China Economics Blog



McEconomics: The price of McDonalds in China (Jul 3)
Pettis over at China Financial Markets has a nice little comment on the role of McDonalds in China (and Asia generally). In my view he has it spot on making an excellent observation that I think deserves to be retold.

The rest of the article is also interesting.

Inflation? Or stagnation? [China Financial Markets]

Occasionally I like to bring foreign visitors to the neighborhood McDonalds, partly because it always generates a lot of outrage and partly because you are far more likely to find a McDonalds outlet replete with local residents conducting their everyday life than you ever would in Nan Luo Gu Xiang, which is much more likely to be peopled by European tourists and upwardly-mobile Chinese who like to eat and shop in the places foreigners do. McDonalds, on the other hand, is as local as it gets for young urban life in most Chinese cities, and it is rare to see one that is empty.

Sorry for that non-economic digression. I mention all this not because I own McDonalds stock or like ...


US assets in Chinese hands (Jun 23)
The debate over the large and increasing holdings of US assets by China. Bloomberg investigates.

China Adds to Holdings of U.S. Assets, Buys More Agency Debt [Bloomberg]

June 17 (Bloomberg) -- China is adding to its holdings of U.S. assets, data from the U.S. government showed yesterday, easing concern the Asian nation will sell dollar investments.

Total holdings of U.S. equities, notes and bonds among foreign investors rose by a net $115.1 billion in April from $79.6 billion the previous month, the Treasury Department said yesterday in Washington. China's holdings of Treasuries gained $11.4 billion to $502 billion, holdings of U.S. agency debt rose $11.9 billion and U.S. corporate bond investments increased $6.9 billion, data showed.

``China was a big buyer of U.S. securities,'' wrote Win Thin, a New York-based senior currency strategist at Brown Brothers in a research note today.

China is the second largest holder of U.S. Treasuries after Japan, investing almost one-third of its $1.68...


Just How Capitalist is China? (Jun 23)
An interesting question and an interesting academic paper that attempts to answer it. The work is taken from the book "Capitalism with Chinese Characteristics" so will be fairly accessible to non academic readers.

I am in general agreement with the findings below:

Just How Capitalist is China? [MIT Sloane Research Paper]

Abstract:
This paper is the first chapter of a forthcoming book, Capitalism with Chinese Characteristics (New York: Cambridge University Press, July 2008). The book is a narrative account of the evolution of capitalism in China in the last three decades. (The year 2008 marks the 30th anniversary of economic reforms in China.) The research is based on detailed archival examinations of policy, bureaucratic and bank documents as well as several waves of household and private-sector firm surveys. As an example, I have examined a 22-volume collection of memoranda, directives, operating manuals, rules of personnel evaluations issued by the presidents of China's central...


BERGSTEN on China's trade challenge (Jun 22)
Foreign Affair have an interesting comprehensive (6 page) China bashing story.

The summary is given as:

Summary: Beijing is shirking its responsibilities to the global economy. To encourage better behavior, Washington should offer to share global economic leadership.

I concentrate here on trade but the whole article is worth reading.

A Partnership of Equals: How Washington Should Respond to China's Economic Challenge[Foreign Affairs]

Some salient paragraphs:

China poses a unique challenge because it is still poor, significantly nonmarketized, and authoritarian. All three characteristics reduce the likelihood that it will easily accept the systemic responsibilities that should ideally accompany superpower status. The integration of China into the existing global economic order will thus be more difficult than was, say, the integration of Japan a generation ago. The United States and the EU would like to co-opt China by integrating it into the regime that they have built and defended over ...


Chinese liquidity (Jun 10)
The FT's Lex column looks at Chinese liquidity.

Chinese liquidity[FT - subscription required]

China surprised the market at the weekend, lifting the ratio of reserves that banks must hold by 100 basis points. This is the fifth rise of the year, as well as the biggest, and brings the ratio up to 17.5 per cent.

What does Beijing know that nobody else does? Inflation numbers, due out on Thursday, look like a red herring. Food price indices point to a slight deceleration in consumer price inflation; besides, impounding an additional $50bn-$60bn in bank vaults does little to curb spiralling prices when loan growth is steaming along at about 15 per cent year-on-year.


The article goes on to talk about the fear of hot money inflows estimated to be in the region of $75bn in April alone.

Lex concludes that such measures may not be sufficient and that capital controls are a possibility.

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