Edward Conard

Top Ten New York Times Bestselling Author

  • “…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
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “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
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

AI Summary. 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.

Michael Cembalest J.P. Morgan
Date Posted:

Cembalest notes according to Chinese data, ~30% of Chinese industrial companies are “unprofitable zombies” that survive due to broad-based subsidies; for example, 58% of new Chinese bank loans are extended at or under its prime rate of 3%.

Do Chinese subsidies keep unprofitable firms alive and shrink other countries' manufacturing?

Core argument: Roughly 30% of Chinese industrial companies are unprofitable zombies sustained by a broad-based subsidy approach that dwarfs the rest of the world, despite prolonged negative industrial producer prices that would normally force competition and capacity cuts.

Normally, a prolonged period of negative industrial producer prices would lead to competition and reduced capacity. Not in China, however; instead, ~30% of Chinese industrial companies are unprofitable zombies that survive due to a broad-based subsidy approach that dwarfs the rest of the world. Countries that experienced large increases in manufactured imports from China also experienced slowdowns in domestic manufacturing. From 2021 to 2024, as Chinese imports to the ASEAN region increased, every ASEAN country except for Brunei, Cambodia, and Laos experienced a decline in their manufacturing share of GDP.

Takeaways by Macro Roundup® AI

  1. Roughly 30% of Chinese industrial companies are unprofitable zombies sustained by a broad-based subsidy approach that dwarfs the rest of the world, despite prolonged negative industrial producer prices that would normally force competition and capacity cuts.
  2. From 2021 to 2024, as Chinese imports into the ASEAN region rose, every ASEAN country except Brunei, Cambodia, and Laos saw its manufacturing share of GDP decline.
  3. Countries that experienced large increases in manufactured imports from China also experienced slowdowns in domestic manufacturing.

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  • 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.
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