Michael Pettis
@michaelpettis.bsky.social
Senior Fellow at Carnegie China. For speaking engagements, please write to [email protected]
Michael Pettis is an American professor of finance at Guanghua School of Management at Peking University in Beijing and a nonresident senior fellow at the Carnegie Endowment for International Peace. He was founder and co-owner of punk-rock nightclub D22 in Beijing, which closed in January 2012. .. more
Economics
76%
Political science
11%
China’s Top Cities Face Office Glut With Supply Doubling Demand in 2025
New supply outstripped demand by more than double in Shanghai, Guangzhou and Shenzhen last year, pushing vacancies to historic highs
www.caixinglobal.com
Caixin: "China’s top-tier cities struggled with a worsening glut of premium office space in 2025, as new supply outpaced demand by more than double in key hubs including Shanghai, Guangzhou and Shenzhen."
www.caixinglobal.com/2026-01-10/c...
www.caixinglobal.com/2026-01-10/c...
2/2
Although many analysts believe that redeployed funds are more likely to favor relatively conservative options, such as insurance products and bank wealth management products, if a meaningful portion is redirected into stocks, this could could provide another year of support.
Although many analysts believe that redeployed funds are more likely to favor relatively conservative options, such as insurance products and bank wealth management products, if a meaningful portion is redirected into stocks, this could could provide another year of support.
Analysis: China’s Deposit Maturity Wave Puts Household Money to the Test
Trillions in deposits nearing maturity raise questions over where savings will flow
www.caixinglobal.com
1/2
Caixin: "Between 30 and 60 trillion yuan in longer-term fixed deposits will come due this year, reshaping how Chinese savers allocate their wealth in 2026, as years of falling interest rates erode the appeal of rolling money back into banks."
www.caixinglobal.com/2026-01-09/a...
Caixin: "Between 30 and 60 trillion yuan in longer-term fixed deposits will come due this year, reshaping how Chinese savers allocate their wealth in 2026, as years of falling interest rates erode the appeal of rolling money back into banks."
www.caixinglobal.com/2026-01-09/a...
2/2
To a hammer, every problem looks like a nail. China's small businesses complain far more about lack of demand than they do about lack of financing, so its not at all clear how further supply-side subsidies, this time on the financing side, will help.
To a hammer, every problem looks like a nail. China's small businesses complain far more about lack of demand than they do about lack of financing, so its not at all clear how further supply-side subsidies, this time on the financing side, will help.
China Offers Subsidized Loans to Small Businesses in New Stimulus Push
New fiscal package includes interest support and risk-sharing mechanisms to revive private investment and household demand
www.caixinglobal.com
1/2
Caiixin: "China unveiled a new package of fiscal and financial measures aimed at jumpstarting domestic demand, including — for the first time — nationwide interest subsidies on loans to small, midsize and micro enterprises."
www.caixinglobal.com/2026-01-10/c...
Caiixin: "China unveiled a new package of fiscal and financial measures aimed at jumpstarting domestic demand, including — for the first time — nationwide interest subsidies on loans to small, midsize and micro enterprises."
www.caixinglobal.com/2026-01-10/c...
The purpose of this investment is mostly to generate growth, productive capacity and jobs at home.
5/5
One caveat. I don't know the extent to which the declining US trade deficit reflects rising gold sales, but excluding jewelry, I would not include gold sales in the trade account. They really belong more appropriately in the capital account.
One caveat. I don't know the extent to which the declining US trade deficit reflects rising gold sales, but excluding jewelry, I would not include gold sales in the trade account. They really belong more appropriately in the capital account.
4/5
Given that Japan, South Korea and Taiwan will fight hard to prevent significant deterioration in their trade balances, I expect Europe will ultimately reflect the bulk of the rebalancing, which may become an even greater challenge for German and European manufacturing.
Given that Japan, South Korea and Taiwan will fight hard to prevent significant deterioration in their trade balances, I expect Europe will ultimately reflect the bulk of the rebalancing, which may become an even greater challenge for German and European manufacturing.
3/5
Simple arithmetic tells us that the difference must be reflected in the trade balances of other countries. Some of this will have showed up initially as rising trade deficits among developing countries, but this will ultimately be limited by their abilities to finance them.
Simple arithmetic tells us that the difference must be reflected in the trade balances of other countries. Some of this will have showed up initially as rising trade deficits among developing countries, but this will ultimately be limited by their abilities to finance them.
2/5
If this persists, it may be the most important factor for those thinking about what is likely to happen in 2026. In a three-month period during which the Chinese trade surplus has surged, the US trade deficit has declined.
If this persists, it may be the most important factor for those thinking about what is likely to happen in 2026. In a three-month period during which the Chinese trade surplus has surged, the US trade deficit has declined.
U.S. Trade Deficit Fell to Lowest Level Since 2009 as Tariffs Reshape Trade
www.nytimes.com
1/5
NYT: "The U.S. trade deficit in goods and services shrank to $29.4 billion in October, down from $48.1 billion the prior month. The figure was the lowest monthly trade deficit recorded since June 2009."
www.nytimes.com/2026/01/08/b...
NYT: "The U.S. trade deficit in goods and services shrank to $29.4 billion in October, down from $48.1 billion the prior month. The figure was the lowest monthly trade deficit recorded since June 2009."
www.nytimes.com/2026/01/08/b...
2/2
I no longer have to make this point as often as I used to because it is, by now, widely accepted, but notice what the FT is saying: China's export surge (and not just China's, by the way) will be driven not by productivity improvements so much as by weaker domestic demand.
I no longer have to make this point as often as I used to because it is, by now, widely accepted, but notice what the FT is saying: China's export surge (and not just China's, by the way) will be driven not by productivity improvements so much as by weaker domestic demand.
Chinese car exports set to jump as domestic sales cool
Mexico, Middle East and parts of Europe are among the top markets, data shows
www.ft.com
1/2
FT: "China’s auto exports will expand by as much as 25 per cent to a record of more than 7mn this year, as carmakers try to offset collapsing domestic sales of petrol cars and slowing electric vehicle growth."
www.ft.com/content/5b13...
FT: "China’s auto exports will expand by as much as 25 per cent to a record of more than 7mn this year, as carmakers try to offset collapsing domestic sales of petrol cars and slowing electric vehicle growth."
www.ft.com/content/5b13...
8/8
The CNA article implies that the gap between the economic value of China's housing stock and the debt used to create it may be much higher than anyone expected. This further implies that the required transfers, once China begins to adjust and rebalance, will also be much higher.
The CNA article implies that the gap between the economic value of China's housing stock and the debt used to create it may be much higher than anyone expected. This further implies that the required transfers, once China begins to adjust and rebalance, will also be much higher.
7/8
These transfers – and not banking crises, as so many analysts think – are the real cost of excessive debt. A banking crisis is just one of the ways to "resolve" excessive debt, but the real cost is the direct and indirect (via financial distress) impact of these transfers.
These transfers – and not banking crises, as so many analysts think – are the real cost of excessive debt. A banking crisis is just one of the ways to "resolve" excessive debt, but the real cost is the direct and indirect (via financial distress) impact of these transfers.
6/8
Even defaulting on or monetizing debt are just transfers, in the former case from creditors (mainly banks) and in the latter from those sectors of the economy that are long monetary assets (e.g. pensioners and those who save in the form of bank deposits).
Even defaulting on or monetizing debt are just transfers, in the former case from creditors (mainly banks) and in the latter from those sectors of the economy that are long monetary assets (e.g. pensioners and those who save in the form of bank deposits).
5/8
This matters a great deal. I've long argued that excess investment in the property sector meant that the value created by property investment was likely to be less than the debt-servicing cost. This gap ultimately can only be resolved through implicit or explicit transfers.
This matters a great deal. I've long argued that excess investment in the property sector meant that the value created by property investment was likely to be less than the debt-servicing cost. This gap ultimately can only be resolved through implicit or explicit transfers.
4/8
CNA notes worryingly that "a nationwide review, based on third-party inspections of more than 100,000 newly completed homes found that nearly two-thirds of units delivered in 2025 were rated “poor quality”, roughly six times the share in 2022."
CNA notes worryingly that "a nationwide review, based on third-party inspections of more than 100,000 newly completed homes found that nearly two-thirds of units delivered in 2025 were rated “poor quality”, roughly six times the share in 2022."