by Brad W. Setser
China's Current Account Surplus Is Likely Much Bigger Than Reported
by Brad W. Setser
Thomas J. Duesterberg writes: Altogether, the various proposals work to weaken China’s attempts to reinvigorate growth by relying on increased trade, attracting more Western capital, and acquiring technology illicitly to increase competitiveness in industries of the future. These proposals will limit Chinese access to Western capital, which the PRC needs for its faltering financial sector and government balance sheets. The measures will also hinder China’s access to Western technology while limiting the PRC’s drive to displace Western industry in global markets. – Hudson Institute
China and America Are Not Destined for War
By Joseph S. Nye, The Strategist (ASPI): “The great-power competition between the United States and China is a defining feature of the first part of this century, but there’s little agreement on how it should be characterised.”
The Debt Supercycle Comes to China By Kenneth Rogoff |
Explaining a decline in the Chinese economy boils down to reduced demand from an aging, contracting population.
What To Do About North Korean Nuclear Weapons
by Christopher Ford via Hoover Institution Press
Recounting the history of North Korea’s nuclear weapons program and the failure of past efforts at negotiated “denuclearization,” this essay explores the options of (1) continuing with denuclearization diplomacy or (2) pursuing “arms control” with North Korea but instead recommends (3) a policy of prolonged pressure and isolation to limit the development of North Korea’s capabilities as much as possible and make its example unattractive to future would-be proliferators.
Turkey’s Increasing Balance Sheet Risks
by Brad W. Setser
Is China Quitting the Economic Race?
America Needs a “Cold War” Strategy for China
Breaking China’s Hold
China’s Technology Strategy: Leverage Before Growth
Dan Blumenthal and Derek Scissors | June 2023
The Debt Issue Isn't Over By Allison Schrager
As usual, the debt ceiling drama came and went. But drama obscured the important fact that US debt is still too large and growing to much higher levels on the path it is on. It is a problem that needs to be addressed.
What Happens When Cities Run Out of Money
By Henry Grabar | SlateFrom the East and West Coasts to the Midwest, cities around the country are struggling to manage the financial implications of a “death spiral:” flagging transit ridership, reduced traffic in business districts, and an increasingly remote workforce.
Demagoguery in the U.K.
The nation’s political class lacks intellect and character.
/ Read here
Erdoğan’s unorthodox economic policy
As the Chinese economy sputters, could it be headed for a “lost decade”? Desmond Lachman compares China’s stagnating economy
Jobs Are Booming. Productivity Growth Isn't. What's Up with That?
The Happiest Way to Change Jobs
Iran: The Dollarization Temptation by Amir Taheri
In new research for AEI, Derek Scissors forecasts these dynamics to suggest why China may not be able to keep up with the United States into the 2040s.
When the Fed stopped focusing on inflation, it undermined the stability of our financial system.
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No Money, No Nukes: Time to Bankrupt China's Regime by Gordon G. Chang
China’s (Rough) Economic Trajectory to 2050
Derek Scissors | April 2023
Since the Chinese economy has matured and the policy trend is established, long-term forecasting should be more accurate. It’s still imprecise, of course, and vulnerable to any sharp domestic change.
The COVID-19 pandemic and recovery interrupted an economic slowdown that began in 2011 and will resume in 2024–25. China will still outperform in the 2020s, but its trajectory will be unmistakable by the end of the decade.
The 2030s will be worse. Aging will be the principal reason, augmented by a large debt burden and (unless lifted) self-imposed constraints on innovation. In the 2040s, these factors will effectively bring growth to a halt.
China’s Demographic Prospects to 2040 and Their Implications: An Overview
Nicholas Eberstadt | Psychoanalysis and Psychotherapy in China | May 26, 2020
Vladimir Putin’s China Gamble
Leon Aron | AEIdeas
Federal Reserve Borrows $184 Billion Without Congressional Authorization, Circumventing the Debt Ceiling
Paul H. Kupiec | Hill
Silicon Valley’s Lesson: How to Change Banking to Prevent Crises and Bailouts
By John H. Cochrane via The Hill
John Cochrane writes that the recent bailout of large depositors of Silicon Valley Bank demonstrates that the banking regulation system is fundamentally broken and has provided perverse incentives for financial institutions to take enormous risks at what is ultimately the taxpayer’s expense. As an alternative to the current system, Cochrane recommends that banks funnel all deposits and short-term debts into interest-paying reserves at the Fed and short-term Treasury investments. Such a policy, he argues, would end bank runs and ensure that there would always be money to satisfy depositors.
Tangled Up in Blue
City and state New York Democrats can’t decide what they stand for. Electoral reform could help clarify matters
Our Military Leaders Need a National Security ‘Fast Lane’ To Compete With China
By Mike Holmes & Dan Patt, The Hill: "The Chinese spy balloon incident highlights both the brashness of China’s military ambitions and the U.S. military’s struggle to counter China’s bold moves with new capabilities such as modern air surveillance tools."
China’s Future Ain’t What It Used To Be
by Josef Joffe via Tablet Magazine
In January, China’s National Bureau of Statistics made it official: After decades of fabulous GDP growth, the rate is now down to 3%. The culprit is Xi Jinping’s “zero-COVID” policy, plus ruptured supply chains and soaring energy prices. In the post-lockdown recovery, growth will of course bounce back, but not into the enduring double-digit rates prevailing since the 1980s, when China became the envy of the world.
Reports: Saudi Arabia to deposit $1 billion in Yemen’s central bank
The European Union also announced additional funding for Yemen, while a famine watchdog said that economic warfare is increasingly causing hardship for Yemenis.
Netanyahu advances judicial overhaul in Israel's Knesset
The government of Prime Minister Benjamin Netanyahu took the first step in getting its judicial reform adopted by the Knesset.
How To End Putin’s Forever War
quoting Stephen Kotkin via The Nation
In a wide-ranging and exceptionally thoughtful interview with The New Yorker, the historian Stephen Kotkin, best known as a biographer of Joseph Stalin, cast a cold eye on the notion that more of the same can lead to a negotiated peace. Kotkin notes that a war of attrition can continue indefinitely unless Russia’s military production capability—its ability “to resupply and produce more weapons”—is damaged.
Michael Rubin writes: Back to the present: Regime change in Iran will be difficult, but it is inevitable. Khamenei will die, and it is unclear any new ayatollah will be able to consolidate power. The Revolutionary Guards will play the role of the Russia-backed reactionaries of a century past as they intercede to stymie more liberal-minded politicians. It will be a tough fight—and very likely a violent one—but the sheer suspicion Iranians have of charismatic figures may ironically give them a second chance at democracy. After 115 years, they deserve one. – 19FortyFive
Michael Rubin writes: President Donald Trump betrayed Syrian Kurds in order to appease Erdogan. Despite Biden’s promise to resist Erdogan’s blackmail, the default position of his team remains to appease. If Biden wants to drive a nail into the coffin of the Islamic State and Iran’s destabilization of the Middle East, there is no other option. The strategic interest of the United States should be to support and reinforce Kurdish autonomy and the AANES. – 19FortyFive
Stanley Chao writes: Whether it’s throwing punches or doling out flowers, China is not really interested in ideological alliances or an international rules-based order. Whether you call it socialist market capitalism or pseudo-communism, China’s approach is one of a kind. Going it alone often begets chaos. It’s simply hard to predict China’s mood at any given time. Ultimately, however, Beijing does want to be a global citizen, just on its own terms. Expect surprises, good or bad, and then roll with the punches when they inevitably come. – The Hill
Former Pakistan Prime Minister Imran Khan was granted protective bail by a court in the eastern city of Lahore on Monday, providing him respite from arrest for two weeks in a case that involves charges under the country’s anti-terrorism laws. – Reuters
Chris Pope explains the mammoth task facing lawmakers as they attempt to curtail explosive federal spending and balance the budget in the next ten years.
Eritrea’s and Ethiopia’s Empty "African Solutions" Mantra
Michael Rubin | 19fortyfive.com
Fast Chinese Gross Domestic Product Is So Last Decade
Derek Scissors | AEIdeas
China’s Global Ambition And The US Response
by Elizabeth Economy via PolicyEd Hoover senior fellow Elizabeth Economy provides her perspective on Xi Jinping’s global ambitions and how likely he is to succeed in reaching them.
Nine Recommendations for Presidential Candidates on China Policy
Dan Blumenthal, Zack Cooper, and Derek Scissors | AEIdeas
There is bipartisan agreement that America’s next president will confront intensifying Sino-American competition and an aggressive People’s Republic of China. To develop comprehensive policy on how to approach the threats that China poses, Dan Blumenthal, Zack Cooper, and Derek Scissors put forth nine recommendations to presidential candidates. On the economic front, the US should ban Chinese participation in key supply chains, require the disclosure of lost intellectual property, and fully implement export controls. To deter military aggression, the US should replace strategic ambiguity, bolster military preparedness, and find ways to work with allies on technology issues. Lastly, the US can use all its recourses by creating a comprehensive counter-coercion strategy for Taiwan, go on the economic offensive against the Chinese Communist Party, and set up structures of collective defense in Asia.
Read more here. >> Learn about AEI’s New China Playbook here. >>
US “Guardrails” with China Are Shaky at Best
Hal Brands | Bloomberg Opinion
For much of 2022, America and China looked to be barreling toward conflict. As 2023 begins, Hal Brands notes that while the relationship has a new atmosphere, that will not last. Neither side is budging on its key interests, all the major disputes remain, and domestic politics are poised to play a spoiling role. What has emerged is a two-track relationship. Track one is intensified diplomacy, featuring renewed engagement on the climate and other transnational problems. The relationship’s second diplomatic track features ongoing and intensifying competition. Neither the US nor China has stopped seeing the other as its chief antagonist. Neither is slackening its efforts to strengthen its position. Continue here. >>
Defense Funding—Highlights from Fiscal Year 2023 to Inform Fiscal Year 2024
Elaine McCusker | AEIdeas
The new Congress must immediately begin performing its most critical duty—developing and debating defense policy and funding initiatives. Elaine McCusker provides three specific considerations for fiscal year 2024. First, cuts to the defense top line, particularly those that would revert to 2022 levels, would be irresponsible, wasteful, and dangerous. Second, as capacity is a capability of its own, and the current inventory of ships, planes, munitions, and ground assets is shrinking, procurement accounts should be a priority, even at the expense of research accounts if necessary. Lastly, Congress should gather real data on the impacts of three critical disruptors to the industrial base—inflation, workforce, and supply chain—to find spaces to save taxpayer money. Learn more here. >>
Turkey: Putin's Open Door for Harming Western Interests by Burak Bekdil
January 20, 2023
When Did Growth Begin? Evidence From England
by Jón Steinsson via Analysis
Over the past few hundred years, economic growth has transformed the standard of living of a large and growing portion of humanity. In the early nineteenth century, the vast majority of people lived in what we now consider extreme poverty. Today, however, the fraction of people living in extreme poverty has dropped to less than 10 percent and keeps falling. The main driver of this monumental change is economic growth.
Are We Beating China Economically?
Derek Scissors | National Review
Priorities for Economic Policy Toward China
Derek Scissors | AEIdeas
Increasing suspicion about China is causing many states to consider banning Chinese acquisition of US land. State governments can ban Chinese acquisition if they choose and it may prevent future problems, but it will do almost nothing to address our current economic vulnerability.
China's Rising Holdings of U.S. Agency Bonds
by Brad W. Setser
Iraq lowers dollar-dinar exchange rate
The Iraqi dinar has been depreciating against the dollar amid restrictions from the US Federal Reserve and other issues.
Economic Policy Working Group Reaches 15-Year Milestone in Providing Rigorous Policy Analysis and Solutions for American Prosperity
According to Hal Brands, PIVOT TO ASIA BEGINS
A Possible New Leader in the Global Economy
Allison Schrager, E21
The world is currently taking stock on the benefits of globalization, especially an overreliance on China which experienced spectacular growth in the last few decades. But China's economic future faces many challenges. Read more here....
Can a Staff Exodus Save Higher Ed?
If university administrators are unhappy, there’s the door.
The Master Negotiator?
By Javan David Frazier, Strategy Bridge: "The Gulf War, Tiananmen Square, the collapse of the Soviet Union and the end of communism in Europe, the Middle East peace process, and the ethnic fighting that erupted in Yugoslavia were just some of the challenges that Baker faced."