Although standard trade theory predicts that highly advanced economies with sophisticated financial sectors, like the United States, should generally run trade surpluses, the country has run persistent, and often large, trade deficits for five decades. This can only be a consequence of significant global economic distortions.

China Financial Markets provides in-depth analysis of one of the world’s largest and most vital economies. Edited by Carnegie Senior Fellow Michael Pettis based in Beijing, China Financial Markets offers monthly insights into income inequality, market structures, and other issues affecting China and other global economies. A noted expert on China’s economy, Pettis is a professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets.

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  • Why U.S. Debt Must Continue to Rise

    156
    February 07, 2019

    Debt is rising more quickly in the United States than most people would prefer. This is happening in part because the U.S. current account deficit and the country’s high level of income inequality distort the structure and amount of American savings.

  • What Is GDP in China?

    46
    January 16, 2019

    Analysts are increasingly skeptical that China’s very high reported GDP growth rate provides a meaningful picture of the economy’s health. There are, however, at least three very different ways that reported GDP can fail to reflect the underlying economy.

  • What China’s Online Shopping Craze Says About Its Bubble Economy

    22
    November 14, 2018

    November 11, known in China as Singles’ Day, started out as a wry, tongue-in-cheek holiday. It has since become a major draw for online shopping, a profoundly Chinese celebration, and an expression of the country’s modern urban youth. But the rampant commercialization of Singles’ Day may one day come to be seen as a symbol of the era of China’s bubble economy.

  • Beijing’s Three Options: Unemployment, Debt, or Wealth Transfers

    111
    September 05, 2018

    China’s debt problems have emerged so much more rapidly and severely this year than in the past that a growing number of analysts believe that this may be the year that China’s economy breaks. There is no question that China will have a difficult adjustment, but it is likely to take the form of a long process rather than a sudden crisis.

  • The U.S. Trade Deficit Isn’t Caused by Low American Savings

    34
    August 08, 2018

    A recent article by Joseph Stiglitz suggests that the United States runs a current account deficit because its people save too little to fund domestic investment. In fact, he may have it backwards: Americans may save too little precisely because the United States runs a current account deficit.

  • Tariffs and Trade Intervention

    65
    July 10, 2018

    Most of the discussions among economists about the impacts of tariffs and trade intervention are more ideological than logical. While tariffs may cause households to pay more for tradable goods, there are many other ways households, and the overall economy, are affected, positively and negatively. What matters are the conditions under which trade intervention policies are made.

  • High Wages Versus High Savings in a Globalized World

    64
    April 03, 2018

    Democracies will increasingly have to choose between raising wages and redistributing income or maintaining free trade and capital flows. Because they are likely to choose the former, the world may face a long-term reversal of globalization.

  • The GDP of Bridges to Nowhere

    31
    January 25, 2018

    In most economies, GDP growth is a measure of economic output generated by the performance of the underlying economy. In China, however, Beijing sets annual GDP growth targets it expects to meet. Turning GDP growth into an economic input, rather than an output, radically changes its meaning and interpretation.

  • Why China Likely Won’t Buy Fewer U.S. Treasury Bonds

    50
    January 12, 2018

    A January 2018 Bloomberg article suggests that Chinese officials may reduce their purchases of U.S. government bonds. It is very unlikely that China can do so in any meaningful way because doing so would almost certainly be costly for Beijing. And even if China took this step, it would have either no impact or a positive impact on the U.S. economy.

  • EVENT: China’s Economy After the Party Congress

    4
    September 29, 2017

    Michael Pettis will be joined by Carnegie’s vice president for studies Douglas H. Paal to address economic factors challenging China and the new leadership that will emerge from the congress. Watch live on Monday, October 2.

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The Carnegie
Podcast

President Trump has made it clear that he wants to reduce the U.S trade deficit with China. If he follows through on his campaign promises to impose tariffs, how would China react? Is a trade deficit with China necessarily a bad thing for the US? One of the most thought-provoking economists on China, Michael Pettis examines the trade relationship between Washington and Beijing, and explains how the Chinese growth model is facing unique challenges.

The Carnegie Podcast is an occasional series featuring commentary and analysis from Carnegie experts on critical global issues.

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