“…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.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
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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
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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.
AI Summary.China's manufacturing export surplus is around 2% of world GDP, roughly twice the largest surplus Japan ever ran, while domestic demand has stalled. Unexplained negative net income of about $125bn on its $4tn in net foreign assets, versus an expected $100bn surplus, supports the argument that the renminbi is about 30% undervalued.
Martin WolfFinancial Times
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Martin Wolf estimates that under reasonable assumptions, China should be earning ~$100B annually on her $4T of foreign assets. Yet, China shows an unexplained negative net income of around $125bn on its net foreign asset position.
Is China's currency undervalued as its export surplus hits record levels?
Core argument: China's manufacturing export surplus stands at roughly 2% of world GDP, described as roughly twice the largest surplus Japan ever ran, while exports surge and domestic demand stalls.
China’s macroeconomics are very different from those obtained before the global financial crisis and, even more so, before the end of its property boom. Exports are surging, but domestic demand has stalled. China's export surplus in manufacturing is now around 2% of world GDP, which is “roughly twice the largest surplus Japan ever ran.” Most importantly, China shows an unexplained negative net income of around $125bn on its net foreign investments. But it should, on reasonable assumptions about the income it earns on its $4tn in net foreign assets, have a surplus of some $100bn. As a result, Brad Setser argues, the renminbi is by now some 30% undervalued. China’s policies look unavoidably threatening to much of the world. If a major trading partner runs huge and persistent trade and current account surpluses, everyone else has to run offsetting deficits. This leads to the shrinkage of sectors specialising in producing tradable goods and services, as well as huge domestic financial deficits.
Takeaways by Macro Roundup® AI
China's manufacturing export surplus stands at roughly 2% of world GDP, described as roughly twice the largest surplus Japan ever ran, while exports surge and domestic demand stalls.
China reports an unexplained negative net income of about $125bn on its net foreign investments, though reasonable assumptions about returns on its $4tn in net foreign assets imply a surplus near $100bn.
Brad Setser argues the renminbi is some 30% undervalued; persistent Chinese trade and current account surpluses require offsetting deficits elsewhere, shrinking sectors producing tradable goods and services and producing large domestic financial deficits.
Related Articles:
The Dangerous Triumph Of Neo-Mercantilism— Neo-mercantilism is thriving in both China, which pairs infant-industry promotion with large trade surpluses, and in a United States focused on external deficits and protecting domestic markets. The author argues this will likely fracture the world economy, and that a new multilateral treaty could include a mechanism to combat large structural trade surpluses.
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.
China’s Economy: Rightsizing 2025, Looking Ahead to 2026— The authors argue China's official growth figures are inconsistent with ten consecutive quarters of deflation, estimating that real GDP is around 11% below official levels, with most of the adjustment in investment. That would imply a drop of roughly 9 percentage points in China's share of global investment, helping explain its export surge.
AI Summary.China's trade surplus with the European Union reached a record, rising 27% year-on-year to $32.9bn in a single month, with its surplus with Germany more than doubling while falling 81% with France. Over the first half of the year, Chinese exports to the bloc rose 17% to $312.3bn while imports rose 9% to $135.6bn.
Bloomberg StaffBloomberg
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China’s trade surplus with the European Union increased 27% y/y to $32.9B in June. China’s surplus with Germany more than doubled.
Is China's trade surplus with the European Union reaching record levels?
Core argument: China's trade surplus with the EU rose 27% from a year earlier to $32.9 billion in June, with exports to the bloc reaching a record, according to Chinese customs data.
China’s trade surplus with the European Union climbed to a fresh high, keeping the issue of growing imbalances high on the agenda as the bloc weighs new measures to shield local industries. With exports to the EU soaring to a record, China’s surplus with the bloc rose 27% from a year earlier to $32.9 billion in June, according to Chinese customs data released on Tuesday. The country’s surplus with Germany more than doubled year-on-year while plunging 81% with France. For the first half of the year, China imported $135.6 billion of goods from the EU, up 9% from a year earlier. Meanwhile its exports amounted to $312.3 billion during the period, a gain of 17%.
Takeaways by Macro Roundup® AI
China's trade surplus with the EU rose 27% from a year earlier to $32.9 billion in June, with exports to the bloc reaching a record, according to Chinese customs data.
China exported $312.3 billion of goods to the EU in the first half of the year, up 17%, while importing $135.6 billion from the bloc, up 9%.
China's surplus with Germany more than doubled from a year earlier while its surplus with France fell 81%, as the EU weighs new measures to shield local industries.
Related Articles:
The Real Problem With Global Trade— Asia's $1.5tn trade surplus is larger as a share of world output than at any point since 1945 and is the only large surplus in the global economy. Exchange rates have a meaningful impact on trade balances: China's surplus reached about 10% of its output amid renminbi depreciation, then fell below 2% after a 40% real appreciation.
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.
China Shock 2.0 The Cost Of Germany’s Complacency— An analysis published by Bloomberg attributes roughly 40% of Germany's shortfall in economic output to lost export markets, another 40% to higher energy prices, and the remaining 20% to weak domestic demand, bureaucracy and other factors. The author argues German politics overemphasizes bureaucracy while China's pressure on the country's industrial base erodes export demand.
AI Summary.Renminbi bonds have outperformed other major bond markets over horizons ranging from year-to-date to the past 10 years, and most countries now trade more with China than with the US. The author argues the world is not deglobalizing but "de-Westernizing," with greater trade with China making countries more willing to save in renminbi.
Charles Gave and Louis-Vincent GaveGavekal
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Post-covid, Renminbi bonds have outperformed all major bond markets over 1, 3, 5, and 10 years. Charles and Louis-Vincent Gave argue that two parallel worlds are emerging: an inflationary OECD and a deflationary Asia/emerging markets.
Is rising trade with China making countries save in renminbi?
Core argument: Renminbi bonds have outperformed other major bond markets year to date and over the past 12 months, three years, five years, this decade, and the past 10 years.
Renminbi bonds have now outperformed other major bond markets year to date, over the past 12 months, three years, five years, so far this decade, and over the past 10 years. Most countries now trade more with China than with the US. This is arguably the major shift of the past two decades. Put differently, for all the talk of “deglobalization,” the world is not so much “deglobalizing” as “de-Westernizing.” The idea that the world is closing in on itself would sound silly to anyone living in Jakarta, Mumbai, Dubai, or São Paulo. And the more countries trade with China, the more comfortable they become saving in renminbi and buying renminbi bonds to fund future trade. In turn, this implies the coexistence of two worlds: one stable—Asia and emerging markets—and one unstable—the OECD; one inflationary—the OECD—and the other deflationary—Asia and emerging markets.
Takeaways by Macro Roundup® AI
Renminbi bonds have outperformed other major bond markets year to date and over the past 12 months, three years, five years, this decade, and the past 10 years.
Most countries now trade more with China than with the United States, a shift the author calls arguably the major one of the past two decades and a sign the world is "de-Westernizing" rather than deglobalizing.
The author argues that greater trade with China makes countries more comfortable saving in renminbi and buying renminbi bonds, implying two coexisting worlds: a stable, deflationary Asia and emerging markets, and an unstable, inflationary OECD.
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.
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.
Finding China in the U.S.TIC Data— China's holdings of U.S. assets began disappearing from U.S. custodial data after the G-7 immobilized Russia's reserves, and estimating them has grown harder as China diversified away from both U.S. and Belgium-based custodians. Estimates suggest a lower share in long-term Treasuries, more bills, and roughly 10% in agency bonds.
AI Summary.China's holdings of U.S. assets began disappearing from U.S. custodial data after the G-7 immobilized Russia's reserves, and estimating them has grown harder as China diversified away from both U.S. and Belgium-based custodians. Estimates suggest a lower share in long-term Treasuries, more bills, and roughly 10% in agency bonds.
Brad SetserCouncil on Foreign Relations
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Once you add back what’s hidden in European custodial centers, China’s US bond holdings have fallen less than the headline “China” line suggests. Setser estimates that China’s total US assets are still 50–55% of its reserve portfolio.
Has China's holdings of U.S. assets become harder to track?
Core argument: China's total U.S. financial holdings remain between 50 and 55 percent of its reserve portfolio after an upward adjustment to its estimated Agency holdings, which stand at around 10 percent of total reserves, more than before 2020.
China hasn’t disclosed the currency composition of its reserves since 2020. But it isn’t clear that China’s central bank has shifted its currency composition of its foreign currency holdings around a lot, in part because the dollar share of its reserves was already low (5 percent) and going underweight the dollar means losing yield. But there is no doubt that China’s holdings did start to disappear from the U.S. data right after the G-7 immobilized Russian reserves in early 2022. There is a clear fall around this time in the bonds China holds in U.S. custodians. Estimating China’s true holdings of U.S. assets has gotten harder because it seems like China has diversified not just out of the US, but also out of Euroclear (a large Belgium-based custodian). The overall result suggests that China has reduced the share of its portfolio in long-term Treasuries, while increasing its bill holdings and maintaining a sizeable Agency portfolio of around 10 percent of total reserves (more than before 2020). Zooming the chart in highlights that the key implication of this upward adjustment to China’s estimated holdings of Agencies is that China’s total U.S. financial holdings remain between 50 and 55 percent of its reserve portfolio.
Takeaways by Macro Roundup® AI
China's total U.S. financial holdings remain between 50 and 55 percent of its reserve portfolio after an upward adjustment to its estimated Agency holdings, which stand at around 10 percent of total reserves, more than before 2020.
China's holdings began disappearing from the U.S. data right after the G-7 immobilized Russian reserves in early 2022, with a clear fall in the bonds China holds at U.S. custodians.
China appears to have reduced the share of its portfolio in long-term Treasuries while increasing bill holdings, and estimating its true U.S. asset holdings has grown harder as it diversified out of Euroclear as well.
Related Articles:
China Is Not Dumping US Treasuries— China's state-owned financial institutions added $100bn in foreign assets in one month and $70bn the next, absorbing dollars from the country's trade surplus as exporters sought to sell dollars for renminbi. The author argues dollar accumulation has shifted from China's foreign exchange agency to state banks, which either buy Treasuries or lend to investors who do.
Foreign Holdings of US Treasuries Climbed to Record in November— Foreign holdings of US Treasuries rose $112.8bn to a record $9.36tn, a figure reflecting both net purchases and valuation changes, according to US Treasury Department data. Increases in Norwegian, Canadian and Saudi holdings offset a $6.1bn decline in China's stockpile to $682.6bn, its lowest since 2008.
Foreigners Rebuff ‘Sell America’ and Buy a Net $1.6 Trillion in Assets— Treasury Department data show overseas investors bought a net $1.55tn of long-term US financial assets, up from $1.18tn the prior year, including $720bn in equities and just under $409bn in Treasury notes and bonds. China was a net seller of $208.6bn, with its Treasury holdings ending at $683.5bn.
AI Summary.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.
Chris MillerChris Miller's Newsletter
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Citing Brooks and Vagle, Miller argues profits are a better measure of economic power than output, and the US and its allies are ahead, especially in high tech. But, Miller asks, “Is perhaps profitability the right metric in peace but not in war?”
Do corporate profits measure national economic power better than GDP?
Core argument: Brooks and Vagle argue profit is evidence that a firm can do something others cannot, and their measurement of profits finds U.S. firms dominate, with Japan and Europe significant players and China a second-tier player.
Profit, [Brooks and Vagle] argue, is evidence that one company can do something others can’t. Monopolists have the highest profit. Oligopolists make good money. Manufacturers of toys and textiles have razor thin margins. When Brooks and Vagle measure profits, they find that U.S. firms dominate, while Japan and Europe remain significant players. China is a second-tier player. The U.S. and allies lead in profits across the board. When it comes to high tech products, the imbalance in America’s favor is particularly pronounced. If profitability is the result of power dynamics, then the U.S. is far more powerful than comparing GDP or industrial output implies. There are a couple of potential counterarguments. Is China pursuing a loss-leading strategy, accepting low profits in the short run to win market share in the long run? In solar power, China has commoditized the sector and produced overcapacity that has led to losses, not profits. There’s no moat in solar the way there is around tech. Is perhaps profitability the right metric in peace but not in war? China is betting that its production advantage will create more durable CATL-style moats that eventually enable both profit and power.
Takeaways by Macro Roundup® AI
Brooks and Vagle argue profit is evidence that a firm can do something others cannot, and their measurement of profits finds U.S. firms dominate, with Japan and Europe significant players and China a second-tier player.
The imbalance in America's favor is particularly pronounced in high-tech products, suggesting that, if profitability reflects power dynamics, the U.S. is far more powerful than comparisons of GDP or industrial output imply.
China has commoditized solar power and produced overcapacity that has led to losses rather than profits, without the moat that surrounds tech, while betting its production advantage will create more durable CATL-style moats enabling both profit and power.
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.
Underestimating China— China's productive capacity is three times that of the United States and exceeds the next nine countries combined, with its share of global manufacturing quintupling to 30% while the U.S. share halved to about 15%. The authors argue Washington must convert its alliances into a platform for pooled capacity building.
China’s Next-Generation Industrial Policy— China's export growth is concentrated in upstream, higher-tech goods: exports of intermediate inputs rose 26% and capital goods 32% between 2021 and 2024, while consumption goods exports were broadly flat. This shift embeds China deeper in global production systems and aligns with its long-running import substitution strategy of localizing entire value chains.
AI Summary.China's industrial policy is costly and wasteful, and China runs larger budget deficits relative to economic output than the U.S., with an economy outside advanced manufacturing weighed down by debt, deflation and aging demographics. Critics expect this approach to eventually collapse under its own contradictions, but it could persist longer than foreign competitors can remain solvent.
Greg IpThe Wall Street Journal
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In 2016, China controlled more than 50% of global export volumes in 163 industries. By 2024, 315 of ~ 2,000 categories tracked. Rhodium Group calls it the “industrial policy of everything.” Beijing’s latest five-year plan covers 24 priority sectors.
Can China sustain costly industrial policy longer than foreign competitors can survive?
Core argument: China runs larger budget deficits relative to economic output than the U.S., and cost and waste are the Achilles' heel of its industrial policy.
The Achilles’ heel of Chinese industrial policy is its cost and waste. China runs bigger budget deficits relative to economic output than the U.S. Outside advanced manufacturing, the economy is moribund, weighed down by debt, deflation and aging demographics. Many critics thus expect, even hope, that Chinese industrial policy will eventually implode under the weight of its own contradictions. But there is no guarantee that will happen soon. To paraphrase an adage about markets, China can stay irrational longer than foreign competitors can stay solvent.
Takeaways by Macro Roundup® AI
China runs larger budget deficits relative to economic output than the U.S., and cost and waste are the Achilles' heel of its industrial policy.
Outside advanced manufacturing, China's economy is moribund, weighed down by debt, deflation and aging demographics.
Related Articles:
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.
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.
China’s Next-Generation Industrial Policy— China's export growth is concentrated in upstream, higher-tech goods: exports of intermediate inputs rose 26% and capital goods 32% between 2021 and 2024, while consumption goods exports were broadly flat. This shift embeds China deeper in global production systems and aligns with its long-running import substitution strategy of localizing entire value chains.
