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).
China’s rebalancing can only occur in a limited number of ways, and each of these has a fairly predictable impact. The path Beijing chooses to follow will likely be based on political decision-making.
China’s problem is excessive debt in the economy, not a banking system facing insolvency. Beijing’s reform strategy should reduce the debt burden as quickly as possible to minimize the economic costs.
There is no way Beijing can address its debt problem without a sharp drop in GDP growth, but as unwilling as Beijing may be to see much lower growth, it doesn’t have any other option.
China is embarking on ambitious economic reforms to boost its growth prospects. What is the rationale behind these new reforms and what are the prospects for their success?
A simple model can help illustrate the problems that China will face over the coming decade.
Because savings and investment must always balance, the idea that the savings rate in any country is determined at home is nonsense.
While it is difficult to predict the nature and timing of the shocks buffeting China’s economy, China’s difficult economic situation makes such crises inevitable.
Some analysts contend that the RMB is no longer undervalued but is in fact overvalued. However, a more careful analysis suggests that the yuan is still undervalued, but perhaps not by much.
The structure of investment strategies in the Chinese stock markets had always guaranteed that this would be a brutally volatile market that trades almost exclusively on “the consensus about the consensus”, and therefore prices will reflect very rapid shifts in this consensus.
Although China’s stock market panic in the summer of 2015 has subsided, the fundamental questions have not been resolved, which leaves it open to possible continued volatility.