SIX, Eight, China discussed on Odd Lots

Odd Lots


Another twenty or thirty years. But that's a tiny part of the investment. Most of it is Bridges and subways and things like that and we haven't seen the benefits yet so in my mind. There's no question that much of this investment is on the solid gated. But when i think doesn't matter clearly. Beijing is very worried about this. This is why they're having this huge debate. About how much growth. They need if the growth was good. You shouldn't debated if you can get eight percent. Get eight percent of you can get ten percent ten percent but they're not trying to get percent ten percent which they easily could they have the debt capacity because clearly they don't believe in that growth and that's why you have all of this talk about rebalancing and dual circulation this is a clear recognition that there is a serious problem with the quality of growth. Could you dive into that a little bit more. So beijing is obviously looking at a trade off between economic growth and more debt accumulation. How are they thinking about that. And what are the political calculations that you see the making at the moment. Well in a couple of weeks will start the famous so two sessions. Typically that's when they set out the plans for the year and for for people like you and me the most important part of the two sessions is that they announced the gdp growth target for the year moster as we know by december what the gdp growth target is last year. There wasn't one and this year there probably won't be gdp growth target. But it's clear that thursday ferocious debate about growth versus debt. You have one group of people saying it is really important to keep. The growth rate is as high as possible by which a lot of people are saying. Gdp growth this year in china will be eight to ten percent. I don't think that's the case. I think they're more likely to go either. Between six and seven percent of the debt guys of the upper hand or seven eight percent of the growth guys of the upper hand but either way. That's the the nature of the debate that we're hearing on the one hand. You have the politico's the provincial leaders you know some of the military and foreign affairs guy saying we need to keep growth rates as high as possible on the other hand. There's almost unanimity among dem. Ix of the central bank people the ministry of finance in the banking regulators almost unanimity not complete saying that. No we absolutely have to get that under control and so that's really what the discussion is going to be a. But it's very hard to do. You cannot get debt under control in my opinion unless you're willing to accept growth rates of two to three percent or maybe even lower and i don't think even the hardest core debt warriors are willing to To see growth. Drop that quickly. So you know thinking back pre virus. And i think i don't remember when we had you on before but it's been a consistent theme of your work and we should of course mentioned the book that you Publish this last year with madd klein Trade wars are class. Wars which seem very timely..

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