lists with This Book. This book is not yet featured on Listopia. Apr 21, Myoungseok Jeong rated it really liked it. Fresh insight, especially about accounting wise.
But it could be more compacted. Jan 20, Liam rated it it was amazing. Ask most people what China’s comparative advantage is, and they are likely to say that it is the huge pool of cheap and disciplined labor. But in fact this doesn’t seem to be reflected in the economy. If China’s comparative advantage were cheap labor, we would expect its growth to be heavily labor-intensive as businesses laded up on the most efficient input. But China’s growth is actually heavily capital-intensive.
Avoiding the Fall: China’s Economic Restructuring
The very cheap capital especially means that a very significant portion of the cost — as much as 20 to 40 percent of the total amount of the loan — is forced onto depositors just in the form of low interest rates. This is effectively a form of avoidlng forgiveness granted, unknowingly, by depositors. This is just arithmetic. In exchange, however, China’s domestic market will become a bigger source of demand as Chinese households benefit from rebalancing.
Over ffall long term, Chinese growth will be much healthier and the risk of a Chinese debt crisis much reduced, but over the short term, unless there is an unlikely surge in global demand, China cannot both rebalance its economy and improve its trade performance. Just as a thw of the renminbi implies a transfer of wealth from the People’s Bank of China to Chinese households, and so is likely to increase consumption, other transfers from the state sector to households can have the same effect.
Pettis lives in Beijing and is a professor of finance there. He was a very successful micchael prior to this. Pettis thinks that China is massively over investing in infrastructure and that this investment has become unproductive.
He points to the examples of Brazil in the s, Japan in the s, the US in the early s and a hypothesized example of Germany in the late s as examples of a failure of this kind of development.
He agoiding spends much of the pondering how China can micheal increase consumption rapidly enough to handle a fall in GDP growth when investment and export growth simply cannot support the growth of the economy any more.
Brazil does not fit into the group. When Brazil crashed it was not at a world leading level of wealth per capita. Fzll question for China is when will growth slow down? The book is somewhat reminiscent of the arguments of Steve Keen, the Australian economist who believed ppettis there was massive debt overhang in the early s that would lead to a financial calamity.
Keen was right overall but wildly wrong on detail, he made a bet that Australian houses would plummet in value which they promptly did not. Nonetheless Keen was right overall that global debt and housing price rises would lead to serious trouble. The book is definitely worth reading for anyone interested in looking at why China may well crash in the next few years. It afll well be wrong, but it is definitely not crazy and definitely is fascinating.
The upside is that while China will slow dramatically in the rebalancing process, the shift towards consumption will partially offset pettis slowing and insulate the household sector. The downside is that notwithstanding this the most benign forms of rebalancing are politically threatening and thus, in Michael Pettis’s view, unlikely to occur. The story Pettis tells would all cohere even if China was a closed economy–much of it is about domestic savings and its allocation to domestic investment–although it also has a substantial international component that will affect the global economy.
What makes Pettis’s book so striking is when he puts his arguments to the test–predicting that China will grow at a percent annual rate in the coming decade. This puts him numerically below many of the other China bears even if his qualitative arguments are similar. Some of the argumentation in the book is overly breathless for my taste, especially around global rebalancing. And much of it makes it sound like Pettis has invented some of the more basic concepts.
But overall it is an interesting, provocative and timely fapl on China’s economy. Apr 29, Tirath rated it it was amazing. One of the best books I have read this year.
The reader would require a basic understanding of balance of payments, but beyond that, Pettis does a fabulous job of explaining what has been going wrong with the China model of growth, and how it has been successfully fire-fighting up until now. I particularly admire the sequence of chapters and perfect progression of explanation of the situation.
Pettis draws apt parallels between China, and Brazil of 70s, US of the 20s and 30s, Japan of the 90s; and One of the best books I have read this year. Pettis draws apt parallels between China, and Brazil of 70s, US of the 20s and 30s, Japan of the 90s; and very logically goes on to show the need for China to rebalance, followed by how it could potentially do so.
He also addressed a very big confusion – why has Chinese inflation been so low in the face of growing credit and very high nominal GDP growth. This book is already a classic for me. Sub three percent growth is a certainty. Nov 30, JG rated it liked it Shelves: If you have read his previous book: It’s a great book though. Luke rated it it was amazing Mar 20, Steve Waas rated it liked it Nov 16, Peter rated it really liked it Oct 13, Jonathan Tepper rated it really liked it Oct 13, Ayman Hindy rated it really liked it May 05, Kevin rated it really liked it Jan 25, Samuel Gruen rated it really liked it Aug 14, Jack Van rated it really liked it Oct 05, John Lowe rated it it was amazing Sep 06, Vineet Tandon rated it liked it Mar 22, Anton I rated it really liked it Oct 08, Nazri Awang rated it liked it Apr 18, Faris rated it it was amazing Jun 04, Mauricio Santoro rated it really liked it Jun 22, Ksenia Kondrashina rated it it was amazing Jun 20, Microdcm rated it really liked it Aug 29, Joe Coffey rated it it was amazing Dec 30, Mike rated it really liked it Jul 18, Kaustubh Sule rated it it was amazing Aug 14, Francis Dwayne rated it it was amazing Jul 17, Zack Sanders rated it really liked it Nov 22, James Fee rated it it was amazing Mar 02, Chen rated it really liked it Dec 28, Jason Kam rated it it was amazing Dec 24, There are no discussion topics on this book yet.
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Quotes from Avoiding the Fall Value investors allocate capital to its most productive use. Speculators, because they trade frequently, provide the liquidity and trading volume that allows value investors and relative value traders to execute their trades cheaply. They also ensure that information is disseminated quickly.