If internal consumption is to be encouraged by the government pendulum, could it be a good idea to look at Macau casino/hotel operators ? If you don't plan in covering them, did you come across any worthy commentary? Thank you
Thanks for the write-up. I would say your pendulum analogy is not unique to China but rather its how all countries operate in their quest to allocate economic resources under scarcity. Every country must balance economic growth, innovation, and country level competitiveness with policy spillover effects. When policy mandates get taken to their extreme, the spillover become more apparent swinging the pendulum back (government intervention or marginal growth rates goes negative with competition).
How the pendulum swings back, in my opinion, matters. I would argue that it’s more important to get this part right than it is to chase the next hot trend (AI, EV, semi’s, etc). My concern with China has always been how they approached this. I’m not disagreeing with their idea of managing the excesses in the Economy, I just think there are better and less economically destructive ways to go about cracking down without taken the entire economy with it. The answer is really transparency and a better understanding of the market mechanism.
The Chinese can self correct and do reexamine their actions constantly - its really meritocratic. Heads do roll when the results are paltry. This government has taken time to iron out the kinks in the administration and the transmission mechanisms and get used to the Xi style of governance. Xi’s hard strict policies to correct the past wrongs lead to diasterous sentiment, flight of capital and investments. I am sure he is aware now that there needs to be more graudated approach and and earnest management to ensure that we dont get into a deflationary spiral.
Nice take!
Very helpful! Thanks
Do you think the chinese government is now officially done with teh tech crackdown and the pendulum is ready to swing the other way?
One of my next articles will be exactly about that. So stay tuned.
If internal consumption is to be encouraged by the government pendulum, could it be a good idea to look at Macau casino/hotel operators ? If you don't plan in covering them, did you come across any worthy commentary? Thank you
Thanks for the write-up. I would say your pendulum analogy is not unique to China but rather its how all countries operate in their quest to allocate economic resources under scarcity. Every country must balance economic growth, innovation, and country level competitiveness with policy spillover effects. When policy mandates get taken to their extreme, the spillover become more apparent swinging the pendulum back (government intervention or marginal growth rates goes negative with competition).
How the pendulum swings back, in my opinion, matters. I would argue that it’s more important to get this part right than it is to chase the next hot trend (AI, EV, semi’s, etc). My concern with China has always been how they approached this. I’m not disagreeing with their idea of managing the excesses in the Economy, I just think there are better and less economically destructive ways to go about cracking down without taken the entire economy with it. The answer is really transparency and a better understanding of the market mechanism.
The Chinese can self correct and do reexamine their actions constantly - its really meritocratic. Heads do roll when the results are paltry. This government has taken time to iron out the kinks in the administration and the transmission mechanisms and get used to the Xi style of governance. Xi’s hard strict policies to correct the past wrongs lead to diasterous sentiment, flight of capital and investments. I am sure he is aware now that there needs to be more graudated approach and and earnest management to ensure that we dont get into a deflationary spiral.