Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
  • “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 must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Thursday, August 22, 2024

AI Summary. Bank and nonbank credit often move in opposite directions, and the authors find they predict downside growth risk differently: a one-standard-deviation increase in bank credit raises the probability of real GDP growth below -2% two years later by 2.5 percentage points against a 6% baseline, while the same increase in nonbank credit lowers it by 1.9 percentage points.

Nina Boyarchenko and Leonardo Elias Federal Reserve Bank of New York
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A @NewYorkFed analysis of 33 countries over 1966-2020 finds 1 s.d. higher growth rate in bank credit increases the probability of real GDP growth below -2% in two years’ time by 2.5 percentage points, while nonbank credit has the opposite effect.

Do bank and nonbank credit booms predict different downside growth risks?

Core argument: A 1 standard deviation increase in bank credit growth raises the probability of year-on-year real GDP growth below -2% two years later by 2.5 percentage points, against a 6% baseline probability in the authors' sample.

Credit extended by the banking and nonbanking sector[s] do not always move together. One type of lending is [often] expanding while the other is contracting, which suggests a substitution between bank and nonbank lending. Overall booms in private credit can be driven by either. We find that bank and nonbank credit expansions predict differentially the downside risk to growth—that is, the probability of extreme negative real GDP growth realizations. The blue line in the chart shows that the likelihood of an extreme negative real GDP growth realization —which we define as year-on-year real GDP growth below -2%— increases following expansions in bank credit for horizons of one to three years, while at the same horizon, growth in nonbank credit actually lowers the probability of a large drop in real GDP growth. In particular, a 1 s.d. Increase in bank credit increases the probability of real GDP growth below -2% in two years’ time by 2.5 ppts relative to a baseline 6% probability in our sample. In contrast, a 1 s.d. higher growth rate in nonbank credit lowers the probability of real GDP growth below -2% in two years’ time by 1.9 ppts.

Takeaways by Macro Roundup® AI

  1. A 1 standard deviation increase in bank credit growth raises the probability of year-on-year real GDP growth below -2% two years later by 2.5 percentage points, against a 6% baseline probability in the authors' sample.
  2. A 1 standard deviation higher nonbank credit growth lowers the probability of real GDP growth below -2% two years later by 1.9 percentage points, the opposite sign from bank credit expansions at horizons of one to three years.
  3. Bank and nonbank credit do not always move together, with one often expanding while the other contracts, which the authors read as substitution between the two, and private credit booms can be driven by either.

Related Articles:

  • Corporate Debt, Boom-Bust Cycles, and Financial Crises — Using a dataset on sectoral credit exposure for 115 economies, the authors find corporate debt accounts for two-thirds of credit expansion before financial crises and three-quarters of nonperforming loans during busts, and that corporate debt expansions predict crises similarly to household debt. Recoveries are slower after corporate debt booms.
  • Credit Allocation and Macroeconomic Fluctuations — Credit expansions disproportionately channel credit to non-tradable sector firms and households, and the authors find that the sectoral allocation of credit predicts future GDP paths and the likelihood of systemic banking crises. Credit growth to non-tradable industries predicts boom-bust output patterns and elevated financial fragility, while credit to tradable industries is associated with higher future productivity growth.
  • Private Credit: Characteristics and Risks — Private credit loans are negotiated bilaterally outside traditional regulatory requirements and are illiquid because no secondary market exists, leaving investors expected to hold them to maturity or face steep losses if they need to exit. Scarce data on this growing form of nonbank lending makes assessing its risks difficult.

AI Summary. 17% of Americans report having no close friends, and survey data show a wide educational gap: 24% of those with a high school education or less have no close friends versus 10% of college graduates. Three decades ago, Americans with less formal education reported social circles at least as large.

Daniel Cox and Sam Pressler American Enterprise Institute
Date Posted:

17% of Americans report having no close friends in 2024, up from 12% in 2021; 24% of Americans with a high school education or less report having no close friends vs. 10% of college grads. @dcoxpolls notes this gap is a relatively recent phenomenon.

Has an educational divide opened up in Americans' friendship circles?

Core argument: 24% of Americans with a high school education or less report having no close friends, compared with 10% of college graduates, according to the survey.

Today, 17% of Americans report having no close friends—a category that excludes close relatives. This is only a modest increase from 2021, when 12% of Americans reported they had no close friends. 18% of Americans have one or two close friends. About one-third (34%) of Americans have three to five close friends, and one-quarter (25%) have six or more. The survey reveals a massive educational disparity in Americans’ number of close friends. Roughly one in four (24%) Americans with a high school education or less report having no close friends, compared to only 10% of college graduates. College graduates are twice as likely as those without any college education to have at least six close friends (33% vs. 17%). The educational gap in the size of American friendship circles is a relatively recent phenomenon. Roughly three decades ago, Americans with more formal education did not have larger social circles. In 1990, nearly half (49%) of Americans with a high school degree or less reported having at least six close friends—a slightly greater share than those with a college degree—while only 3% reported having no close friends.

Takeaways by Macro Roundup® AI

  1. 24% of Americans with a high school education or less report having no close friends, compared with 10% of college graduates, according to the survey.
  2. College graduates are twice as likely as Americans with no college education to have at least six close friends, 33% versus 17%.
  3. In 1990, 49% of Americans with a high school degree or less reported at least six close friends—slightly more than college graduates—and only 3% reported having none.

Related Articles:

AI Summary. Spreading the 818,000 downward revision to payrolls evenly across the 12-month period amounts to about 68,000 fewer jobs per month, against average monthly job growth of 242,000. Even after that adjustment, every month in the revision period would still show positive job growth.

Jeremy Horpedahl Economist Writing Every Day
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.@jmhorp notes that Goldman Sachs was anticipating a 0.6-1.0mm reduction in the BLS March 2024 jobs revision, vs. the 0.8mm actual reduction, and argues that net of revisions, “every single month in the revision period would still be positive.”

Does a large payroll revision still leave every month positive?

Core argument: Spreading the BLS payroll revision of 818,000 jobs over the 12 months from March 2023 to March 2024 amounts to an average of 68,000 fewer jobs per month.

If we spread the 818,000 jobs revision over 12 months (which is, more or less, what BLS will eventually do once they have the final numbers), this amounts to 68,000 fewer jobs per month on average. Over that time frame (March 2023 to March 2024), the average monthly job growth was 242,000 jobs. Crucially, the lowest monthly job growth during that period was 165,000 jobs, in October 2023. Cutting 68,000 from that month would indeed be large, but every single month in the revision period would still be positive.

Takeaways by Macro Roundup® AI

  1. Spreading the BLS payroll revision of 818,000 jobs over the 12 months from March 2023 to March 2024 amounts to an average of 68,000 fewer jobs per month.
  2. Average monthly job growth from March 2023 to March 2024 was 242,000 jobs, so subtracting 68,000 per month would leave every month in the revision period positive.
  3. The lowest monthly job growth in the revision period was 165,000 jobs in October 2023, and cutting 68,000 from that month would be large but still leave growth positive.

Related Articles:

  • The Strong Labor Market Has Boosted US-Born Employment — The authors estimate that the cumulative increase in the U.S.-born population since 2010 was about 1.4m larger, and the foreign-born increase 1.7m larger, than official survey data show. Published data show a decline in the U.S.-born population over a recent one-year span, while the authors estimate an increase of 1.5m.
  • New Immigration Estimates Help Make Sense Of The Pace Of Employment — The Congressional Budget Office estimates net immigration was 3.3m in 2023, versus the 1m it had projected, implying faster population and labor force growth than currently reported. The authors estimate this raised real economic growth by about 0.1 percentage point and, by lifting both production and demand, added little price or wage pressure.
  • The U.S. Job Market Is Better Than It Looks — Permanent job losers account for just 0.1 percentage point of the 0.8 percentage point rise in the US unemployment rate from its trough, with new entrants and re-entrants to the labor force explaining nearly all of the increase. Typical worker pay is still rising a little more than 4% a year, faster than before the pandemic.

AI Summary. Massachusetts Institute of Technology's first undergraduate class admitted after the U.S. Supreme Court banned affirmative action saw Black enrollment fall to 5% from 15% and Hispanic and Latino enrollment fall to 11% from 16%. Asian American students rose to 47% from 40%, while white students were 37% compared with 38%.

Anemona Hartocollis and Stephanie Saul New York Times
Date Posted:

MIT admitted their first post-affirmative action class; the self-reported Asian share rose from 40% for the class of 2027 to 47% for the class of 2028.

How did banning affirmative action change university enrollment by race?

Core argument: Black students fell to 5% of MIT's class of 2028 from 15% in the class of 2027, and Hispanic and Latino students fell to 11% from 16%, the university announced.

Massachusetts Institute of Technology’s incoming class of 2028 saw a precipitous drop off in the percentage of Black, Hispanic, Native American, and Pacific Islander students, the university announced on Wednesday. It is the university’s first undergraduate class to be admitted since the U.S. Supreme Court’s decision last year banning affirmative action. The comparison to the class of 2027 was dramatic. The percentage of Black students enrolled dropped to 5% from 15%, and the percentage of Hispanic and Latino students dropped to 11% from 16%. White students made up 37% of the new class, compared to 38% last year. The percentage of Asian American students in the class rose to 47% from 40%. [Class of 2027 percentages add up to 109% because students could declare more than one race, according to M.I.T. Class of 2028 percentages added to 100%]

Takeaways by Macro Roundup® AI

  1. Black students fell to 5% of MIT's class of 2028 from 15% in the class of 2027, and Hispanic and Latino students fell to 11% from 16%, the university announced.
  2. MIT's class of 2028 is its first undergraduate class admitted since the U.S. Supreme Court's decision banning affirmative action.
  3. Asian American students rose to 47% of MIT's class of 2028 from 40%, while white students made up 37%, compared with 38% in the class of 2027.

Related Articles:

AI Summary. China has lent more than $1tn abroad, largely for infrastructure built by Chinese firms, making it the world's largest sovereign lender and leaving many developing countries with debt levels comparable to the 1980s. The World Bank reports interest payments of the 75 poorest countries have quadrupled over the past decade.

Michael Beckley New York Times
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China lent $1T over the last two decades under its Belt & Road Initiative, but emerging markets may face a credit crunch due to a decline in China’s lending as its economic growth slows. @AEIecon

Has China's lending left developing countries with unsustainable debt burdens?

Core argument: China has lent more than $1 trillion abroad, largely for Belt and Road infrastructure projects built by Chinese companies, and one in three African infrastructure projects over the past two decades was built by Chinese entities.

China lent more than $1 trillion abroad, largely for infrastructure projects to be built by Chinese companies under its Belt and Road Initiative. Over the past two decades, one in three infrastructure projects in Africa was built by Chinese entities. The long-term debt risks for fragile developing economies were often ignored. China, now by far the world’s largest sovereign lender, has played a leading role in saddling many countries with levels of debt, often through nontransparent arrangements, that are comparable with those seen in the 1980s. The situation is becoming perilous. Over the past decade, during which China doled out more lending than the Paris Club — a grouping of 22 of the world’s largest creditor nations — the total value of interest payments of the 75 poorest countries in the world have quadrupled and will outstrip their total annual spending on health, education and infrastructure combined, according to the World Bank. An estimated 3.3 billion people live in countries where interest payments exceed investments in either education or health, the United Nations said.

Takeaways by Macro Roundup® AI

  1. China has lent more than $1 trillion abroad, largely for Belt and Road infrastructure projects built by Chinese companies, and one in three African infrastructure projects over the past two decades was built by Chinese entities.
  2. The World Bank reports that interest payments of the world's 75 poorest countries quadrupled over the past decade and will outstrip their total annual spending on health, education and infrastructure combined.
  3. The United Nations estimates that 3.3 billion people live in countries where interest payments exceed investment in either education or health, and China, now the world's largest sovereign lender, lent more over the past decade than the 22-nation Paris Club.

Related Articles:

  • China As an International Lender of Last Resort — Using the first comprehensive dataset of China's overseas bailouts, the authors find China has extended over $170bn in central bank swap line liquidity to distressed countries plus $70bn in rescue loans from state-owned banks and enterprises, equal to more than 20% of International Monetary Fund lending over the past decade.

Friday, August 23, 2024

AI Summary. The authors identify a "Beveridge threshold" level of labor market tightness—the ratio of job vacancies to unemployed workers—below which the relationship between inflation and economic activity steepens and labor market adjustment occurs mainly through vacancies rather than unemployment. They estimate that during the post-pandemic inflation surge the unemployment rate fell as much as 1.08 percentage points below this threshold.

Pierpaolo Benigno and Gauti Eggertsson Federal Reserve Bank of Kansas City
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.@PierpaBenigno and @GautiEggertsson argue that inflation rose sharply in 2022 due to labor market tightening well beyond the “Beveridge Threshold,” where job vacancies exceed unemployed workers.

Does labor market tightness beyond a threshold steepen the inflation tradeoff?

Core argument: The gap between the unemployment rate and the Beveridge-threshold rate widened to a maximum of -1.08% in March 2022 at the peak of the inflationary surge, with unemployment at 3.65% against a threshold rate of 4.73%.

The Phillips curve [PC] relates inflation to economic activity. The Beveridge curve [BC] [relates] job vacancies v and the unemployed u. A metric of labor market tightness is the ratio v/u. The Beveridge threshold [BT] marks a critical point, measured by the ratio v/u, that triggers fundamental changes in both the PC and the BC. Once the BT is crossed, the PC becomes steeper and more prone to generating inflation, while the BC becomes nearly vertical, with most labor market adjustments occurring through changes in vacancies. The BT marks an unemployment rate that triggers stronger inflationary pressures, which we call the Beveridge threshold (BT) unemployment rate, the point below which the Phillips curve steepens significantly. Figure 30 plots the unemployment rate in comparison with the BT counterpart, The post-pandemic episode started in May 2021, with the gap suddenly widening to a maximum of -1.08% exactly in March 2022 at the peak of the inflationary surge. At that time, the unemployment rate was at 3.65%, while the Beveridge-threshold rate lagged behind at 4.73%. This gap is another way to read the pressure coming from the labor market to inflation, combined with the steep part of the Phillips curve.

Takeaways by Macro Roundup® AI

  1. The gap between the unemployment rate and the Beveridge-threshold rate widened to a maximum of -1.08% in March 2022 at the peak of the inflationary surge, with unemployment at 3.65% against a threshold rate of 4.73%.
  2. The Beveridge threshold, measured by the vacancy-to-unemployment ratio, marks the point below which the Phillips curve steepens and becomes more prone to generating inflation, while the Beveridge curve becomes nearly vertical.
  3. Once the Beveridge threshold is crossed, most labor market adjustments occur through changes in vacancies; the post-pandemic episode started in May 2021.

Related Articles:

  • An Analysis of Pandemic-Era Inflation In 11 Economies — A cross-country analysis of 11 economies finds wide agreement that global energy and food price increases and supply disruptions in key sectors drove pandemic-era inflation, and that their recession accounts for most of the global cooling of inflation. The authors find tight labor markets had smaller but more persistent inflationary effects, leaving wage inflation as the larger remaining factor.
  • Markets Think Inflation Will Be Too High For The Next 20 Years — Inflation expectations derived from the gap between regular Treasury yields and inflation-indexed Treasury yields show expected annual inflation over the next 10 and 20 years running considerably above expected inflation for the decade beginning 20 years out. Before the pandemic-era inflation surge, actual inflation and expected future inflation tracked each other closely.
  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.

AI Summary. An analysis of executive assessments finds four factors—general ability, execution versus interpersonal skills, charisma versus analytical skills, and creative-strategic versus detail-oriented—explain roughly half the variation in candidate characteristics. Hired CEOs in the later period are more analytical and more detail-oriented, though still more charismatic and more strategic than the average candidate.

Yann Decressin, Steven Kaplan and Morten Sorensen National Bureau of Economic Research
Date Posted:

In a study of 1,299 candidates for CEO positions from 2000 to 2019, @KaplAnalysis compared pre- vs. post-2009 results, and found that, “interpersonal or ‘softer’ skills do not increase over time, either for CEO candidates or hired CEOs.”

How have the traits of hired CEOs changed over time?

Core argument: Four factors — general ability, execution versus interpersonal skills, charisma versus analytical skills, and creative-strategic versus detail-oriented — explain roughly half the total variation in specific characteristics across the sample of executive assessments.

We find that four factors–which we interpret as [1] general ability, [2] execution vs. interpersonal skills, [3] charisma vs. analytical skills, and [4] being creative-strategic vs. detail-oriented–explain roughly half the total variation in the specific characteristics for this sample of executive assessments. The hypothesis “E=L” is that the factor scores for the hired CEO candidates are the same in the early and late periods. For general ability (factor 1) and interpersonal versus execution skills (factor 2), the factor scores are largely similar in the early and late periods; we see no evidence of changes in the hired CEOs for these two factors.Turning to factors 3 and 4, the last columns of Panel A of Table 3 reveal some significant changes. In the late period, hired CEOs are more analytical and less charismatic (increasing factor 3), although the hired CEOs are still more charismatic than the average candidate (negative factor 3). Hired CEOs are also less creative-strategic and more detail-oriented (decreasing factor 4), while remaining more strategic than average (positive factor 4).

Takeaways by Macro Roundup® AI

  1. Four factors — general ability, execution versus interpersonal skills, charisma versus analytical skills, and creative-strategic versus detail-oriented — explain roughly half the total variation in specific characteristics across the sample of executive assessments.
  2. Hired CEOs in the late period are more analytical and less charismatic than those in the early period, though they remain more charismatic than the average candidate.
  3. Hired CEOs in the late period are less creative-strategic and more detail-oriented while remaining more strategic than average, and general ability and interpersonal-versus-execution skills show no evidence of change between the early and late periods.

Related Articles:

  • The Market for CEOs: Evidence from Private Equity — In a study of larger U.S. companies bought by private equity, more than 70% hired new chief executives, and over 75% of those were external hires, unlike public companies where internal promotions dominate. The authors estimate these executives' pay exceeds that at similar-sized public companies, suggesting an active market for chief executives.
  • Executive Compensation: The Trend Toward One-Size-Fits-All — A study finds 24% of the variation across chief executive pay components — salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites — has disappeared, and that greater similarity in pay structure is associated with lower shareholder value. The author identifies institutional investors' influence, proxy advisors' recommendations, and expanded compensation disclosure as drivers of this standardization.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. Adjusting United Nations figures for lower recorded births, the author estimates the global fertility rate was 2.18, below the 2.21 replacement threshold. Population is not yet falling because women born in the 1990s and 2000s are having children while older generations live longer, so births still exceed deaths, with a projected peak in about 30 years.

Jesus Fernandez-Villaverde The Spectator
Date Posted:

Jesus Fernandez-Villaverde estimates UN projections overstate the fertility rate which he puts at 2.18 and argues “Creating the conditions for large families to flourish is the only way to reverse the trend in fertility rates.” @AEIecon

Has the global fertility rate already fallen below replacement?

Core argument: Adjusting UN figures for lower recorded births, the author estimates the global fertility rate last year was 2.18, below the 2.21 replacement threshold, and argues it may be lower still if African birth rates fell more than the UN estimated.

By adjusting the UN’s figures to account for the lower births in many countries, I estimate the global fertility rate last year was 2.18, i.e. below the 2.21 replacement threshold. It could be even lower than that, as it’s likely that the birth rate in many African countries saw a larger fall than the UN estimated. This doesn’t mean the global population is already falling. ‘Demographic momentum’ means that women born in the 1990s and 2000s are currently having children, while their parents’ generations haven’t yet died. Longevity, meanwhile, is increasing. So although global births are falling, they still exceed deaths. At present rates the human population will peak in around 30 years. Then start plummeting. Creating the conditions for large families to flourish is the only way to reverse the trend in fertility rates. If we fail to do so, then the coming demographic winter will be far harsher than anyone cares to admit.

Takeaways by Macro Roundup® AI

  1. Adjusting UN figures for lower recorded births, the author estimates the global fertility rate last year was 2.18, below the 2.21 replacement threshold, and argues it may be lower still if African birth rates fell more than the UN estimated.
  2. Demographic momentum and rising longevity mean global births still exceed deaths, with women born in the 1990s and 2000s now having children while their parents' generations have not yet died.
  3. At present rates the author projects the human population will peak in around 30 years and then plummet, arguing that creating conditions for large families to flourish is the only way to reverse falling fertility.

Related Articles:

  • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.
  • East Asia’s Coming Population Collapse — United Nations projections show China's population falling 8%, Japan's 18%, South Korea's 12%, and Taiwan's 8% between 2020 and 2050, while the US population rises 12%. Working-age people per person over 65 are projected to drop to about 1.8 in China and 1.2 in Japan and South Korea.
  • Exploring the Implications of Sub-Saharan Africa’s Demographic Explosion — Sub-Saharan Africa is projected to hold a quarter of the world's working-age population within a few decades and to surpass China's working-age population in roughly a decade. Even with modest productivity growth near 2%, the region's growth is estimated at 4.5–5.5%, raising its share of global output from about 3% while remaining small.

AI Summary. Chinese policy advisers say China's leadership is guided by building a self-sufficient industrial supply chain that could withstand severe Western sanctions and by a philosophical objection to U.S.-style consumption as wasteful. That leaves exports as the main route to stabilizing a weakened economy and replacing jobs lost in domestic construction, shifting job losses to workers abroad.

Lingling Wei and Jason Douglas Wall Street Journal
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Chinese export volumes adjusted for FX rates were up 10% since the end of 2021 relative to 1.5% for the rest of the world. @michaelxpettis notes of the export strategy, “The rest of the world wants the opposite. The world cannot accommodate it.”

Why is China relying on exports rather than domestic consumption?

Core argument: Chinese policy advisers say Xi is guided by the goal of building an all-encompassing industrial supply chain that can keep the domestic economy running under severe sanctions by the U.S. and other Western countries.

Two principles have guided Xi’s thinking, Chinese policy advisers say. The first is that China must build an all-encompassing industrial supply chain that can keep the domestic economy running in the event of severe sanctions by the U.S. and other Western countries. In the top leader’s views, advisers say, industrial security sits at the core of China’s stability as tensions with the developed world rise. The second is a deep-rooted philosophical objection to U.S.-style consumption, which Xi sees as wasteful. That leaves China with few options other than investing in exports to stabilize its weakened economy and create jobs to make up for losses in domestic construction. The upshot: Rather than Chinese workers losing their jobs, steelworkers in Brazil, chemical engineers in Europe, and solar panel makers in the U.S. may lose theirs.

Takeaways by Macro Roundup® AI

  1. Chinese policy advisers say Xi is guided by the goal of building an all-encompassing industrial supply chain that can keep the domestic economy running under severe sanctions by the U.S. and other Western countries.
  2. Xi holds a deep-rooted philosophical objection to U.S.-style consumption as wasteful, according to Chinese policy advisers, leaving China with few options other than investing in exports to stabilize its weakened economy and replace jobs lost in domestic construction.
  3. Rather than Chinese workers losing their jobs, steelworkers in Brazil, chemical engineers in Europe, and solar panel makers in the U.S. may lose theirs.

Related Articles:

  • Pettis On China’s Export Strategy — China is shifting investment from its weakened property sector toward manufacturing, which already accounts for 27% of Chinese GDP versus 14% elsewhere and is constrained by weak demand rather than scarce capital. Since China holds about 18% of global GDP but 30% of global manufacturing, added output must be absorbed abroad absent higher consumption.
  • China’s Record Manufacturing Surplus — China's manufacturing trade surplus has reached about 2% of world GDP, exceeding the peak surpluses of export powerhouses like Japan and Germany, and shows no signs of shrinking as policy continues to emphasize advanced manufacturing capacity. The main offsetting manufactured-goods deficit is in the United States rather than commodity exporters.
  • Brazil, India, and Mexico Are Taking on China’s Exports — Foreign direct investment into China fell to a 30-year low even as Chinese leaders launched an investment push in high-tech goods such as batteries and electric vehicles. Weak domestic demand for cars, chemicals, and steel has pushed Chinese goods into global markets, with average manufactured export prices down nearly 10% and export volumes near record levels.