Pettis, an expert on China’s economy, is professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets.
Michael Pettis is a nonresident senior fellow in the Carnegie–Tsinghua Center for Global Policy. 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.
From 2002 to 2004, he also taught at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs.
Pettis worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the sovereign debt trading team at Manufacturers Hanover (now JPMorgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was managing director principal heading the Latin American capital markets and the liability management groups. He has also worked as a partner in a merchant-banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team.
In addition to trading and capital markets, Pettis has been involved in sovereign advisory work, including for the Mexican government on the privatization of its banking system, the Republic of Macedonia on the restructuring of its international bank debt, and the South Korean Ministry of Finance on the restructuring of the country’s commercial bank debt.
He formerly served as a member of the Board of Directors of ABC-CA Fund Management Company, a Sino–French joint venture based in Shanghai. He is the author of several books, including The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy (Princeton University Press, 2013).
There are conditions under which governments can create money—or debt—without fear of inflation or excessive debt burdens. There are other conditions under which debt or money creation can lead to inflation and balance sheet problems.
Taxing capital inflows is a far better way to balance trade than imposing tariffs. This would address the root causes of trade imbalances, improve the productive investment process, and shift most of the adjustment costs onto banks and speculators.
Facebook seems to think its new digital currency Libra will be used mainly for purchasing goods and services and for current account transactions. But it will probably be used mainly for capital account transactions. Do we really want to eliminate frictional costs on the capital account?
Income inequality in the United States hampers growth and forces up debt. In advanced economies in which investment is not constrained by scarce savings, high levels of income inequality lead automatically to either more unemployment or more debt. Such inequality undermines not only the health of the economy, but eventually also the rich.
While foreign investment usually benefits developing economies and creates local economic benefits in advanced economies, it generally does not benefit advanced economies on the whole except in very limited cases. On the contrary, foreign investment in advanced economies is more likely to lead to higher unemployment or rising debt.
A number of recent articles suggest 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.
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.
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.
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.
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.