My year-end lists: books first

Great report. Fragmentation isn't uniform. High-tech trade is increasingly geopolitical, low-tech isn't. China expands exports everywhere while slashing imports from the West. The "techno-security state" is real, asymmetric, and concentrated where it matters most.

It’s giving minimum effort, maximum vacation vibes.

This was absolutely bonkers 🤯🤯🤯

China needs to fix its nominal growth problem, but conventional macro arguments for this haven’t gotten through with policymakers. maybe rivalry with the US will

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Here is the link to Nick's piece, which I hope will move the debate in a more productive direction:

The key to "boosting consumption" therefore is not the social-safety net but traditonal macro: China needs macroeconomic policies that tighten the job market and move it closer to full employment. That's what will reassure households. 9/

In my view the main drivers of the persistently high household savings rate are now cyclical rather than structural. Households are cautious because the job market has been weak and uncertain for at least four years (six if you count the pandemic). 8/

It just doesn't make sense to think that the social problems of the 2000s are still determining the household savings rate in the 2020s. We should look to more proximate causes, which I think are actually quite obvious. 7/

Public spending on benefits as a % of GDP has already doubled, but a lot of economists keep saying that the government needs to expand spending on social benefits in order to get the household savings rate down. That spending will expand anyway as society ages. 6/

The view that Chinese society is wracked by insecurity made sense in the 2000s, in the aftermath of the massive SOE layoffs of the 1990s and before the government had built a new benefits system. It doesn't make sense today, when social insurance at least touches most people. 5/

These days China's social-safety net is pretty decent by middle-income-country standards, and in some cases (like those pensions for former SOE/gov't employees) arguably overly generous. 4/

The single most important change was the creation of the "resident" pension program in 2012, which extended income support in old age to those outside the privileged minority of SOE/large urban employees. This has led to substantial gains in government transfers to households. 3/

In fact I've been making this argument for literally a decade (the receipts: my blog post titled "the death of the precautionary savings hypothesis" is dated April 2015). Those paying attention know China started boosting public spending on the social safety net around 2006. 2/

Nick Lardy has an excellent new paper out reviewing China's progress in building up a social safety net, particularly its pension system. He thinks the consensus view that a weak social safety net is pushing up savings and pushing down consumption is outdated. I agree! 1/

Interesting list, not just the usual

Eighteen centuries before Adam Smith!!! 🤯 “There must be farmers to produce food, men to extract the wealth of mountains and marshes, artisans to process these things and merchants to circulate them. There is no need to wait for government orders; each man will play his part,

On this theme, the great novel of trying, but failing, to achieve The American Dream is Wallace Stegner's *The Big Rock Candy Mountain*, which I re-read recently. Hardworking, talented guy keeps trying to strike it rich, comes close a few times but it always goes wrong.

How do people in a rising power view their country's global standing? My new paper in @IntOrgJournal finds significant national overconfidence in China and shows that misperceptions can be corrected and triumphalism mitigated https://t.co/8w3eh66RBW 崛起大国的过度自信及其校正

At least, it is good for China's planners to recognize reality and attempt less distortion of the economy in pursuit of unattainable goals. More at the blog:

Will these tweaks in wording make a real difference to the economy? Maybe not. But they could signal a change at the margin away from the recent pattern of all-out subsidies for manufacturing output and investment, which many would welcome.