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Michael Pettis

@michaelpettis.bsky.social
13K followers 102 following 7.5K posts

Senior Fellow at Carnegie China. For speaking engagements, please write to chinfinpettis@yahoo.com

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Michael Pettis @michaelpettis.bsky.social · 12/10/2026
2/2 As the article notes, this surge in debt is largely caused by Beijing's need to maintain investment at an extraordinarily high 40% of GDP if it is to achieve its politically-determined growth targets, even though a rising share of this investment is funding economically non-viable projects.
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Michael Pettis @michaelpettis.bsky.social · 12/10/2026
1/2 WSJ: "Last year, China’s credit to the nonfinancial sector—a broad measure of corporate, government and household borrowings—topped 300% of gross domestic product, 60 percentage points higher than at the end of 2019 and now far bigger than in the U.S. www.wsj.com/world/china/...
wsj.com
Xi’s Superpower Ambitions Fuel a Dangerous Debt Spiral in China
Chinese leader Xi Jinping is presiding over a dangerous spiral of debt that is strangling the economy at home and damaging trade partners around the world.
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Michael Pettis @michaelpettis.bsky.social · 12/10/2026
My tennis-mad friends in Beijing are ecstatic: "Olympic champion Zheng Qinwen became the first Chinese player to win the China Open, beating French ​Open winner Mirra Andreeva 7-5 6-4 on Sunday." www.reuters.com/sports/tenni...
reuters.com
Zheng Qinwen overpowers Mirra Andreeva to win China Open
Olympic champion Zheng Qinwen became the first Chinese player to win the China Open.
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Michael Pettis @michaelpettis.bsky.social · 12/10/2026
Reuters: "Passenger vehicle sales fell 28.1% from a year earlier ​to 1.63 million ​units in September, worsening from ‌a ⁠23.7% decline in August. Car exports jumped 73.2% on ​year to 923,000 ​vehicles ⁠last month, versus a 77.5% rise in ⁠August." www.reuters.com/business/aut...
reuters.com
China home car sales downturn continues, exports retain momentum
China's domestic car sales extended ​their decline for a ‌12th successive month, while exports remained a ​key growth driver ​as automakers looked overseas to ⁠cushion the impact ​of a sluggish home ​...
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Michael Pettis @michaelpettis.bsky.social · 12/10/2026
Very positive move: "China’s labor ministry released draft rules that would set nationwide protections for workers in the fast-growing gig economy, including minimum-pay safeguards and stronger obligations for internet platforms." www.caixinglobal.com/2026-10-09/c...
caixinglobal.com
China Unveils First Nationwide Labor Rules to Protect Gig Economy Workers
The sweeping draft regulations aim to secure minimum pay, guarantee rest periods, and curb arbitrary fines for millions of delivery riders and ride-hailing drivers who currently fall outside tradition...
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
Very good piece.
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
Caixin: "China’s Ministry of Finance announced Friday that it will allow local governments to tap 550 billion yuan ($82 billion) in unused debt quotas to plug budget gaps and fund infrastructure projects as policymakers intensify efforts to bolster the economy." www.caixinglobal.com/2026-10-09/b...
caixinglobal.com
Beijing Lets Local Governments Tap 550 Billion Yuan in Unused Debt Quotas
The ministry will direct 300 billion yuan to county and district budgets and 250 billion yuan to infrastructure, as policymakers step up efforts to support the economy
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
2/2 Although you probably wouldn't know this from reading the Chinese or foreign press, China probably has the worst debt dynamics of any major economy today. Its debt-to-GDP ratio is the second highest (after Japan) and is the fastest growing in history.
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
1/2 FT: "China’s growing debt pile is constraining the government’s fiscal capacity for sweeping new stimulus to revive flagging domestic demand and strengthen economic growth, studies of state finances show." www.ft.com/content/a0ff...
ft.com
China’s growing debt burden limits space for economic stimulus
Mounting interest payments restrict headroom to revive domestic demand, say experts
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
6/6 GDP (which would be politically disruptive as well as bad for the global economy) or to intervene in its external accounts in such a way that it reverses the competitive impact of China's low household share of GDP.
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
5/6 rather because of its deep consumption imbalance and the very low household income share of GDP. As long as that happens, the only recourse for the EU, if it does not want to accept deindustrialization, is either to reduce its own household share of...
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
4/6 For historical reasons, trade discussions are usually held on a product-by-product basis, but while that may make sense in a world of broadly balanced trade, it makes no sense in a world of deep, persistent imbalances. China runs huge surpluses not because it produces too many hybrids but...
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
3/6 All that will happen is a shift in the locus of net manufacturing imports from China, so that EU producers of hybrids will be better off, but at the expense of other EU manufacturers.
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
2/6 This may seem like a victory, but the problem is a systemic one, and not sectoral. Because this agreement does not in any way address either China's demand imbalance or the overall role of the EU in absorbing that imbalance, it won't have much effect on overall EU manufacturing.
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Michael Pettis @michaelpettis.bsky.social · 11/10/2026
1/6 NYT: "Maros Sefcovic, the trade commissioner of the 27-nation bloc, said that the understanding could lead to China’s halving the number of hybrid gasoline-electric cars that it sends to the European Union in the next four years." www.nytimes.com/2026/10/09/b...
nytimes.com
China and Europe Step Back From Trade War With Limits on Chinese Car Exports
The European Union said the deal could roughly halve shipments of hybrid vehicles from China in the next four years. But it also could lead to an even stronger Chinese auto industry.
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Michael Pettis @michaelpettis.bsky.social · 06/10/2026
Bloomberg: "“We want to enable the European Commission to act quickly when necessary,” Merz told reporters in Berlin. “The drawback of European trade policy in recent years has always been that decision-making took too long.”" www.bloomberg.com/news/article...
bloomberg.com
Germany and France Push Trade Weapon to Bar China Access
Germany and France are urging the European Union to adopt new powers that could cut China or other countries off from the bloc’s single market, risking a response from Beijing days before key talks on...
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Michael Pettis @michaelpettis.bsky.social · 06/10/2026
An interesting new paper by the Institut Jacques Delors argues that China's export surge is the result of a systemic domestic model that suppresses consumption and channels saving into subsidized investment and manufacturing capacity. institutdelors.eu/en/publicati...
institutdelors.eu
A new EU Structural Rebalancing Instrument to respond to China’s export surge - Institut Jacques Delors
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Michael Pettis @michaelpettis.bsky.social · 05/10/2026
China News Update: "There is an awkward question lurking beneath this enormous restructuring: if a struggling bank disappears into a bigger bank, where does its bad debt go?" chinanewsupdate.com/chinas-banki...
chinanewsupdate.com
China’s Bank Closures: Why Mergers Won’t Erase Bad Debt Risk
China is consolidating banks at unprecedented speed, while Britain weighs EV tariffs and Taiwan faces growing uncertainty. The key question: where does bad debt go when weak lenders disappear?
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Reposted by Michael Pettis
Martin Anota @manota.bsky.social · 05/10/2026
"Les accords du Plaza n'ont pas été la cause des décennies perdues du Japon. Leur objectif était de contribuer à corriger un déséquilibre international" Ma traduction 👉 annotationsbis.blogspot.com/2026/10/les-...
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Michael Pettis @michaelpettis.bsky.social · 05/10/2026
Bloomberg: "China’s mutual funds are closing at the fastest pace in eight years because of weak returns." Since 2023 Beijing has hoped that a strong stock market would replace a weak property market as a source of consumption-boosting confidence. www.bloomberg.com/news/article...
bloomberg.com
China Fund Closures Head for Eight-Year High as Demand Fades
China’s mutual funds are closing at the fastest pace in eight years as weak returns and investor redemptions leave hundreds of products too small to survive.
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Michael Pettis @michaelpettis.bsky.social · 05/10/2026
6/6 This is why Joan Robinson warned that the inevitable result of beggar-thy-neighbor policies, once deficit countries are no longer able politically to bear the costs, is a breakdown in trade. Rising debt and suppressed wages can only go on for so long.
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Michael Pettis @michaelpettis.bsky.social · 05/10/2026
5/6 It is of course a good thing if businesses and governments around the world invest to expand productivity growth, but it is not a good thing if workers' wages don't rise in line with the growth in productivity. There's no point in making more stuff if people can't afford to buy it.
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Michael Pettis @michaelpettis.bsky.social · 05/10/2026
4/6 If too many countries try to suppress wages, or expand productivity while suppressing the accompanying wage growth, the only way to keep demand and supply balanced globally is with surging debt.
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Michael Pettis @michaelpettis.bsky.social · 05/10/2026
3/6 This is the kind of world Keynes warned about, in which countries try to expand production while suppressing demand. But while a few individual countries can get away with beggar-thy-neighbor growth policies, the world itself cannot do so.
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Michael Pettis @michaelpettis.bsky.social · 05/10/2026
2/6 don't rise in line with productivity. In a system in which nations "win" at manufacturing mainly by suppressing unit labor costs, every country that wants a large manufacturing sector is under pressure to keep wage growth from rising in line with productivity growth.
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Michael Pettis @michaelpettis.bsky.social · 05/10/2026
1/6 This article indirectly describes one of the more important consequences of our current, distorted form of globalization, even if it isn't commented upon enough. Automation helps Japanese and Korean shipbuilders compete with Chinese shipbuilders only if wages... www.ft.com/content/ea32...
ft.com
Japanese and Korean shipbuilders deploy robots to take on China
US allies invest in ‘smart shipyards’ as Beijing’s dominance of industry alarms Washington
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Michael Pettis @michaelpettis.bsky.social · 04/10/2026
Brendan Greely on "moneyness": "Were Treasuries debt or money? Did the Treasury sell its bonds, like a security? Or did it simply issue them, like currency?" www.ft.com/content/7128...
ft.com
Treasuries are losing their moneyness
For four decades, US government bonds have been both securities and money. They may no longer be that special
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Michael Pettis @michaelpettis.bsky.social · 04/10/2026
2/2 For those who think in balance-of-payments terms, an increase in foreign purchases of German Bunds must be balanced either by a reduction in foreign purchases of other German assets, an increase in German purchases of foreign assets, or a reduction in German net exports.
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Michael Pettis @michaelpettis.bsky.social · 04/10/2026
1/2 FT: "German government debt has emerged as the pre-eminent haven in the global bond rout, as concerns about an overheating US economy and fiscal worries elsewhere in Europe leave investors with few other places to turn." www.ft.com/content/9302...
ft.com
Investors seek refuge from bond rout in haven German debt
Bund yields have fallen this week even as US, French and other governments’ bonds have sold off sharply over inflation fears
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Michael Pettis @michaelpettis.bsky.social · 04/10/2026
3/3 This was probably inevitable as the quality of loan assets in China began to deteriorate sharply. Bank concentration doesn't resolve systemic risk, and may actually make it worse by prolonging bad lending, but it does reduce the risk of bank runs.
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Michael Pettis @michaelpettis.bsky.social · 04/10/2026
2/3 China has shifted from a highly concentrated banking system in the late 1990s to a highly fragmented one two decades later. Since then we have seen a rise in bank concentration, especially as many of the smaller ones went under and were absorbed by larger banks.
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Michael Pettis @michaelpettis.bsky.social · 04/10/2026
1/3 FT: "China has reduced the total number of banks by nearly a quarter as part of a drive to strengthen oversight of smaller lenders at a time of slower economic momentum. There were more than 670 closures of banking entities last year." www.ft.com/content/8a8f...
ft.com
China closes hundreds of banks to bolster financial system
More than 670 lenders, a record, shut down last year as Fitch says smaller players remain sector’s weakest part
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Michael Pettis @michaelpettis.bsky.social · 03/10/2026
Here is my latest substack, a shorter version of my most recent Carnegie piece. michaelpettis858496.substack.com/p/the-plaza-...
michaelpettis858496.substack.com
The Plaza Accord and Global Imbalances
The Plaza Accord was originally meant to be part of a broader restructuring that Japanese economists and policymakers themselves recognized was necessary.
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Michael Pettis @michaelpettis.bsky.social · 03/10/2026
To my friends in Mexico, I will spend much of this coming week (October 5-9) in Mexico City and am open to setting up additional meetings with old friends or anyone in banking or government with a particular interest in China. Please let me know.
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Michael Pettis @michaelpettis.bsky.social · 26/09/2026
3/3 Fix only the fiscal numbers and leave the recycling loop untouched and the imbalance won’t shrink the way the IMF’s models predict."
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Michael Pettis @michaelpettis.bsky.social · 26/09/2026
2/3 US ‘over-consumption’ is sustainable in the first place because the same surplus economies the IMF blames for excess saving do keep on holding dollars, allowing US banks to keep running the printing press and finance import demand, without hitting the ceiling all other countries hit.
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Michael Pettis @michaelpettis.bsky.social · 26/09/2026
1/3 Biagio Bossone: "The IMF reads this as two separate domestic distortions needing two separate domestic fixes: Chinese fiscal expansion and US fiscal tightening. But the two are not separate stories. www.omfif.org/2026/09/the-...
omfif.org
The missing variable in the imbalances debate - OMFIF
IMF traces global imbalances back to domestic saving-investment gaps – weak Chinese investment and an over-spending US – rather trade policy
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Michael Pettis @michaelpettis.bsky.social · 26/09/2026
2/2 Perhaps a more fundamental question for the UK is what role it wants manufacturing overall to play in driving its economy. As of now, the manufacturing value-added share of the English economy is about three-quarters that of Europe.
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Michael Pettis @michaelpettis.bsky.social · 26/09/2026
1/2 FT: "Brussels has warned Andy Burnham that Britain would need to raise tariffs on Chinese cars and align more closely with EU trade policy if it wants to avoid “made in Europe” barriers that would hit key exports." www.ft.com/content/5453...
ft.com
EU urges UK to raise tariffs on Chinese cars to avoid ‘made in Europe’ barriers
London has lobbied intensely to secure equal treatment for British products but continues to rule out a customs union
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Michael Pettis @michaelpettis.bsky.social · 26/09/2026
2/2 Its effects were undermined, however, when Tokyo responded to the resulting slowdown with policies that exacerbated investment, credit expansion, and the very imbalances the exchange-rate realignment was intended to resolve.
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Michael Pettis @michaelpettis.bsky.social · 26/09/2026
1/2 My newest Carnegie piece revisits the Plaza Accord and its relevance for China. The accord was not an externally imposed punishment on Japan but part of a broader restructuring that Japanese economists and policymakers themselves recognized was necessary. carnegieendowment.org/china-financ...
carnegieendowment.org
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 u...
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Michael Pettis @michaelpettis.bsky.social · 24/09/2026
Usually when I share music on BlueSky, it is music from my friends in the Beijing scene, but Thelonious Monk is one of a handful of my favorite 20th-Century musicians, and this piece is so good (and Charlie Rouse so nuanced and perfect in it), that I had to share. youtu.be/yHKl0euhZI0?...
youtu.be
Thelonious Monk - Blue Monk (Norway, 1966)
YouTube video by The Jazz Estate
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Michael Pettis @michaelpettis.bsky.social · 24/09/2026
Caixin: "Total net outbound direct investment reached an all-time high of $213.58 billion last year, rising 11.1% from 2024." www.caixinglobal.com/2026-09-23/a...
caixinglobal.com
Analysis: China’s Outbound Investment Hits Record $214 Billion as Mega Deals Disappear
As cross-border takeovers plunge to a 17-year low amid Western regulatory walls, Chinese capital is pivoting to Asia to construct defensive, trade-linked supply chains
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Michael Pettis @michaelpettis.bsky.social · 24/09/2026
Former Mexican ambassador to Beijing, Jorge Guajardo, and prominent Colombian economist and banker, Bruce Mac Master, discuss what China means to the Latin American economy. www.youtube.com/watch?v=Lc5v...
youtube.com
En 30 años, China construyó una Europa entera, hoy necesita vender | Exembajador de México en China
YouTube video by Un Continente Posible
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Michael Pettis @michaelpettis.bsky.social · 24/09/2026
Cambridge's William Hurst argues that not all empty urban projects in China are the same, and that the differences among them imply a different distribution of political and economic costs.
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Michael Pettis @michaelpettis.bsky.social · 23/09/2026
Interesting substack by venture investor David Cheng on his recent China trip. earnedintuition.substack.com/p/involution...
earnedintuition.substack.com
Involution Without Export Is Wasted Effort
A week in Beijing and Shanghai with the people building AI in China
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Michael Pettis @michaelpettis.bsky.social · 23/09/2026
Scott Lincicome: "Dramatic changes to Chinese policy must come from Chinese officials. Washington unfortunately keeps giving them reasons not to change." www.bloomberg.com/opinion/arti...
bloomberg.com
The US Is Badly Losing Its Trade War With China
Xi Jinping’s arrival at the White House on Thursday will be the first Chinese state visit to the United States since 2015. It thus makes for the perfect time to judge the radical changes to US-China t...
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Michael Pettis @michaelpettis.bsky.social · 23/09/2026
3/3 Interesting Caixing article. I wouldn't say this is the policymaking consensus yet, but the speed with which similar views have been spreading in public suggests that we may be nearing a turning point in the narrative.
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Michael Pettis @michaelpettis.bsky.social · 23/09/2026
2/3 "The core issue," Zhao coninues, "is not that Chinese manufacturing is too competitive, but that this advantage is essentially subsidized by the severe compression of domestic consumption and labor costs. Rebalancing is no longer optional; it is urgent."
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Michael Pettis @michaelpettis.bsky.social · 23/09/2026
1/3 Xijing Research Institute dean Zhao Jian: "For years, the conventional wisdom was that China’s economy was held hostage by its real estate sector. Today, Beijing faces a new, equally perilous predicament: an economy dangerously overreliant on exports." www.caixinglobal.com/2026-09-22/c...
caixinglobal.com
Commentary: Are Exports Holding China’s Economy ‘Hostage’?
Manufacturing competitiveness has cushioned the fallout from the property downturn and local-debt retrenchment. But a durable recovery will require Beijing to rebuild household confidence, consumption...
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