China’s Currency is Now Facing Substantial Appreciation Pressure
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Showing 89 database articles primarily about China
Who Will Win The War Of Neo-Mercantilists?
Martin Wolf Financial Times- Date Posted:
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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.
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- The Dangerous Triumph Of Neo-Mercantilism — China’s refusal to address its excess saving will likely fracture the global economy, Wolf argues. He suggests reviving Keynes’ attempt, rejected by the US at…
- Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push — GS estimates that for every 1pp export-driven increase in Chinese GDP, advanced economies experience a 0.1–0.3pp drag. “China Shock 2.0 is likely to crowd out…
- China’s Economy: Rightsizing 2025, Looking Ahead to 2026 — Rhodium estimates that China’s GDP grew 2.5–3% in 2025, with growth increasingly dependent on its $1T trade surplus, which accounted for 57 to 68% of China’s…
China’s Trade Surplus With EU Hits Record as Tensions Intensify
AI Summary. China's trade surplus with the European Union reached a record $32.9bn in a single month, driven by exports growing nearly 2x faster than imports over the first half of the year.
Bloomberg Staff Bloomberg- Date Posted:
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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 imbalance with Europe becoming unsustainable?
Core argument: China’s trade surplus with the European Union climbed to a fresh high, keeping the issue of growing imbalances high on.
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 European Union climbed to a fresh high, keeping the issue of growing imbalances high on.
- The country’s surplus with Germany more than doubled year-on-year while plunging 81% with France For the first half of the.
- Meanwhile its exports amounted to $312.3 billion during the period, a gain of 17%.
Related Articles:
- The Real Problem With Global Trade — Asia's trade surplus has reached $1.5tn, a larger share of world GDP than at any point since 1945, making it the only large surplus in the global economy. Currency movements drive trade imbalances: a depreciating currency expands export surpluses, while real appreciation shrinks them.
- Understanding Global Imbalances — Four economies—the United States, China, Germany, and Japan—account for roughly two-thirds of global imbalances, with current account surpluses and deficits now lasting twice as long as they did in the 1980s. Persistent imbalances have accumulated into large foreign asset and liability positions, with the United States holding net foreign liabilities
- China Shock 2.0 The Cost Of Germany’s Complacency — Germany's economy is 6% below its pre-pandemic growth path, with Chinese industrial subsidies of $800bn annually and a potentially undervalued currency driving a manufacturing surplus of ~$2tn that has cost Germany over 400,000 jobs. Without stronger EU trade defenses, continued Chinese manufacturing expansion will accelerate German deindustrialization.
The Emergence Of A New Anchor
AI Summary. Renminbi bonds have outperformed all major bond markets across every major time horizon, as most countries now trade more with China than with the United States. Greater trade with China increases comfort holding renminbi savings and bonds, splitting the world into two blocs: a stable, deflationary Asia and emerging markets
Charles Gave and Louis-Vincent Gave Gavekal- Date Posted:
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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 the renminbi replacing the dollar as the global reserve currency anchor?
Core argument: Renminbi bonds outperformed all major bond markets across 1–10 year periods, driving increased non-Western savings in Chinese assets.
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 outperformed all major bond markets across 1–10 year periods, driving increased non-Western savings in Chinese assets.
- And the more countries trade with China, the more comfortable they become saving in renminbi, and buying renminbi bonds to.
- The Emergence Of A New Anchor.
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- Why Global Imbalances Matter — Surplus economies depend on deficit countries as buyers of excess goods, giving deficit nations structural leverage despite appearing financially weak.
- Is China’s High-Quality Investment Output Economically Viable? — China's high-quality infrastructure and technological gains from investment do not rule out overinvestment, because investment that generates less real value than it costs in resources — including subsidies — still represents a net economic loss even when it produces visible physical assets.
- Finding China in the U.S.TIC Data — China's total holdings of U.S. financial assets remain between 50–55% of its reserve portfolio, with a shift away from long-term government bonds toward short-term bills and mortgage-backed agency debt.
Finding China in the U.S.TIC Data
AI Summary. China's total holdings of U.S. financial assets remain between 50–55% of its reserve portfolio, with a shift away from long-term government bonds toward short-term bills and mortgage-backed agency debt.
Brad Setser Council on Foreign Relations- Date Posted:
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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.
Is China reducing its exposure to long-term U.S. government debt?
Core argument: China’s dollar reserve share of 55% remains low, limiting further diversification and driving continued U.S. asset holdings of 50–55% of.
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 dollar reserve share of 55% remains low, limiting further diversification and driving continued U.S. asset holdings of 50–55% of.
- China’s shift out of long-term Treasuries into bills and agencies post-2022 reflects geopolitical risk concerns, leading to reduced custodial transparency.
- China’s agency portfolio increased to ~10% of reserves post-2020, offsetting Treasury reductions and maintaining overall U.S. financial exposure despite diversification.
Related Articles:
- China Is Not Dumping US Treasuries — Talk of “dollar diversification” to the contrary, China bought a record $170B in US dollars and foreign securities in December and January. The lower…
- Foreign Holdings of US Treasuries Climbed to Record in November — Foreign holdings of Treasuries hit a record high of $9.36T in November. Official Chinese holdings of Treasuries dropped $6.1B. However, holdings in Belgium…
- Foreigners Rebuff ‘Sell America’ and Buy a Net $1.6 Trillion in Assets — Foreign investors bought a net $1.55T of American long-term US financial assets in 2025, including $720B of net equity purchases and $409B in Treasury notes…
How Should We Measure Economic Power?
AI Summary. U.S. firms hold dominant global economic power as measured by corporate profit margins, particularly in high-tech sectors, while China ranks as a second-tier player despite leading in industrial output. Profit concentration signals market power that GDP comparisons obscure, though China's loss-leading strategy in sectors like solar aims to convert production
Chris Miller Chris Miller's Newsletter- Date Posted:
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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?”
Are profit margins a better measure of economic dominance than output volume?
Core argument: U.S. firms dominate global profit margins vs. Japan, Europe, and China, demonstrating superior economic power beyond GDP comparisons.
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
- U.S. firms dominate global profit margins vs. Japan, Europe, and China, demonstrating superior economic power beyond GDP comparisons.
- High-tech sector profitability imbalance favors America particularly, while China’s solar commoditization and loss-leading strategy prioritize market share over near-term returns.
- China’s production advantage and low-profit strategy drive long-term moat-building, challenging Western firms’ assumption that profitability alone ensures competitive resilience.
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- The Real China Trump Card — China is far more vulnerable than the US to bilateral trade disruptions, argue Stephen Brooks & @ben_vagle. In 2022, US firms demonstrated significantly…
- Underestimating China — “China possesses scale, and the [US] does not.” @RushDoshi argues the US can balance China only by “transforming its alliance architecture” to gain scale…
- China’s Next-Generation Industrial Policy — China's exports are shifting away from consumer goods and toward intermediate inputs and capital goods, with those categories rising 26% and 32% respectively over three years. This reflects a strategy of progressively localizing entire supply chains, embedding China deeper into global manufacturing systems as a supplier of components and machinery
Beijing’s ‘Industrial Policy of Everything’ Leaves Rest of the World in the Dust
AI Summary. China's industrial policy now dominates over 315 of ~2,000 globally tracked export categories, up from 163 in 2016, spanning sectors from brain-computer interfaces to dry cleaning chemicals. China's fiscal deficits exceed those of the United States as a share of output, allowing it to sustain this strategy longer than foreign
Greg Ip The Wall Street Journal- Date Posted:
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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.
Is industrial policy giving one country an unfair economic advantage?
Core argument: China’s industrial policy reach expanded to 315 of ~2,000 export categories by 2024 vs. 163 in 2016, driving dominance across.
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’s industrial policy reach expanded to 315 of ~2,000 export categories by 2024 vs. 163 in 2016, driving dominance across.
- Chemical exports including tetrachloroethylene surged 25x since 2019, demonstrating industrial policy penetration into mature sectors previously considered non-strategic.
- China’s biopharma contracting services doubled 2018–2022 with projected doubling by 2027, showing policy-driven expansion into high-margin services beyond traditional manufacturing.
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- Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push — GS estimates that for every 1pp export-driven increase in Chinese GDP, advanced economies experience a 0.1–0.3pp drag. “China Shock 2.0 is likely to crowd out…
- Why Global Imbalances Matter — Surplus economies depend on deficit countries as buyers of excess goods, giving deficit nations structural leverage despite appearing financially weak.
- China’s Next-Generation Industrial Policy — China's exports are shifting away from consumer goods and toward intermediate inputs and capital goods, with those categories rising 26% and 32% respectively over three years. This reflects a strategy of progressively localizing entire supply chains, embedding China deeper into global manufacturing systems as a supplier of components and machinery