Given all of the recent publicity, I thought I would re-up on my China video, The Rise and Fall of the Chinese Economy. This is a recent addition to our Everyday Economics series from MRUniversity, and it also will be part of our in-progress macroeconomics course.
The Learn More page features additional resources about this topic. As I say in the video, the key variable to track for whether things get really bad is capital flight. In other words, recent developments have indeed been unsettling.
What we’ve seen is the central government spending down reserves at a much higher pace than virtually anyone had expected…except perhaps the central government. The response to falling stock prices has been to make it legally harder and harder to sell — what do the prices even mean at this point? A barometer of which kind of PR hit the government feels like taking on a given day? And perhaps most importantly of all, more and more people, both in and outside of China, are questioning whether the government really has matters under control. It seems not.
By the way, here is your China fact of the day, Larry Summers informs us:
Over the past year, about 20 per cent of China’s growth as reported in its official statistics has come from its financial services sector, which is now about as large relative to gross domestic product as in Britain, and Chinese debt levels are extraordinarily high. This is hardly a case of healthy or sustainable growth.
On the (somewhat) cheerier side: “Film market analysts have pointed out that the biggest films have performed similarly in China and the US in recent years.” Star Wars: The Force Awakens had the biggest single-day opener in Chinese history (FT link), let’s see how well the future installments do.