• Commentary
  • Research
  • Experts
  • Events
Carnegie China logoCarnegie lettermark logo
{
  "authors": [
    "Michael Pettis"
  ],
  "type": "legacyinthemedia",
  "centerAffiliationAll": "dc",
  "centers": [
    "Carnegie Endowment for International Peace"
  ],
  "collections": [],
  "englishNewsletterAll": "asia",
  "nonEnglishNewsletterAll": "",
  "primaryCenter": "Carnegie Endowment for International Peace",
  "programAffiliation": "AP",
  "programs": [
    "Asia"
  ],
  "projects": [],
  "regions": [
    "North America",
    "United States",
    "East Asia",
    "China"
  ],
  "topics": [
    "Economy",
    "Trade",
    "Foreign Policy"
  ]
}

Source: Getty

In The Media

China’s War on Low U.S. Interest Rates—When Imbalances Get Out of Hand

Despite recent Chinese criticism of low U.S. interest rates, changing these rates in either direction would have adverse effects on China’s economy, underscoring the deep imbalances in the global financial system.

Link Copied
By Michael Pettis
Published on Nov 17, 2009

Source: The New York Times

China’s War on Low U.S. Interest Rates—When ImbalaEDITORS: After their summit meeting on Tuesday, President Obama and President Hu Jintao  of China announced that they had agreed on many issues. But their statement was vague, in contrast to the pointed criticisms Chinese officials have been making of American financial policies in recent days. Over the weekend, China’s top bank regulator attacked the low interest rates in the United States, even though the Federal Reserve continues to indicate that it will not raise them anytime soon. Would higher rates in America be in China’s best interests anyway? While Chinese investments might earn higher returns, if American consumers spend even less if it costs more to borrow, would that be a bigger problem? Or is China less and less dependent on Americans’ ability to buy its products?

PETTIS: The criticism by China’s top bank regulator, Liu Mingkang, of too-low U.S. interest rates indicates how terribly confused the debate has become. Low U.S. interest rates and the expected depreciation of the American dollar encourage investors to borrow dollars and invest in Asia, where it may be encouraging additional investment in China, a country that is already drowning in too much investment.

But low interest rates in the U.S. will help reverse the sharp fall in U.S. consumption that has been catastrophic for China’s export sector.

China’s overinvestment problem was created as part of the imbalance that had Chinese overproduction feeding American overconsumption for many years. China’s huge stimulus is likely to increase production even further at the expense of domestic consumption, putting even more pressure on China to sell its excess capacity to American consumers.

So which hurts China, lower or higher U.S. interest rates? Unfortunately, both. That is the problem with imbalances getting out of hand. They are never easy to fix.

About the Author

Michael Pettis

Nonresident Senior Fellow, Carnegie China

Michael Pettis is a nonresident senior fellow at the Carnegie Endowment for International Peace. An expert on China’s economy, Pettis is professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets. 

    Recent Work

  • Commentary
    A China Financial Markets Post

      Michael Pettis

  • Commentary
    What’s New about Involution?

      Michael Pettis

Michael Pettis
Nonresident Senior Fellow, Carnegie China
Michael Pettis
EconomyTradeForeign PolicyNorth AmericaUnited StatesEast AsiaChina

Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.

More Work from Carnegie China

  • Commentary
    Malaysia’s Year as ASEAN Chair: Managing Disorder

    Malaysia’s chairmanship sought to fend off short-term challenges while laying the groundwork for minimizing ASEAN’s longer-term exposure to external stresses.

      Elina Noor

  • Commentary
    When It Comes to Superpower Geopolitics, Malaysia Is Staunchly Nonpartisan

    For Malaysia, the conjunction that works is “and” not “or” when it comes to the United States and China.

      Elina Noor

  • Commentary
    ASEAN-China Digital Cooperation: Deeper but Clear-Eyed Engagement

    ASEAN needs to determine how to balance perpetuating the benefits of technology cooperation with China while mitigating the risks of getting caught in the crosshairs of U.S.-China gamesmanship.

      Elina Noor

  • Commentary
    Neither Comrade nor Ally: Decoding Vietnam’s First Army Drill with China

    In July 2025, Vietnam and China held their first joint army drill, a modest but symbolic move reflecting Hanoi’s strategic hedging amid U.S.–China rivalry.

      • Nguyen-khac-giang

      Nguyễn Khắc Giang

  • Commentary
    Today’s Rare Earths Conflict Echoes the 1973 Oil Crisis — But It’s Not the Same

    Regulation, not embargo, allows Beijing to shape how other countries and firms adapt to its terms.

      Alvin Camba

Get more news and analysis from
Carnegie China
Carnegie China logo, white
  • Research
  • About
  • Experts
  • Events
  • Contact
  • Careers
  • Privacy
  • For Media
Get more news and analysis from
Carnegie China
© 2026 Carnegie Endowment for International Peace. All rights reserved.