Articles By: Michael Pettis

Michael Pettis

Michael Pettis is a Senior Associate at the Carnegie Endowment for International Peace and a finance professor at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets. Pettis has worked on Wall Street in trading, capital markets, and corporate finance since 1987. Pettis is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs. He received an MBA in Finance in 1984 and an MIA in Development Economics in 1981, both from Columbia University. He writes the blog .

Here are my most recent posts

China: Choosing More Debt, More Unemployment, Or Transfers

China: Choosing More Debt, More Unemployment, Or Transfers

China’s success will depend on the extent to which Beijing in 2016 is able to centralize power, to begin to sell off government assets (probably local and provincial, and not central, government assets), to rein in credit growth, and to accept much lower GDP growth rates while keeping household income growth from dropping too sharply. If it cannot do this, China’s adjustment is likely to be much more difficult, much longer lasting, and perhaps much more disruptive.

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The titillating and terrifying collapse of the dollar. Again.

The titillating and terrifying collapse of the dollar. Again.

This post was originally published at China Financial Markets. By Michael Pettis Foreign perceptions about the Chinese economy are far more volatile than the economy itself, and are spread across a fantastic array of forecasts. On one extreme there are still many who hold the view that overwhelmingly dominated the consensus just four of five years ago, with a book […]

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If we don’t understand both sides of China’s balance sheet, we understand neither

If we don’t understand both sides of China’s balance sheet, we understand neither

These debt-related shocks will occur regularly for many more years, and each shock will advance or retard the rebalancing process so that it affects the way future shocks occur. There are only a few broad paths along which the Chinese economy can rebalance, and if we can get some sense of the China’s institutional constraints and balance sheet structures, we can figure what these paths are and how likely we are to slip from one to another. In order to get Chinas right I would argue that above all we must understand the dynamics of debt, and of balance sheet structures more generally.

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Do markets determine the value of the RMB?

By Michael Pettis Last Tuesday the PBoC surprised the markets with a partial deregulation of the currency regime, prompting a great deal of discussion and debate about the value of the RMB. Part of the discussion was informed by a consensus developing in one part of the market that the RMB is no longer undervalued but is in fact overvalued. […]

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Internal and external balance

The global economy is an economic system in which any country’s domestic economy is inextricably linked to other economies through the balance of payments mechanisms. The ability to place events within their global context is consequently crucially important in understanding any country’s economic performance, but actually doing so tends more to be the exception than the rule.

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What multiple should we give China’s GDP growth?

By Michael Pettis Last week Derek Scissors, a think tank analysts at the American Enterprise Institute, published an article in which he referred to an October, 2014, studyby Credit Suisse that attempts to measure total household wealth by region and by country. Scissors argues that in the interminable debate about whether or not China will overtake the US as the […]

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Will the AIIB ever matter?

By Michael Pettis When Isaac, an editor at Foreign Policy, sent me an email two weeks ago asking if I could write a piece on the new Asian Infrastructure Investment Bank (AIIB), I quickly wrote back promising 1,200 words within a few days. I thought it would be pretty easy to come up with the points I wanted to make, […]

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When do we decide that Europe must restructure much of its debt?

When do we decide that Europe must restructure much of its debt?

It is hard to watch the Greek drama unfold without a sense of foreboding. If it is possible for the Greek economy partially to revive in spite of its tremendous debt burden, with a lot of hard work and even more good luck we can posit scenarios that don’t involve a painful social and political breakdown, but I am pretty convinced that the Greek balance sheet itself makes growth all but impossible for many more years.

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Syriza and the French indemnity of 1871-73

Syriza and the French indemnity of 1871-73

The euro crisis is a crisis of Europe, not of European countries. It is not a conflict between Germany and Spain (and I use these two countries to represent every European country on one side or the other of the boom) about who should be deemed irresponsible, and so should absorb the enormous costs of nearly a decade of mismanagement. There was plenty of irresponsible behavior in every country, and it is absurd to think that if German and Spanish banks were pouring nearly unlimited amounts of money into countries at extremely low or even negative real interest rates, especially once these initial inflows had set off stock market and real estate booms, that there was any chance that these countries would not respond in the way every country in history, including Germany in the 1870s and in the 1920s, had responded under similar conditions.

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Why deflationary pressure in China mandates monetary tightening, not loosening

Why deflationary pressure in China mandates monetary tightening, not loosening

Deflationary pressures in China indicates that we probably need monetary tightening, not loosening. I know this sounds extremely counterintuitive, and so violates what we have learned about the world by assuming that the world looks a lot like the US, but there is both a logical argument behind it and what I think is overwhelming historical evidence. The convention that any economic variable that works one way in the US must work the same way in China is one of those assumptions that is implicit in so much that is written about the Chinese economy, and yet is made by foreign and Chinese economists who would indignantly reject the assumption were it ever made explicitly.

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My reading of the FT on China’s “turning away from the dollar”

My reading of the FT on China’s “turning away from the dollar”

By Michael Pettis The Financial Times ran a very interesting article last week called “China: Turning away from the dollar”. It got a lot of attention, at least among China analysts, and I was asked several times by friends and clients for my response. The authors, James Kynge and Josh Noble, begin their article by noting that we are going […]

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How might a China slowdown affect the world?

How might a China slowdown affect the world?

By Michael Pettis Two years ago it was hard to find analysts who expected average GDP growth over the rest of this decade to be less than 8%. The current consensus seems to have dropped to between 6% and 7% on average. I don’t think Beijing disagrees. After assuring us Tuesday that China’s economy – which is growing a little […]

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