China’s economy now teeters on the brink of a Fisherian debt-deflation spiral, challenging long-held assumptions about its growth model and policy effectiveness. China appears to be ignoring crucial lessons from Japan’s lost decades. pic.twitter.com/wDnOfM8VU7
— James E. Thorne (@DrJStrategy) December 17, 2024
Irving Fisher’s debt-deflation spiral theory explains how excessive debt can lead to economic depression through a self-reinforcing cycle. The process begins with over-indebtedness, which leads to distress selling of assets to repay debts. This causes a contraction in the money…
— James E. Thorne (@DrJStrategy) December 17, 2024
For what it is worth, I also had the chance to visit China this fall, and was also surprised by how dark the mood was …
The collapse in import volumes is another worrying sign.https://t.co/XV4rVrD2dj
2/2 pic.twitter.com/WbEd2sLWAt
— Brad Setser (@Brad_Setser) December 18, 2024
China Races to Squelch Unrest as Signs of Economic Malaise Spread
Excerpt:
Faced with rising social frustrations and public unrest, China’s leaders are ramping up security measures and squelching discordant views on the country’s economic health.
A spate of deadly attacks in China in recent weeks—including mass stabbings and car-ramming incidents—has unnerved officials and ordinary people alike, raising concerns that stagnating growth has played a role in fueling unrest and even outbursts of violence, amid an increase in public protests over economic grievances.
In response, the Communist Party’s security czar last month ordered nationwide efforts to “resolve conflicts at the grassroots and nip them in the bud.” China’s top prosecutor urged officials to better protect the rights of low-income workers, job-seeking graduates and vulnerable groups such as the elderly as a way to “strictly prevent extreme cases from happening.”
Officials have fanned out to screen for people who have suffered financial or emotional setbacks and assess their risks of disrupting public order. Authorities also deployed paramilitary troops to help guard some schools in Beijing and elsewhere, after some recent attacks appeared to target students. Internet censors, meanwhile, have scrubbed viral commentaries about weaknesses in the world’s second-largest economy.
At its latest meeting this month, the party’s elite Politburo implicitly acknowledged the connection between economic difficulties and social unrest, ordering officials to “protect people’s livelihoods” with the goal of “ensuring the overall stability of society.”
The challenges facing Xi Jinping are formidable. Millions of young Chinese struggle to find jobs. Homeowners have been watching their property values sink, while others worry that debt-laden developers might not finish building the apartments they bought. Many migrant workers and even some government employees aren’t getting paid. …………………………………………….
14 views