M.Moon

It dawned on me. ## retweets and likes are only to note events of our times; likes could well be satirical

[M.Moon @MorlinMoon]

洞见

[Murong Xuecun慕容雪村 @hawking197428]

所谓『历史感』就是这个意思吧，某些事現在看來很重要，但在更久远的时空中，它还是那么重要吗？它对于未來有什么价值和意义？值得为之辩论和爭吵吗？值得为之努力和奋斗吗？每个人都有与他人交流和辩论的欲望，但在加入论战之前，先想想这些问題可能也沒什么坏处。

[莫之许 @qinglongzui]

最近几年的一个变化是：党国不仅通过强制驱逐/边缘了自由化言论，还逐步形成了党国与基本盘在社媒上的耦合——基本盘发难/网暴，党国回应并充当最后裁判人——并通过这种耦合进一步驱逐/边缘自由派言论，突出党国青睐的价值观，类似剧目反复上演，如前段期间的“两个老公”，以及这个事情都是如此。

[Michael Pettis @michaelxpettis]

In his recent Tsinghua PBCSF Forum speech, Huang Qifan acknowledges that China’s trade surplus is a problem for both China and the world, but he claims that the surplus "is not the result of a deliberate export-oriented strategy, nor of government efforts to drive exports through preferential treatment and incentive policies. Rather, it reflects the gradual strengthening of China’s manufacturing sector and the natural rise in its industrial competitiveness."

Treating a trade surplus as the consequence of a series of unrelated, incremental conditions may be something that many analysts do, but it is mistaken. A country's trade surplus is systemic, not incremental, caused in China's case by government policies that very specifically subsidize manufacturing production at the expense of household income.

There is nothing wrong with arguing that the rise in Chinese manufacturing exports may reflect "the gradual strengthening of China’s manufacturing sector" (although this "strengthening" was itself the result of highly-directed industrial policies), but the failure of imports to keep pace with rising exports has mostly to do with the failure of the growth in household income to keep pace with the growth in production. It was, in other words, the consequence of political decisions, and not simply a coincidental consequence of a growing manufacturing sector.

Huang calls for resolving this issue through a slow, gradual strengthening of the RMB (which works by shifting income from producers of tradable goods to net importers, i.e. the household sector) because too-rapid an appreciation may be disruptive.

It almost certainly will be. China's overall global competitiveness in manufacturing is mostly the flip side of its weak domestic consumption, and a rapid revaluation risks adjusting not through faster consumption growth but rather through slower production growth.

But it's not clear that after refusing to rebalance for 10-15 years, Beijing can now decide to do so at whatever pace it chooses. Both rising anger among its trade partners and (more importantly) surging domestic debt problems are limiting factors in China's ability to choose its adjustment pace.

What is clear, however, is that the sooner China begins the adjustment process, the less disruptive it will be, which means that China might not have the luxury of debating a few more years before it formally recognizes that its trade surplus is a problem both to the world economy and to itself.
https://t.co/mYas7oVpa0

[M.Moon @MorlinMoon]

This is broadly correct, and it is a shame that there is no wider public discussion of this issue. However, nuance must be taken into account, eg whether the sports teams of hostile countries are actively politicising their participation and using their presence for propaganda.

[Timur Kuran @timurkuran]

The hosts of international sports events should be equally hospitable to all competitors, including political rivals. During the Cold War, Soviet teams were treated decently. It’s a disgrace to deny Iranian players basic courtesies—and shameful that FIFA is allowing this.

[Michael Pettis @michaelxpettis]

2/2
But, as I explain in my latest Substack piece, they may be framing the issue incorrectly. This isn't a question of whether government should intervene in the economy so much as it is a question of which government should intervene in the economy.
https://t.co/f3mjSqJhdh

[M.Moon @MorlinMoon]

UK couple beat and starved man to death and left him resembling a 'walking skeleton' after he was sent to live with them by social workers - kept victim in their council house 'for own financial benefit' and abused him 'for fun and kicks' @dailymailuk https://t.co/LJvM9dyUHI

[M.Moon @MorlinMoon]

"A Ford dealer is encouraging people to 'beat the changes' coming to the controversial Motability scheme and 'lock in' taxpayer-funded benefits before they are slashed." Ford dealership accused of urging claimants to get a free gov-funded car @dailymailuk https://t.co/9W7IXfypV7

[M.Moon @MorlinMoon]

Zero punishment, break laws as you want in the UK. | Moment woman cyclist with THREE children riding on back pedals through a red light and holds up her hand to try and stop cars as she dodges traffic @dailymailuk https://t.co/7XAqtkWceu

[@_rt* @literatura_rte]

Fan Su-Luan
A Pond in the Summer

[Nick Gerli @nickgerli1]

Stocks and housing have never been this expensive relative to the U.S. economy.

Stock market value: 250% of GDP.

Housing value: 146% of GDP.

This is the first time in modern U.S. history both have simultaneously approached record valuations.

In 2000, it was mostly stocks.

In 2006, it was mostly housing.

Today, it's both.

[易富贤Yi Fuxian《大国空巢》 @fuxianyi]

The Guardian published an interview with me regarding the "Childless 100 Days Campaign" once implemented in Shandong Province, China. 英国《卫报》就中国山东省曾推行“百日无孩日”运动发表对我的采访。https://t.co/ewiWoRGsiJ

[Michael Pettis @michaelxpettis]

It is harder than ever to find good news in China's data release today. The economy continues to be structurally locked into increasing production at the expense of consumption, even though China suffers from many years of growing excess capacity.

China's industrial output, for example, increased by 5.4% year on year in the first five months of 2026, with a 4.5% year on year increase in the month of May. This was a little higher than April’s 4.1% increase, although lower than the 5.7% increase in March.

The uglier numbers were (as always) on the consumption side. For the first five months of 2026, total retail sales grew 2.8%, just over half the pace of industrial output. Although they were barely expected to grow in May, in fact they actually fell by 0.6%, well below the disappointing 0.2% increase in April and the first decline since the end of the Covid lockdown in 2022.

For all the excited claims about consumption spending during the important May holiday, in other words, it was more than offset by the decline in spending over the rest of the month, proving, once again, that what limits household consumption is the household budget, not spending opportunities.

Meanwhile China's fixed-asset investment declined 4.1% year on year in the first five months of 2026.

Last week's trade and debt numbers reinforce the claim that China is finding it harder than ever to restructure its economy. It is expending huge resources in growing output, especially manufacturing output, but Chinese producers rely more than ever on soaring exports to offset weak domestic demand.

So far this year's numbers show that China's economy has further increased its already-excessive dependence on surging debt and soaring trade surpluses to keep GDP growth from slowing. It is not clear how much longer this growth model can be sustained before China is forced into a very difficult economic adjustment, but it is almost impossible for China to exit this model without a sharp slowdown in near-term growth, which is why, for all its promises, Beijing has been unable to adjust.

The problem, of course, is that as long as this process continues, it will increase the final adjustment costs for the Chinese economy and will further undermine manufacturing in the rest of the world.
https://t.co/N6uiKiTPUy

[Michael Pettis @michaelxpettis]

Caixin: "A rush of new entrants into China’s humanoid robotics industry is stirring concern among founders and investors that the sector could become overcrowded and face the same self-destructive competition, or “involution,” plaguing the country’s EV market."

This was always quite predictable. Since last year I've argued that for all the talk of fighting involution, China's growth model requires the spread of involution into more and more sectors as long as the political need to achieve excessively high GDP growth targets is met by pouring capital into manufacturing, with the most likely industries that will suffer from involution being those in politically preferred areas.
https://t.co/yC2QG8Vj6P

[M.Moon @MorlinMoon]

Comment by RollingMyEyesAtYou: "Trying to imagine the coverage if Obama had spent $60 million to host a pay-per-view NBA event at the WH where LeBron called Melania a hooker." | UFC fighter made vile Michelle Obama slur at T's White House event @dailymail https://t.co/Ez89eaOp9Q

[Michael Pettis @michaelxpettis]

I'd definitely vote for this. Who is more New York, after all, than Sonny Rollins? He turned Williamsburg bridge into an artistic landmark and part of the mythology of jazz, unlike many other true New Yorkers, he was even born in the city.
https://t.co/icViyjplux

[Ning Leng @leng_ning]

Totally agree with this great analysis by @michaelxpettis. I would add that the design of China’s post-2008 stimulus plan accelerated and intensified the broader problem of wasteful investment. It added powerful economic incentives to existing political incentives, encouraging local officials to build and invest in projects that often lacked economic sustainability. Visibility projects were one important subset of this broader pattern.

And I completely agree that the advancement of China’s SOEs and the gradual retreat of the private sector should not be understood as an ideological turn, but a structural outcome of China’s political economy model.

[M.Moon @MorlinMoon]

"What many analysts saw as the result of a change in ideological preferences, in other words, is in fact the necessary outcome of the growth model"

[Michael Pettis @michaelxpettis]

Ning Leng makes an important point here: "Over time, state-owned enterprises expand in these spaces because their soft-budget constraints make them better able to absorb the costs of visibility projects."

In a 2012 Carnegie piece I warned that China was finding it increasingly difficult to identify enough productive investment projects (i.e. in which the value of the goods produced exceeded the value of the resources needed to produce them) to achieve the excessively high GDP growth rates Beijing was setting for the economy. If this continued, I argued, we would inevitably see a surge in the country's debt burden and a shift in the share of total Chinese production from private-sector producers to state and quasi-state producers.

The reason was because the private sector mostly operates under hard budget constraints while the state and quasi-state sectors mostly doesn't. This means that private businesses in manufacturing sectors that have growing excess capacity (and over time more and more sectors will suffer from this problem) will find it increasingly difficult to get banks to fund growing losses and rising inventories, and so eventually they would have to cut production.

Because high GDP growth targets required increasing production, rather than cutting it, and because state and quasi-state entities had much softer budget constraints, I argued that this would inevitably shift total production away from hard-budget constrained entities to soft-budget constrained entities, i.e. from the private sector to the state and quasi-state sectors. What many analysts saw as the result of a change in ideological preferences, in other words, is in fact the necessary outcome of the growth model, and this will continue either until Beijing allows GDP growth rates to drop sharply or until the system runs out of debt capacity.

The point is that the regulators can insist all they want that businesses be more disciplined and that manufacturers and local governments behave more rationally, but it is precisely the hard-budget constraint that imposes discipline on investment. By insisting on excessively high GDP growth targets and all but eliminating hard budget constraints, there is simply no way to eliminate involution.

[Michael Pettis @michaelxpettis]

2/2
In my most recent substack piece I argue that while this has been the fairly standard response by most mainstream economists to rising anti-globalization sentiment, they fail to understand that globalization is not a synonym for free trade.
https://t.co/BXX112AQJx

[Michael Pettis @michaelxpettis]

1/2
In a recent piece for the IMF's F&D Magazine, Gordon Hanson argues that the rising reaction against globalization and free trade has been caused by the failure of our political system to distribute the benefits evenly.
https://t.co/purA5ppwcf

[Michael McNair @michaeljmcnair]

3/ By his implied definition any country running a trade deficit is overspending bc that country by definition must sell financial assets to settle that balance and today that largely means issuing net debt. But that’s just circular argument and it’s the classic mistake of misunderstanding the direction of causality.

If the US were desperately pulling in foreign capital to fund its deficits, the currency would be in free fall and poor asset returns and low valuations.
Instead, the dollar has appreciated over 300% over the period of persistent deficits and US financial assets have the highest valuations in the world.

That is what it looks like when foreign demand for US assets drives the trade deficit, not the other way around.

The fiscal deficit is just one of the mechanisms through which the US absorbs the imbalance while sustaining domestic demand. It is not the whole explanation for why the imbalance exists.

Read the attached report (esp the last section) for the full explanation.

https://t.co/1197gllYla

[Robert Clapp @RobertClapp]

@AnthropicAI A few days ago I had Claude Fable 5 pick out a donut for me. Today it became clear: the US government knows this kind of power cannot fall into the hands of foreign nationals. God help us all.