{"id":14506,"date":"2016-11-18T23:35:30","date_gmt":"2016-11-19T04:35:30","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=14506"},"modified":"2016-11-18T23:35:30","modified_gmt":"2016-11-19T04:35:30","slug":"china-choosing-more-debt-more-unemployment-or-transfers-michael-pettis","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2016\/11\/18\/china-choosing-more-debt-more-unemployment-or-transfers-michael-pettis\/","title":{"rendered":"China: Choosing More Debt, More Unemployment, Or Transfers | Michael Pettis"},"content":{"rendered":"

From Michael Pettis:<\/p>\n

I have often written in this blog and elsewhere about the three policy choices Beijing faces as it tries to manage through the adjustment process. My argument is that subject to two very plausible assumptions, every economic policy Beijing implements ultimately can be abstracted to one choice among three options. These two assumptions are: <\/p>\n

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  1. China has overinvested in infrastructure and manufacturing capacity to such an extent that in the aggregate the cost of additional public sector investment exceeds the present value of future increases in productivity generated by the investment. China\u2019s public-sector investment, in other words, is value destroying, and because it is funded by debt, additional investment causes China\u2019s real debt servicing costs to rise faster than its real debt servicing capacity.<\/li>\n
  2. China\u2019s long-term sustainable growth rate is substantially below the economy\u2019s current GDP growth target, and so the economy is only able to meet the growth target by increasing its debt burden.<\/li>\n<\/ol>\n

    …..any policy Beijing chooses must involve, usually implicitly, some combination of three outcomes. In every case, in other words, we will see as a consequence of the policy one or more of the following:<\/p>\n