“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“A full-throated defense of economic dynamism.” - The Wall Street Journal
AI Summary.The United States generates almost twice as much economic output per dollar invested as China, the opposite of what would be expected from a mature developed economy versus a fast-growing economy catching up. The gap points to overexuberance in Chinese investment.
Robin Rivaton and Ben SouthwoodWorks In Progress
Date Posted:
The US generates ~2x as much output per dollar of capital as China. Rivaton and Southwood argue that relentless competition among Chinese subnational governments, who account for ~85% of public expenditure, drives industrial growth at the cost of reduced capital efficiency.
Does China get less economic output per dollar invested than America?
Core argument: The United States obtains nearly twice as much GDP from every dollar invested as China does, measured by the capital efficiency ratio of output to invested capital stock.
Overexuberance is visible in economic data. Interest rates that banks pay to depositors are capped, giving banks artificially cheap capital. Entrepreneurs may be backed to attempt extremely unlikely, borderline schemes. The capital efficiency ratio measures how much output a country gets out of the capital stock it has invested – how many dollars of GDP a country can buy with a dollar of investment. The United States gets almost twice as much economic output out of every dollar it invests as China does, precisely the opposite of what we would expect from a developed country with a mature economy versus a rapidly growing country playing catch up.
Takeaways by Macro Roundup® AI
The United States obtains nearly twice as much GDP from every dollar invested as China does, measured by the capital efficiency ratio of output to invested capital stock.
China’s capital efficiency inverts the expected pattern, in which a rapidly growing catch-up economy would extract more output per dollar of investment than a mature developed economy.
Overexuberance is visible in Chinese macroeconomic data, with China’s investment generating less economic output per dollar than that of the United States.
Related Articles:
The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism— About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
Xi’s Superpower Ambitions Fuel a Dangerous Debt Spiral in China— China's credit to the nonfinancial sector—corporate, government and household borrowing—topped 300% of gross domestic product, 60 percentage points above its end-2019 level and larger than in the US, according to the Bank for International Settlements. The International Monetary Fund estimates broad Chinese government debt, including local financing vehicles, reached 127% of GDP, up from 98% in 2020.
Is China’s High-Quality Investment Output Economically Viable?— China's technological progress and infrastructure do not refute claims of overinvestment, since overinvestment often produces real physical assets and technological gains yet still counts as overinvestment when it generates less real value than the resources, subsidies, and transfers it consumes. When such losses are capitalized, assets are carried above their real economic value.
AI Summary.Goldman Sachs estimates that artificial intelligence–related stocks account for 57% of Chinese equity trading turnover and that nearly $5tn in AI-related market value has been created, including $2tn from new listings. China also holds dominant shares of the physical supply chain, including 97% of humanoid robot shipments, 75% of electric vehicle production, and 90% of rare-earth refining.
Paul KedroskyApplied Complexity
Date Posted:
China accounts for 77% of global token usage, but only 22% of token spending, according to a GS analysis. Kedrosky notes, “This is what widespread AI adoption at low prices looks like. And it is the channel through which Chinese competition will pressure prices elsewhere.”
How large is AI's footprint in Chinese markets and supply chains?
Core argument: AI-related stocks account for 57% of trading turnover in Chinese equities, and Goldman estimates almost $5 trillion in AI-related market value has been created since the DeepSeek moment, including $2 trillion from IPOs.
AI-related stocks now represent 57% of trading turnover in Chinese equities. Since the DeepSeek moment, Goldman estimates almost $5 trillion in AI-related market value has been created, including $2 trillion from IPOs. AI dominates Chinese equity markets even more than it does U.S. markets. It's a one-factor world. China shipped 97% of humanoid robots in the first half of 2026. Alongside China’s 75% share of EV production and 80% of battery production, China basically owns the physical side of AI and AI-adjacent technologies. The industrial base behind the AI buildout is already concentrated in China: 60% of global transformer production capacity, 60% of PCB and optical-module production, 77% of new foundry capacity, and 90% of rare-earth refining. There are more than 880 AI-related companies focused mainly on China’s domestic market, with $3.2 trillion in market value. To put it in context, this is nearly half the total market of the Nasdaq at the peak of the dot-com frenzy.
Takeaways by Macro Roundup® AI
AI-related stocks account for 57% of trading turnover in Chinese equities, and Goldman estimates almost $5 trillion in AI-related market value has been created since the DeepSeek moment, including $2 trillion from IPOs.
China shipped 97% of humanoid robots in the first half of 2026, alongside a 75% share of EV production and 80% of battery production.
China holds 60% of global transformer production capacity, 60% of PCB and optical-module production, 77% of new foundry capacity, and 90% of rare-earth refining, concentrating the industrial base behind the AI buildout.
Related Articles:
Who’s Afraid of Chinese Models?— Demand for frontier artificial intelligence models exceeds supply because computing capacity is scarce, allowing chip suppliers and their customers to resell compute at high margins. The author argues alarm over Chinese models is overblown, expecting the inference market to grow faster than training costs so labs can thrive at lower prices.
Semiquincententacles— Leading artificial-intelligence labs are moving to usage-based token pricing on a cost-plus basis that includes total ownership costs, pushing token prices higher and giving some enterprises reason to migrate to cheaper open models. Frontier models remain necessary for cybersecurity, distillation training, agents, and scientific discovery, where maximum performance is required.
Why .400 Hitters Disappeared — and What It Means for AI— Artificial intelligence models' capability gains are shrinking in percentage terms, falling from about 15% relative to the baseline early on to roughly 10% for the same absolute increment, narrowing the gap between frontier and good-enough models. The author argues this points to a commoditizing market where price, not minor model differences, becomes the main differentiator, pressuring frontier firms' margins.
AI Summary.China's credit to the nonfinancial sector—corporate, government and household borrowing—topped 300% of gross domestic product, 60 percentage points above its end-2019 level and larger than in the US, according to the Bank for International Settlements. The International Monetary Fund estimates broad Chinese government debt, including local financing vehicles, reached 127% of GDP, up from 98% in 2020.
Brian SpegeleWall Street Journal
Date Posted:
Credit to the Chinese nonfinancial sector was over 300% of GDP in 2025, 60pp above its 2019 level, driven by borrowing and slower GDP growth. It has risen by more than $43T since late 2012.
How much has China's debt risen relative to GDP?
Core argument: China’s credit to the nonfinancial sector topped 300% of GDP last year, 60 percentage points above end-2019 and far above the U.S. level, according to the Bank for International Settlements.
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. It has jumped by more than $43 trillion since Xi took office in late 2012, according to the Bank for International Settlements. China’s government says its debts are under control. Central government borrowings were only around 30% of GDP in recent years, small compared with federal debts in the U.S. A broader gauge of overall Chinese government debt—including official local borrowings as well as the debts of these local government financing vehicles—ballooned to an estimated 127% of GDP last year, according to the International Monetary Fund, up from 98% in 2020.
Takeaways by Macro Roundup® AI
China’s credit to the nonfinancial sector topped 300% of GDP last year, 60 percentage points above end-2019 and far above the U.S. level, according to the Bank for International Settlements.
Chinese nonfinancial-sector credit has risen by more than $43 trillion since Xi Jinping took office in late 2012, according to the Bank for International Settlements.
The International Monetary Fund estimates broad Chinese government debt, including official local borrowings and local government financing vehicles, reached 127% of GDP last year, up from 98% in 2020, while central government borrowings were around 30% of GDP.
Related Articles:
Why Global Imbalances Matter— Countries running persistent trade surpluses, such as China, Germany and Japan, have built their economies around an excess supply of tradeable goods and services, leaving them dependent on deficit countries to absorb it. That dependence gives deficit countries bargaining power and exposes surplus countries to pressure to expand domestic demand.
Using China’s Central Government Balance Sheet to “Clean up” Local Government Debt Is a Bad Idea— The International Monetary Fund attributes more than half of the rise in the global debt-to-GDP ratio since 2008 to China, whose ratio is exceeded only by Japan's among major economies and is unusually high for a middle-income country. The author argues this debt reflects extensive unrecognized losses hidden in collective balance sheets, and that delaying recognition raises the eventual cost.
Is China’s High-Quality Investment Output Economically Viable?— China's technological progress and infrastructure do not refute claims of overinvestment, since overinvestment often produces real physical assets and technological gains yet still counts as overinvestment when it generates less real value than the resources, subsidies, and transfers it consumes. When such losses are capitalized, assets are carried above their real economic value.
AI Summary.China faces three options as external demand weakens: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or let production and growth slow. The first requires substantial changes in income distribution and saving incentives; the second risks more debt and excess capacity; the third implies higher unemployment.
Michael PettisChina Financial Markets
Date Posted:
“Beijing cannot choose whether China will adjust; one way or another, it will.” Pettis warns Zhongnanhai against postponing rebalancing with another round of debt-financed investment “despite increasingly weak returns.”
What choices does China face as external demand weakens?
Core argument: China faces three options: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or allow production and growth to slow.
What it can choose is how painful that adjustment will be. If weaker external demand is met by encouraging more borrowing and domestic investment, regardless of whether that investment is economically justified, China risks postponing the inevitable. China therefore faces the same basic choice Japan confronted, but with deeper imbalances and less accommodating global conditions. It can shift a larger share of national income toward households and allow consumption to absorb more of what the economy produces; or it can continue relying on investment, despite increasingly weak returns; or it can allow production and growth to slow. The first choice requires a substantial change in the domestic distribution of income and the incentives to save. The second risks still more debt and excess capacity and, ultimately, a more painful adjustment. The third implies higher unemployment and weaker growth.
Takeaways by Macro Roundup® AI
China faces three options: shift a larger share of national income to households so consumption absorbs more output, keep relying on investment despite weak returns, or allow production and growth to slow.
China confronts the same basic choice Japan faced, but with deeper imbalances and less accommodating global conditions, and can choose only how painful the adjustment will be.
Meeting weaker external demand with more borrowing and domestic investment, regardless of whether it is economically justified, risks further debt and excess capacity and a more painful adjustment, while slower growth implies higher unemployment.
Related Articles:
The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism— About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push— Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.
Record Influx Of University Graduates Pushes China’s Youth Unemployment Rate To 18.9%— China's urban unemployment rate for 16- to 24-year-olds excluding students reached 18.9%, the highest since the statistics agency revised its methodology to exclude students. A record influx of university graduates is entering a job market weighed down by weak domestic demand and growing adoption of artificial intelligence.
AI Summary.China has extended travel restrictions on top artificial intelligence and chip talent to their spouses and children, who must now obtain government approval before going abroad even for short trips. The requirement broadens existing curbs on the movement of influential technology entrepreneurs, researchers and executives.
Bloomberg StaffBloomberg
Date Posted:
Beijing has expanded overseas travel restrictions for top AI professionals to include their families. While not an outright ban, foreign travel will now require state approval.
Is China extending travel approval requirements to tech talent's families?
Core argument: China now requires spouses and children of certain AI and chip executives whose work is deemed paramount to state security to obtain Beijing’s approval before traveling abroad, even for short trips, according to people familiar with the matter.
Government agencies have recently begun to share the wider restrictions with affected people, which include prominent startup founders as well as the heads of strategically important companies in AI-related fields. Direct relatives such as spouses and children of certain AI and chip executives, whose work is considered paramount to state security, are now required to obtain approval from Beijing before going abroad even for short trips. That marks a broadening of existing curbs on the freedom of movement of China’s most influential tech talent. While not an outright ban on travel, the new requirement is likely to exert a further chilling effect on a tech sector already facing unprecedented curbs. China has restricted foreign travel for top AI professionals in private firms such as Alibaba and DeepSeek since earlier this year.
Takeaways by Macro Roundup® AI
China now requires spouses and children of certain AI and chip executives whose work is deemed paramount to state security to obtain Beijing’s approval before traveling abroad, even for short trips, according to people familiar with the matter.
The restrictions extend to prominent startup founders and heads of strategically important companies in AI-related fields, broadening existing curbs on the movement of China’s entrepreneurs, researchers and executives.
China has restricted foreign travel for top AI professionals at private firms such as Alibaba and DeepSeek since earlier this year, and the new family requirement is likely to exert a further chilling effect on the tech sector.
Related Articles:
Who’s Ahead in the Global AI Talent Race?— An analysis of authors at a leading AI research conference finds China is the largest originating source of elite AI talent, with its share of researchers holding Chinese undergraduate degrees rising 11 percentage points to 57%, while the US share fell to 13%. The US remains a net importer of AI researchers, gaining 2,145 while China lost 1,729.
China Tightens Control Of Overseas Travel In Sweeping New Law— China has imposed new legal controls on overseas travel that formalise restrictions on mid-to-senior civil servants, Communist Party cadres, state-owned enterprise employees, and private citizens working in sensitive areas, as part of efforts to protect state secrets, advanced technology, and highly skilled workers. Violators face steep fines and exit bans ranging from three months to indefinite.
The Future, Made In China— China's economy runs on parallel tracks: a property crash, a booming high-tech manufacturing sector, and university graduates trained for traditional white-collar jobs entering a labor market geared toward advanced manufacturing. Researchers at Stanford and Harvard found a swing from optimism to pessimism, with about 28% of citizens expecting living standards to improve.
AI Summary.By manufacturing value added China has the world's largest manufacturing sector, with the US and European Union roughly co-equal and individually smaller; netting out intra-EU trade, the EU is the largest exporter of goods and services and the US a distant third. The author argues all three are vulnerable to weaponized interdependence, with China apparently least so.
Paul KrugmanKrugman Wonks Out
Date Posted:
Product-level data suggest China is less dependent on the EU and the US than they are China, even though US and EU manufacturing output jointly exceeds that of China. Krugman argues that in this tripartite world, economic power may be increasingly downstream from a bloc’s economic resilience.
How do manufacturing and trade size shape vulnerability to weaponized interdependence?
Core argument: China has by far the world’s largest manufacturing sector by value added, while the US and EU are roughly co-equal, each individually smaller than China but larger than China combined.
If we look at manufacturing value added, China has by far the biggest manufacturing sector; the US and EU are roughly co-equal, both individually smaller than China but bigger combined. Netting out intra-EU exports, the EU is the world’s largest exporter of goods and services, with the US a distant third [see figures in gallery]. [The featured image, from the Mercator Institute for China Studies, shows that from 2000–2022 the number of product categories in which the US and EU depended on China rose, while the number in which China depended on them fell. The chart excludes textiles]. The Western economies are increasingly dependent on China, and if anything the US is more dependent than the EU [by this product-count measure]. Who is vulnerable here? The three superpowers are all vulnerable to weaponized interdependence, although apparently China less than the rest. What really scares me is Taiwan. Given time, we can reconstruct a semiconductor supply chain without Taiwan. But the few years it would take would be very ugly.
Takeaways by Macro Roundup® AI
China has by far the world’s largest manufacturing sector by value added, while the US and EU are roughly co-equal, each individually smaller than China but larger than China combined.
Netting out intra-EU exports, the EU is the world’s largest exporter of goods and services, with the US a distant third.
Mercator Institute for China Studies figures show that from 2000 to 2022 the number of product categories in which the US and EU depended on China rose while the number in which China depended on them fell, excluding textiles.
Related Articles:
The Real China Trump Card— Among the world's 2,000 largest companies, U.S. firms generated 38% of global profits and firms based in allied countries 35%, while Chinese firms including Hong Kong generated 16%. The U.S. leads in 20 of 27 industries and China in three, with profits used as a measure of economic chokepoints.
How Should We Measure Economic Power?— The authors argue profits measure economic power because they show a firm can do what others can't, and by that metric U.S. firms dominate globally—with Japan and Europe significant and China second-tier—implying greater U.S. power than GDP or industrial output comparisons suggest. The gap favoring the U.S. is most pronounced in high-tech products.
How to Fight an Economic War— China earned about $3.4bn from exporting rare-earth elements and magnets in a year, while the U.S. Geological Survey estimates a 30% disruption to U.S. supply of the rare-earth element neodymium alone would cut U.S. GDP by 2.2%, over $600bn. This asymmetry gives Chinese export controls their leverage.
AI Summary.A projection estimates China gains about $1.13tn in annual export value by 2030 relative to baseline while the rest of the world loses about $5.1tn, including $2.25tn for the G7. The authors attribute the net global decline to trade shifting toward Chinese goods whose export prices keep falling.
Charles Austin Jordan and Logan WrightRhodium Group
Date Posted:
Is Database:
Database
China’s share of global exports by volume is on track to rise from 20% in 2025 to 28% by 2030. Yet China’s rising export share may depress the total value of global exports as lower-priced Chinese goods displace more expensive exports from other countries.
Do China's export share gains reduce global export values?
Core argument: The projection has China gaining roughly $1.13 trillion in annual export value by 2030 relative to the baseline scenario, while the rest of the world loses about $5.1 trillion.
The net result of our projection would suggest that China gains around $1.13 trillion in annual export value by 2030 relative to the baseline scenario, while the rest of the world loses around $5.1 trillion, with the G7 accounting for $2.25 trillion of those potential losses alone. This implies that China’s export share gains effectively destroy overall global trade values relative to the status quo due to continued declines in export prices. Regardless of which assumptions are used, China’s export share gains appear to reduce global total potential export values, because trade patterns are shifting toward Chinese goods that are declining in price.
Takeaways by Macro Roundup® AI
The projection has China gaining roughly $1.13 trillion in annual export value by 2030 relative to the baseline scenario, while the rest of the world loses about $5.1 trillion.
The G7 accounts for $2.25 trillion of the projected $5.1 trillion in export value losses borne by countries outside China.
China’s export share gains appear to reduce global total potential export values regardless of the assumptions used, because trade patterns shift toward Chinese goods whose prices continue to decline.
Related Articles:
The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism— About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
China Is Making Trade Impossible— Interviews with Chinese economists, technologists and business leaders yielded no clear answer to what products China would want to buy from the rest of the world in future, beyond commodities, luxury goods and higher education. The author argues China sees nothing it cannot eventually make better and cheaper itself, undermining trade as a two-way exchange.
Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push— Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.
AI Summary.China's export boom shows signs of cresting, with year-over-year growth leveling off at roughly 24-27% in US dollar terms, and memory chips now the biggest single swing factor for exports. Total export growth is expected to converge toward the recent trend for non-artificial-intelligence products of about 5-7%.
Andrew BatsonGavekal
Date Posted:
Is Database:
Database
Andrew Batson argues that as the memory-chip price cycle’s impact on Chinese export growth fades, export growth in renminbi terms in 2027 “will most likely converge toward the recent trend for products outside the AI complex, which is around 5–7%.”
Is China's export boom leveling off toward slower growth?
Core argument: China’s export growth has leveled off over the past three months at roughly 24–27% year-on-year in US dollar terms and 18–20% in renminbi terms, a sign the export wave is cresting.
China’s latest extraordinary export wave is showing signs of cresting. The headline YoY growth of exports has leveled off over the past three months, staying around 24-27% in US dollar terms and 18-20% in renminbi terms. The boom in exports of products associated with investment in artificial intelligence is certainly not over, but current super-high growth rates will probably slow in coming months. Memory chips are now the biggest single swing factor for exports, and prices for some products have recently leveled off after their massive surge. While the ebb and flow of memory prices is difficult to forecast, growth of total exports in 2027 will most likely converge toward the recent trend for products outside the AI complex, which is around 5-7%. Semiconductor cycles have limited implications for China’s vast range of other exports, which are still very competitive in global markets.
Takeaways by Macro Roundup® AI
China’s export growth has leveled off over the past three months at roughly 24–27% year-on-year in US dollar terms and 18–20% in renminbi terms, a sign the export wave is cresting.
Memory chips are the biggest single swing factor for China’s exports, with prices for some products leveling off after a massive surge and super-high AI-related growth rates likely to slow in coming months.
Total Chinese export growth in 2027 will most likely converge toward the recent 5–7% trend for products outside the AI complex, which remain very competitive in global markets.
Related Articles:
China’s Share Of Global Container Exports Soars To 40%— China accounted for 40% of global container exports on a three-month rolling average, up 2.5 percentage points in nine months, according to the European Union Chamber of Commerce in China. The chamber's president argues this shows global trade imbalances are growing faster than expected.
Understanding Global Imbalances— The US, China, Germany, and Japan account for roughly two-thirds of global current account imbalances, with the US deficit at 4% of GDP financed by capital inflows into dollar assets. The average duration of a surplus or deficit spell roughly doubled since the 1980s, building large net foreign asset and liability positions.
The Year of the Trojan Fire Horse: China’s Imbalanced Economy and Unrelenting Mercantilism— About 30% of Chinese industrial companies are unprofitable "zombies" kept alive by subsidies far larger than those elsewhere, rather than exiting amid falling industrial producer prices. Countries with large increases in manufactured imports from China also saw slowdowns in domestic manufacturing, including declining manufacturing shares of output across most of Southeast Asia.
