Michael Pettis: China’s Consumption Crisis Is The World’s Crisis

In this episode of Monetary Matters, Jack Farley interviews Michael Pettis, a Senior Fellow at the Carnegie Endowment, about the imbalances in the Chinese economy and its impact on global trade. Pettis explains how China's high savings and low consumption rates lead to trade surpluses, which are then invested in Anglophone economies like the U.S., causing those economies to adjust, often negatively impacting their manufacturing sectors. They discuss the unsustainability of the current global trade system, potential solutions like tariffs (though poorly implemented currently) or a customs union, and the challenges China faces in increasing domestic consumption. Pettis also touches on the role of debt, the shift of investment from real estate to manufacturing in China, and the potential for trade wars and contraction if imbalances are not addressed.