China’s Involution Trap | Michael Pettis on China's Excess Savings, Industrial Overcapacity, and Exporting of Deflation

In this episode of Monetary Matters, Jack Farley interviews Michael Pettis about the imbalances within the Chinese economy and between China and the rest of the world. Pettis explains how China's high savings rate and low consumption rate lead to trade surpluses, which are invested abroad, particularly in Anglophone economies, impacting those economies. He argues that China's domestic policies influence its trade partners and that countries like the U.S. have lost control of their domestic economies due to these imbalances. Pettis suggests that for China to resolve its economic issues, it needs to increase its consumption share of GDP, which is difficult due to the structure of the economy. They also discuss the role of tariffs, the potential for a new kind of globalization, and the impact of AI on the global economy.