Cautious Optimism About China

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In The Media

Cautious Optimism About China

China's new political leadership knows that economic reform is necessary, but has difficulty gathering the political will to enact such reforms.

By Michael Pettis

Published on Nov 13, 2012

Source: CNBC's Worldwide Exchange

Speaking on CNBC's Worldwide Exchange, Carnegie's Michael Pettis noted that he believes China's new leardership understands the urgency of implementing economic reforms. However, he explained that he is only cautiously optimistic that reforms will actually be enforced, given that the groups who have benefitted from China's investment-driven miracle are unwillingly to see adjustments to China's economy.

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
The Plaza Accord and Its Relevance for China
- Michael Pettis
Commentary
Who Paid for China’s Last Debt Cleanup, and Who Will Pay for the Next?
- Michael Pettis

Economy East Asia China

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

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The Plaza Accord and Its Relevance for China
The Plaza Accord was not an externally imposed punishment of Japan but part of a broader restructuring that Japanese economists and policymakers themselves recognized was necessary. Its effects were undermined, however, when Tokyo responded to the resulting slowdown with policies that exacerbated investment, credit expansion, and the very imbalances the adjustment was intended to resolve.
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Paper
Untangling the Nuclear Knot: A Constructive Agenda for Managing China’s Nuclear Relations with the United States and Its Allies
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More Work from Carnegie China

Commentary

China Financial Markets

The Plaza Accord and Its Relevance for China

The Plaza Accord was not an externally imposed punishment of Japan but part of a broader restructuring that Japanese economists and policymakers themselves recognized was necessary. Its effects were undermined, however, when Tokyo responded to the resulting slowdown with policies that exacerbated investment, credit expansion, and the very imbalances the adjustment was intended to resolve.

Michael Pettis

The nuclear missile formation passes through Tian'anmen Square during a military parade on September 3, 2025 in Beijing, China.

Paper

Untangling the Nuclear Knot: A Constructive Agenda for Managing China’s Nuclear Relations with the United States and Its Allies

The nuclear relationship between China and the United States is increasingly shaped by widening perception gaps rather than deliberate strategic design.

Tong Zhao

Commentary

China Financial Markets

Who Paid for China’s Last Debt Cleanup, and Who Will Pay for the Next?

China’s banking crisis in the 2000s was resolved by transferring the costs to households through financial repression—a decision that recapitalized the banks while exacerbating the structural imbalances that continue to shape the Chinese economy today.

Michael Pettis

Robot arm with disposable test tube virus sampling in laboratory

Commentary

Caught in the Middle: Chinese Biotech Firms’ Divergent Responses to U.S. Sanctions

Chinese biotech companies have been on the receiving end of U.S. economic coercion. Yet their responses have differed significantly because firm and state interests are not uniformly aligned. For Washington, treating all Chinese tech firms the same, irrespective of their actual interests, risks pushing them farther into Beijing’s corner.

Xue Gong

An aerial drone photo taken on June 4, 2026 shows a wind-photovoltaic power storage station of Huadian Inner Mongolia New Energy Co., Ltd. as part of the Horinger data center cluster green energy supply demonstration project, in Hohhot, north China's Inner Mongolia Autonomous Region.

Commentary

Are Data Centers the Solution to China’s Renewables Excess Capacity?

China’s latest energy plan explicitly calls for integrating data centers into the electricity system, particularly connecting them to green energy. It appears Beijing wants to use compute as a source of domestic demand to absorb renewables excess capacity.

Damien Ma