Perspectives on the Chinese economic adjustment

July 7, 2016


 

What is going to happen to the Chinese economy? That’s perhaps the biggest question, and largest unknown, regarding the global economy. Some observers, such as George Soros, think that a ‘hard landing’ is going to happen. He believes that the build up of bad debt within the Chinese financial system is now so great that a 2008 type financial crisis is now inevitable in China. Such a crisis would have profound implications for both the evolution of Chinese society and its political system, as well as for the wider global economy.

Others observers such Michael Pettis, professor of finance at Guanghua School of Management in Beijing, believe that while a 2008 type event is not impossible the more likely outcome will be a big adjustment that stops short of a major financial crisis, and instead we are witnessing the beginnings of a long period of much lower Chinese growth and a period of slow and painful internal adjustment. Pettis is one of the most astute observers of the Chinese economy, and an expert on global economic imbalances in general. He is the author of “The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy” and he also writes an excellent blog.

In these two lectures Pettis examines aspects of the Chinese adjustment, an economic event that will have a profound impact on the global economy.

In this first lecture, Michael Pettis explores China’s tumultuous stock market and its impact on the global economy. Pettis actually starts speaking at 4.45 minutes in the video.

In this second lecture Pettis discusses how recent events in the Chinese equity and currency markets have made it clear just how complex a task Beijing faces as it manages an extremely difficult adjustment to the deep imbalances created during three decades of rapid growth. How Beijing manages this adjustment will set the stage for the next three or four decades of growth or stagnation.

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