https://www.scmp.com/rss/321950/feed Dr Andy Xie is a Shanghai-based independent economist specialising in China and Asia, and writes, speaks and consults on global economics and financial markets. He joined Morgan Stanley in 1997 and was managing director and head of the firm’s Asia-Pacific economics team until 2006. Prior to that he spent two years with Macquarie Bank in Singapore, where he was an associate director in corporate finance. He also spent five years as an economist with the World Bank. He was voted one of the 50 most... en https://assets.i-scmp.com/static/img/icons/scmp-meta-1200x630.png https://www.scmp.com Andy Xie Andy Xie The Iran war’s oil shock has dramatically increased the security risk for oil-dependent countries, incentivising a turn towards renewable energy. This impact will outlast the war and oil price spikes because the world knows this war will recur. China will be the biggest beneficiary and its exports are likely to do very well this year, offsetting losses from buying higher-priced oil. A fifth of the global supply of oil and liquefied natural gas plus a third of seaborne fertilisers traditionally... https://www.scmp.com/opinion/china-opinion/article/3347634/oil-shocked-world-turns-renewables-china-will-reap-rewards?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3347634/oil-shocked-world-turns-renewables-china-will-reap-rewards?utm_source=rss_feed Thu, 26 Mar 2026 12:30:07 +0000 Andy Xie Andy Xie The rise of Chinese research labs is accelerating tech breakthroughs across a broad array of fields. It is leading to a new era of abundance based on cheap energy, new materials and their applications. The US-led tech embargo against China helped jump-start its investment in research. Breakthroughs are accelerating and being turned into efficient scale production. This could be the most important dynamic in shaping the 21st century. China solved its food self-sufficiency problem in the 1980s... https://www.scmp.com/opinion/china-opinion/article/3343821/how-chinas-research-prowess-will-shape-course-21st-century?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3343821/how-chinas-research-prowess-will-shape-course-21st-century?utm_source=rss_feed Wed, 18 Feb 2026 21:30:09 +0000 Andy Xie Andy Xie China achieved its twin goals of tech advancement and macro stability in 2025. Its goals for 2026 remain the same. However, a rapidly deteriorating global security environment is likely to shift national priorities towards preparation for worst-case scenarios. Oil supplies and sea lanes are becoming insecure. The US-China trade war could reignite at any time. China will have to accelerate its goals of energy and technology self-sufficiency to enhance national resilience. Fighting for sea lane... https://www.scmp.com/opinion/china-opinion/article/3340177/why-security-not-growth-likely-command-chinas-attention-2026?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3340177/why-security-not-growth-likely-command-chinas-attention-2026?utm_source=rss_feed Tue, 20 Jan 2026 01:30:10 +0000 Andy Xie Andy Xie The open source approach championed by some Chinese tech companies is preventing monopoly platforms from taking hold in artificial intelligence (AI). The massive investment in AI is justified in the case of repeat monopoly winners from previous waves of tech development, such as Microsoft, Intel, Qualcomm, Google and Meta. However, as China views proprietary systems and platforms as potential chokepoints, it is leveraging its market to develop open source substitutes. Users in the wider world... https://www.scmp.com/opinion/china-opinion/article/3337922/rise-chinas-open-source-platforms-will-burst-ai-bubble?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3337922/rise-chinas-open-source-platforms-will-burst-ai-bubble?utm_source=rss_feed Tue, 30 Dec 2025 01:30:07 +0000 Andy Xie Andy Xie Renewable energy is the tech revolution of our time. It promises ubiquitous, cheap and easily accessible energy for all. The rise of the sodium-ion battery is the final piece to make this dream come true. Its low cost and reliable energy storage can make distributed and affordable electrification widely available for everyone across the world. Chinese firm CATL is on the verge of mass-producing a sodium-ion battery that can charge more than 10,000 cycles, performs between minus 40 and 70 degrees... https://www.scmp.com/opinion/china-opinion/article/3334221/battery-revolution-set-spark-global-souths-century-prosperity?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3334221/battery-revolution-set-spark-global-souths-century-prosperity?utm_source=rss_feed Tue, 02 Dec 2025 08:30:09 +0000 Andy Xie Andy Xie President Xi Jinping is expected to meet with his US counterpart, Donald Trump, on the sidelines of the Asia-Pacific Economic Cooperation (Apec) summit later this month. Regardless of how the summit might go, don’t count on China walking back its recently announced export controls on rare earths. Beijing might consider increasing supplies for civilian industries if the US rolls back its own escalatory policies following the trade truce brokered in Geneva, Switzerland earlier this year. The US is... https://www.scmp.com/opinion/china-opinion/article/3330255/dont-expect-china-compromise-rare-earth-controls-apec?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3330255/dont-expect-china-compromise-rare-earth-controls-apec?utm_source=rss_feed Sun, 26 Oct 2025 21:30:08 +0000 Andy Xie Andy Xie The AI bubble is entering extra time by walling in money and sharing it among key players. As profitable firms plug money back into loss makers, the net cash requirement for the bubble circle is being minimised for the collective loss. The next step is for profitable companies to sell stocks to raise cash and pump it into loss makers. However, this extra time is likely to be measured in quarters, not years. It is possible that the US government will pump borrowed money into the bubble next,... https://www.scmp.com/opinion/world-opinion/article/3327497/why-clock-ticking-fed-fuelled-ai-bubble?utm_source=rss_feed https://www.scmp.com/opinion/world-opinion/article/3327497/why-clock-ticking-fed-fuelled-ai-bubble?utm_source=rss_feed Sat, 04 Oct 2025 21:30:07 +0000 Andy Xie Andy Xie China has been increasing investment in renewable energy to give its economy a boost. In the first half of 2025, China’s solar power generation capacity jumped 54.2 per cent year on year, while wind power’s generation capacity increased by 22.7 per cent in the same time period. The country is also constructing what is set to be the world’s largest hydropower project, expected to cost less than 1 per cent of China’s gross domestic product (GDP). Reduced consumption of crude oil coupled with lower... https://www.scmp.com/opinion/china-opinion/article/3320834/chinas-clean-energy-transition-solves-several-problems-once?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3320834/chinas-clean-energy-transition-solves-several-problems-once?utm_source=rss_feed Wed, 06 Aug 2025 08:28:59 +0000 Andy Xie Andy Xie Stock markets have roared back to levels seen before “Liberation Day”, seemingly on the mere belief that US President Donald Trump always chickens out – otherwise known as Taco – so no harm will be done in the end. However, the Taco trade is based on a bubble. Collective self-deception can work for a while but only when there is enough money behind it. Despite recent talks to de-escalate, the US-China trade war is still pushing the global economy to the brink. A looming recession and higher... https://www.scmp.com/opinion/world-opinion/article/3314775/will-markets-wake-taco-bubble-its-too-late?utm_source=rss_feed https://www.scmp.com/opinion/world-opinion/article/3314775/will-markets-wake-taco-bubble-its-too-late?utm_source=rss_feed Fri, 20 Jun 2025 08:30:08 +0000 Andy Xie Andy Xie China must stimulate consumption to offset the potential loss of the US market. To have a lasting impact, stimulus measures must aim to boost the birth rate, given that in societies like China, consumption is driven by raising children. There are costs and benefits to raising children that extend to society as a whole. Faced with an inverted population pyramid, the Chinese government, which has control over so many parameters, is in a unique position to shift the economic value of raising... https://www.scmp.com/opinion/china-opinion/article/3308352/china-should-stimulate-domestic-consumption-boosting-birth-rate?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3308352/china-should-stimulate-domestic-consumption-boosting-birth-rate?utm_source=rss_feed Wed, 30 Apr 2025 08:30:08 +0000 China is going the whole hog in response to US President Donald Trump’s tariff war, showing it is prepared to completely cease trade with the United States. The European Union and Canada are stiffening their backs too. Trump’s tariff salvo is clearly demented, in basing the rates on trade imbalances. If a country’s imports from the US are only 10 per cent of its US exports, Trump interprets it as a 90 per cent tariff – though in his magnanimity, he halves it, ending up with 45 per cent. The... https://www.scmp.com/opinion/china-opinion/article/3305545/why-china-can-and-should-go-all-out-against-trump-his-trade-war?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3305545/why-china-can-and-should-go-all-out-against-trump-his-trade-war?utm_source=rss_feed Wed, 09 Apr 2025 10:30:08 +0000 DeepSeek has unravelled the assumption that a few hyperscalers will dominate the artificial intelligence market, extracting payments from an AI-dependent global economy. The Chinese company’s open-source program lets businesses develop their own applications without having to pay anyone. The revenue assumption of hundreds of billions of dollars that underpins hyperscalers is looking like hot air. The US economy depends on its buoyant stock market which, at twice the value of its gross domestic... https://www.scmp.com/opinion/china-opinion/article/3298748/how-deepseeks-disruption-could-finally-burst-us-stock-bubble?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3298748/how-deepseeks-disruption-could-finally-burst-us-stock-bubble?utm_source=rss_feed Tue, 18 Feb 2025 21:30:08 +0000 Donald Trump’s policies as US president, set against China’s manufacturing competitiveness, could trigger a liquidity crisis for many countries squeezed in between. This is the risk of rising US interest rates due to the president-elect’s threatened tariffs, his promise to deport undocumented immigrants and a rising US fiscal deficit as a result of his proposed tax cuts. The euro is at greatest risk but the Japanese yen and Indian rupee are also in the firing line. A US debt crisis is further... https://www.scmp.com/opinion/world-opinion/article/3294591/trumps-plans-could-trigger-liquidity-crises-across-europe-and-asia?utm_source=rss_feed https://www.scmp.com/opinion/world-opinion/article/3294591/trumps-plans-could-trigger-liquidity-crises-across-europe-and-asia?utm_source=rss_feed Wed, 15 Jan 2025 08:35:10 +0000 China has overcome Donald Trump’s trade war and tech sanctions before. This time, it is in a much stronger position to withstand new threats. As a result, the United States could pivot away from trade confrontations towards information and financial warfare. However, China’s nearly US$1 trillion trade surplus would be a strong buffer against financial instability. Trump began the trade war with China in 2018. By 2023, exports from mainland China and Hong Kong to the US had fallen by about a... https://www.scmp.com/opinion/china-opinion/article/3288694/why-china-need-not-worry-about-trumps-tech-and-financial-warfare?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3288694/why-china-need-not-worry-about-trumps-tech-and-financial-warfare?utm_source=rss_feed Wed, 04 Dec 2024 08:30:07 +0000 A victory by Donald Trump in this year’s US presidential election would spell higher tariffs on American imports. It would accelerate the relocation of production from middle powers such as Germany and Japan to the United States, weakening their economies and solidifying the centrality of a G2 – China and the US – in the global economy. The inflationary pressure from higher tariffs would stop the Federal Reserve from cutting interest rates. In the long run, as US trade dwindles, the dollar’s... https://www.scmp.com/opinion/world-opinion/article/3284326/why-trump-tariffs-20-may-well-result-g2-world?utm_source=rss_feed https://www.scmp.com/opinion/world-opinion/article/3284326/why-trump-tariffs-20-may-well-result-g2-world?utm_source=rss_feed Wed, 30 Oct 2024 12:30:08 +0000 China’s consumption of fossil fuels has been declining this year due to the rise of electric vehicle use and surging capacities in renewable energy sources. With capacity of renewables potentially growing faster than the likely growth in energy demand, China’s consumption of hydrocarbons is entering a path of secular decline. China may have already peaked its carbon emissions seven years ahead of the deadline for its Paris Agreement commitments. China’s petrol consumption increased by 0.32 per... https://www.scmp.com/opinion/china-opinion/article/3278889/how-china-becoming-saudi-arabia-renewables?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3278889/how-china-becoming-saudi-arabia-renewables?utm_source=rss_feed Wed, 18 Sep 2024 21:30:08 +0000 The US Federal Reserve will cut interest rates this month. The purpose is to manage fears over a bursting artificial intelligence (AI) stock bubble and, if the situation can’t be saved, to prevent the malaise from spreading to all other asset classes. The Fed’s lesson from the 2008 global financial crisis is to prolong a bubble economy by any means possible. A rate cut is a way to keep the animal spirits alive. Talking about a Fed rate cut has been a psychological crutch for asset markets for... https://www.scmp.com/opinion/world-opinion/article/3277129/us-fed-really-business-running-bubble-economy?utm_source=rss_feed https://www.scmp.com/opinion/world-opinion/article/3277129/us-fed-really-business-running-bubble-economy?utm_source=rss_feed Wed, 04 Sep 2024 12:30:07 +0000 China is right to ignore the International Monetary Fund’s proposal that the government bail out the country’s property sector, a plan estimated to cost US$1 trillion. Stimulus right after a bubble deflates only risks reviving that bubble – as seen in the United States after 2008 – and seeding a greater catastrophe. If China had a trillion dollars to spare, it should spend it instead on attracting talent from around the world to help build the country’s technological independence and,... https://www.scmp.com/opinion/china-opinion/article/3274362/us1-trillion-property-bailout-last-thing-chinas-economy-needs?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3274362/us1-trillion-property-bailout-last-thing-chinas-economy-needs?utm_source=rss_feed Thu, 15 Aug 2024 21:30:08 +0000 The US’ China containment strategy and its shift towards re-industrialisation are shrinking the market for competitive industries in high-income economies. Ultimately, these economies could face increasing competition with a technologically independent China, as well as higher prices for raw materials. The squeeze on multiple fronts may push them into middle-income status. Currencies such as the yen, the euro, the won and even the New Taiwan dollar have been on trajectories similar to that of a... https://www.scmp.com/opinion/world-opinion/article/3272609/us-china-trade-war-could-be-death-knell-advanced-economies?utm_source=rss_feed https://www.scmp.com/opinion/world-opinion/article/3272609/us-china-trade-war-could-be-death-knell-advanced-economies?utm_source=rss_feed Fri, 02 Aug 2024 12:30:11 +0000 China’s main interest is preserving the system of world trade. It is the largest trading economy by far and its future depends on its trade success. A tit-for-tat trade war with the United States spiralling out of control brings no advantage to China. Thus, in responding to US President Joe Biden’s new tariffs on Chinese imports, Beijing’s chief objective should be to deter the European Union from following suit. Slapping 100 per cent tariffs on US car imports, which are worth about US$5... https://www.scmp.com/opinion/china-opinion/article/3263468/china-must-respond-bidens-new-tariffs-eye-europe?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3263468/china-must-respond-bidens-new-tariffs-eye-europe?utm_source=rss_feed Wed, 22 May 2024 12:30:11 +0000 The global economy is moving further towards a world of two prices as the West prop up their green technological industries with subsidies and protectionist tariffs against the cheaper products made by the Global South. The protectionism of the United States and the European Union is likely to spread to other emerging industries, such as small modular nuclear reactors, and even to high-value sectors like aviation or shipbuilding. But this strategy will only lead these high-cost Western economies... https://www.scmp.com/opinion/china-opinion/article/3259939/western-protectionism-will-fail-chinas-success-isnt-down-subsidies?utm_source=rss_feed https://www.scmp.com/opinion/china-opinion/article/3259939/western-protectionism-will-fail-chinas-success-isnt-down-subsidies?utm_source=rss_feed Wed, 24 Apr 2024 07:30:21 +0000 A Chinese export recovery, momentum from improving domestic tourism and a consumption boost could more than offset the drag from China’s deflating property sector and lift the economy by 5 per cent this year. In the long term, as more Chinese companies advance from working for original equipment manufacturers to becoming OEMs themselves, they will revive China’s growth trajectory. Reviving the macro economy through upgrading the micro economy is the right path for China. Not repeating the... https://www.scmp.com/comment/china-opinion/article/3256825/chinas-future-depends-it-getting-its-microeconomics-right?utm_source=rss_feed https://www.scmp.com/comment/china-opinion/article/3256825/chinas-future-depends-it-getting-its-microeconomics-right?utm_source=rss_feed Sat, 30 Mar 2024 01:30:10 +0000 The Bank of Japan’s monetary policy is powering the Nikkei index by shifting income from households to the corporate sector via inflation. Meanwhile, Japan’s economy is stuck in a recession and exports are no better than a decade ago. The case that inflation will power the economy forward is a fantasy. Making people poorer will not make the economy richer. Declining competitiveness has been at the heart of Japan’s economic decline, and reviving inflation will not fix it. The Japanese stock... https://www.scmp.com/comment/opinion/article/3254094/why-japans-nikkei-freak-show-should-scare-chinese-investors?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3254094/why-japans-nikkei-freak-show-should-scare-chinese-investors?utm_source=rss_feed Tue, 05 Mar 2024 09:30:13 +0000 China is likely to stick to muddling through on its macroeconomic policy at the National People’s Congress meeting next month. Cautious monetary and fiscal policy will prevail. There will not be any large-scale bailouts of the struggling property industry, shadow banking system or distressed local governments. The real focus will remain on technology for geopolitical competition. The GDP growth rate for this year is likely to be in the middle single digits, which is good enough. Rising... https://www.scmp.com/comment/opinion/article/3252702/why-china-will-focus-technology-muddle-through-policy-npc-meeting?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3252702/why-china-will-focus-technology-muddle-through-policy-npc-meeting?utm_source=rss_feed Thu, 22 Feb 2024 21:30:23 +0000 China’s substantial trade surplus and rising competitiveness is putting pressure on the yuan to appreciate, which would help encourage consumption and discourage overcapacity. While Beijing may be reluctant to let the renminbi appreciate in a sluggish economy, a more realistic renminbi value would in fact help China reduce its structural weakness and increase global stability. China’s trade surplus was above US$800 billion, or 4.5 per cent of GDP, last year, higher than Japan’s 3.2 per cent in... https://www.scmp.com/comment/opinion/article/3250307/why-stronger-yuan-actually-good-chinas-sluggish-economy?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3250307/why-stronger-yuan-actually-good-chinas-sluggish-economy?utm_source=rss_feed Thu, 01 Feb 2024 01:30:19 +0000 This is likely to be another tough year for China’s economy. The path forward is to focus on productive and competitive economic activities. If stimulus is pursued, it should go into renewable energy like solar, given that technologies are coming together to make near-zero electricity costs possible. Solar singularity – the point at which solar power becomes so cheap it is the default choice for new power generation – seems within reach. Currently, a deflating property sector continues to weigh... https://www.scmp.com/comment/opinion/article/3247573/bright-idea-china-jump-start-economy-solar-power-push?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3247573/bright-idea-china-jump-start-economy-solar-power-push?utm_source=rss_feed Wed, 10 Jan 2024 08:30:17 +0000 The Federal Reserve’s ability to tame America’s monetary bubble remains the biggest factor in the global economic outlook. The US central bank made an unexpected dovish turn at the latest Federal Open Market Committee meeting but has already had to walk some of that back. The Fed is on schedule to trim its balance sheet by another US$1.1 trillion next year. There will, without doubt, be financial incidents and an erratic Fed would only make things worse. This could be the biggest threat to the... https://www.scmp.com/comment/opinion/article/3246358/why-erratic-fed-could-pose-biggest-risk-global-economy-2024?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3246358/why-erratic-fed-could-pose-biggest-risk-global-economy-2024?utm_source=rss_feed Wed, 27 Dec 2023 08:30:17 +0000 China’s economy is more sustainable precisely because it is deflating its bubbles, while a US economy that continues to rely on an expanding debt bubble can only be headed for a cliff. For the first three quarters of this year, China’s growth of 5.2 per cent came from improving efficiency on the supply side; in the US, growth came on the back of its fiscal deficit increasing sharply as a proportion of its gross domestic product. Yet there is manufactured consensus in the West that China’s... https://www.scmp.com/comment/opinion/article/3242206/booming-us-economy-and-chinese-crash-think-again?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3242206/booming-us-economy-and-chinese-crash-think-again?utm_source=rss_feed Tue, 21 Nov 2023 11:00:08 +0000 The escalating war in the Middle East could be the straw that breaks the back of the US dollar super bubble. As oil prices rise and the US budget deficit widens, bond yields will surge. This is likely to pop the stock and property bubbles in the US, then everywhere else. China’s surging trade surplus and wage inflation will only add pressure to its unofficial dollar peg. Once that “peg” breaks, the dollar will collapse. There is little doubt the US is experiencing a super bubble. Its asset... https://www.scmp.com/comment/opinion/article/3239054/dollar-super-bubble-may-finally-be-popped-israel-gaza-war?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3239054/dollar-super-bubble-may-finally-be-popped-israel-gaza-war?utm_source=rss_feed Thu, 26 Oct 2023 06:15:11 +0000 As the de-dollarisation movement grows, Brics-plus countries can help it along by working to integrate their currency and fixed-income markets. Such integration would lead to better liquidity and a more efficient price discovery process. Easier access to local bond markets would also offer a more convenient way to store trade surpluses. To aid the process, the Brics-plus states – Brazil, Russia, India, China, South Africa and six others set to become full members – should impose a Tobin tax on... https://www.scmp.com/comment/opinion/article/3235197/how-brics-can-push-de-dollarisation-and-avert-global-dollar-disaster?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3235197/how-brics-can-push-de-dollarisation-and-avert-global-dollar-disaster?utm_source=rss_feed Thu, 21 Sep 2023 21:30:16 +0000 Disinflation in China – a slowdown in rising prices – can’t bring down global inflation. Labour shortages, declining labour productivity, deglobalisation and a massive monetary overhang will sustain substantial global inflation for years to come. The inflation climax will come when the US dollar crashes. When China joined the World Trade Organization, I predicted disinflation for the global economy. The possibility of shifting production to China changed labour market dynamics in developed... https://www.scmp.com/comment/opinion/article/3233321/when-it-comes-prices-what-happens-china-stays-china?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3233321/when-it-comes-prices-what-happens-china-stays-china?utm_source=rss_feed Mon, 04 Sep 2023 13:30:09 +0000 Market-driven restructuring is driving China’s deflation. It leads to more efficient allocation of resources and greater purchasing power for consumers. If China can resist the reflationary pressure from those who lose out due to the deflation of property and financial bubbles, a healthier and more sustainable growth cycle is coming, which will turn China into a high-income country. In 1997, I predicted deflation coming to China, after assessing the impact of the massive devaluation of its... https://www.scmp.com/comment/opinion/article/3231809/china-must-not-panic-over-deflation-and-reinflate-bubble?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3231809/china-must-not-panic-over-deflation-and-reinflate-bubble?utm_source=rss_feed Tue, 22 Aug 2023 07:30:09 +0000 China’s post-Covid economic recovery has disappointed the market – but the expectations were unrealistic anyway. Its economy, which is absorbing a deflating property bubble and various overcapacities, needs time and structural reform to regain healthy growth. But, unlike Japan, which also faced property bubble woes 30 years ago, China’s economy is still gaining in competitiveness, and so has time to fix its problems. For now, the biggest headwind for domestic demand is the deflation of the... https://www.scmp.com/comment/opinion/article/3226694/without-reforms-china-can-still-afford-time-muddle-through-its-economic-problems?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3226694/without-reforms-china-can-still-afford-time-muddle-through-its-economic-problems?utm_source=rss_feed Sat, 08 Jul 2023 22:15:09 +0000 Hong Kong’s currency peg to the dollar is not sustainable. The city risks being increasingly led by US monetary policy as the utility of the fully convertible Hong Kong currency in meeting China’s demand for US dollars is fading. As global yuan demand grows, switching to that currency would boost Hong Kong’s financial fortunes. With China’s interest rates expected to stay lower than US rates, due to lower Chinese inflation, embracing the yuan would stabilise Hong Kong’s asset markets. Sticking... https://www.scmp.com/comment/opinion/article/3222054/why-hong-kong-must-ditch-us-dollar-peg-and-switch-yuan-now?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3222054/why-hong-kong-must-ditch-us-dollar-peg-and-switch-yuan-now?utm_source=rss_feed Tue, 30 May 2023 08:15:08 +0000 The rapid expansion and innovation of China’s electric vehicle industry has made EVs more affordable for the world. As more EVs become cheaper than cars that use internal combustion engines (ICEs), the climate-friendly choice is also becoming an economical one. Yet the Global North is likely to erect barriers in the name of national security. The Global South, however, will welcome Chinese EVs to ease its dependence on imported oil – also a matter of national security – lower transport costs and... https://www.scmp.com/comment/opinion/article/3219585/chinas-lead-electric-vehicles-unassailable-global-north-simply-cant-compete?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3219585/chinas-lead-electric-vehicles-unassailable-global-north-simply-cant-compete?utm_source=rss_feed Wed, 10 May 2023 14:00:10 +0000 Japan has mistaken its competitiveness problem for a monetary one. For decades, its central bank’s fight against deflation kept interest and exchange rates low, and in keeping a large and persistent fiscal deficit, government spending subsidised demand. Uncompetitive companies were kept afloat as a result, depriving new and competitive companies of the resources they needed to rise. As a nation, Japan is being outcompeted and its living standards have steadily eroded. The disciples of Keynesian... https://www.scmp.com/comment/opinion/article/3217106/japan-wrong-about-its-economy-deflation-was-symptom-not-cause?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3217106/japan-wrong-about-its-economy-deflation-was-symptom-not-cause?utm_source=rss_feed Wed, 19 Apr 2023 07:45:14 +0000 Chinese companies have come to appreciate the risk of losing access to key equipment or components. Their responses, sometimes with financial assistance from local governments, are leading to a wave of import substitution. While precision and complexity make some equipment difficult to replicate in the short term, a decade could be enough for China to be self-sufficient in some key technologies. The replication of global tech supply chains within China will lead to overcapacity and price... https://www.scmp.com/comment/opinion/article/3215839/fallout-us-china-chip-war-could-be-global-overcapacity-across-industries?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3215839/fallout-us-china-chip-war-could-be-global-overcapacity-across-industries?utm_source=rss_feed Tue, 04 Apr 2023 15:00:11 +0000 When commercial banks fail, spooked central bankers slow down the normalisation of monetary policy. This gives the liquidity overhang more time to turn into inflation, entrenching expectations. Interest rates may be lower in the short term as a result of banking crises – but they will be higher in the long run. The failure of Silicon Valley Bank (SVB) is just the latest example of the financial excess. After the 2008 global financial crisis, the US Federal Reserve added US$4 trillion in... https://www.scmp.com/comment/opinion/article/3213663/silicon-valley-bank-bailout-unrepentant-us-spending-its-way-out-trouble-again?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3213663/silicon-valley-bank-bailout-unrepentant-us-spending-its-way-out-trouble-again?utm_source=rss_feed Thu, 16 Mar 2023 07:45:11 +0000 China’s reopening and economic recovery is driving an increase in energy demand. Most of this is likely to be covered by the rapid rise in domestic coal and renewable energy production. Demand for oil imports is likely to be limited, as China works towards achieving energy security. China’s oil imports have fallen for two years in a row, just as the economy was hit by the pandemic. So, many expect the end of China’s zero-Covid policy to bring a return in oil demand, pushing up oil prices. But... https://www.scmp.com/comment/opinion/article/3211163/why-chinas-economic-reopening-not-making-oil-prices-jump?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3211163/why-chinas-economic-reopening-not-making-oil-prices-jump?utm_source=rss_feed Thu, 23 Feb 2023 17:00:15 +0000 China is replacing the developed economies of the Global North in the developing world in the supply of capital and capital goods. This is because of its lower cost, the breadth and depth of products available, fast and vast implementation capacity and massive surplus capital from its trade surplus. The reduced investment cost improves the growth potential of the developing economies and makes them more immune to growth volatility in the developed economies. As the Global South improves... https://www.scmp.com/comment/opinion/article/3208699/how-emerging-economies-can-help-china-achieve-its-goal-peaceful-rise?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3208699/how-emerging-economies-can-help-china-achieve-its-goal-peaceful-rise?utm_source=rss_feed Thu, 02 Feb 2023 19:30:10 +0000 Beijing is ditching its zero-Covid strategy. The move should halt the contraction of China’s economy from numerous lockdowns. But the economic headwinds that existed before the pandemic remain. Only profound structural reforms can reverse China’s growth trend, and Beijing is unlikely to pursue such reforms. It will instead go down the path of least resistance and deal with the fiscal and debt crises piecemeal along the way. Phasing out zero-Covid isn’t a strategy to end the pandemic. It’s a... https://www.scmp.com/comment/opinion/article/3203969/why-ending-zero-covid-wont-revive-chinas-economy?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3203969/why-ending-zero-covid-wont-revive-chinas-economy?utm_source=rss_feed Wed, 21 Dec 2022 07:45:10 +0000 Andy Xie Andy Xie The Federal Reserve’s liquidity tsunami, especially its response to the Covid-19 crisis, supercharged financial bubbles and Ponzi scams. The collapse of the cryptocurrency exchange FTX is just one of many inevitable failures, as the US central bank unwinds quantitative easing. The Fed has actually kept the pace of balance-sheet unwinding rather slow (more on this later), given fears of a financial meltdown. But it is just prolonging the inflation crisis and keeping up the pressure for monetary... https://www.scmp.com/comment/opinion/article/3201272/how-federal-reserve-helped-create-and-burst-ftx-crypto-bubble?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3201272/how-federal-reserve-helped-create-and-burst-ftx-crypto-bubble?utm_source=rss_feed Tue, 29 Nov 2022 17:00:16 +0000 The world’s central banks are probably going to have to buy up bad assets to contain a looming financial crisis. This would slow down their fight against inflation, and result in higher inflation for longer. By extension, interest rates would go higher and stay there longer. Thus, while a 2008-style financial crisis could be avoided, the higher interest rates would force asset markets to deflate anyway. To put it another way, the world would be swapping the financial explosion of 2008 for... https://www.scmp.com/comment/opinion/article/3196227/thanks-feds-excesses-2008-world-bound-another-economic-disaster?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3196227/thanks-feds-excesses-2008-world-bound-another-economic-disaster?utm_source=rss_feed Mon, 17 Oct 2022 17:00:10 +0000 China’s property bubble is deflating quickly. The vast industry and local governments are trying to revive it. But it won’t work. The sector is beset by developers’ financing woes and a massive supply overhang amid high household debt, a property affordability crisis and, crucially, a collapse in the rate of marriage. The government can ease developers’ financial pressure and cut debt costs for households. But it cannot revive the marriage rate. The property industry must downsize by at least... https://www.scmp.com/comment/opinion/article/3193174/chinas-property-sector-must-downsize-if-there-arent-enough?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3193174/chinas-property-sector-must-downsize-if-there-arent-enough?utm_source=rss_feed Thu, 22 Sep 2022 04:28:40 +0000 The global economy has become more dependent on China since the pandemic began, while the geopolitical climate has become more confrontational as tensions rise between the US-led West and China. The divergence seems to be deepening over the question of Taiwan. That raises the risk of geopolitics suddenly overwhelming economics. This is likely to be the biggest risk to the global economy in the coming years. Then US president Donald Trump declared a trade war on China in July 2018, and reshoring... https://www.scmp.com/comment/opinion/article/3190099/us-china-tensions-rising-over-taiwan-global-economy-must-brace?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3190099/us-china-tensions-rising-over-taiwan-global-economy-must-brace?utm_source=rss_feed Thu, 25 Aug 2022 19:30:27 +0000 The US Federal Reserve and other central banks are trying to convince financial markets that they will do everything possible to contain inflation. To buy themselves time, the banks are playing psychological tricks on the market. While they are raising interest rates, they are not stemming the supply of new money that began when Covid-19 hit, which is the least that is required to contain inflation. Stimulus spending has led to massive fiscal deficits and debt-fuelled housing inflation. Rolling... https://www.scmp.com/comment/opinion/article/3185889/real-answer-inflation-no-one-wants-hear-stop-spending?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3185889/real-answer-inflation-no-one-wants-hear-stop-spending?utm_source=rss_feed Wed, 20 Jul 2022 14:00:11 +0000 China is entering a “zero-Covid” normal. People are now required to regularly take a polymerase chain reaction (PCR) test and show proof of a negative result when entering any public or commercial premises. The updating interval is currently 72 hours. But if the government feels insecure, it could be reduced to 48 hours. A positive case will lead to the lockdown of numerous residential buildings and commercial facilities, as the infected person is likely to have come into contact with many... https://www.scmp.com/comment/opinion/article/3181665/how-much-chinas-zero-covid-policy-cutting-economic-potential?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3181665/how-much-chinas-zero-covid-policy-cutting-economic-potential?utm_source=rss_feed Thu, 16 Jun 2022 01:15:11 +0000 China’s domestic demand is dramatically contracting under the weight of its zero-Covid measures. As lockdowns persist and spread, the extraordinary decline in domestic demand is likely to trigger a global recession. While reduced Chinese demand for commodities might ease inflationary pressure, the supply chain disruption will more than offset that and keep up the pressure on major central banks to continue raising interest rates into a recession. The world remains on a dual track of real economy... https://www.scmp.com/comment/opinion/article/3177606/how-chinas-zero-covid-policy-tipping-world-recession?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3177606/how-chinas-zero-covid-policy-tipping-world-recession?utm_source=rss_feed Mon, 16 May 2022 00:45:22 +0000 The Chinese economy is expected to take a heavy hit from the spate of Covid-19 lockdowns. As the Omicron variant of Covid-19 proves to be enduring despite the deployment of harsh lockdown measures, the economic disruption could expand even further in the coming weeks and months. The disruption to the global supply chain could get worse, while the slow-motion bursting of China’s property bubble could turn into a rout. But despite the dire economic consequences, changing the “zero-Covid” policy... https://www.scmp.com/comment/opinion/article/3173960/end-reality-may-force-china-compromise-its-zero-covid-policy?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3173960/end-reality-may-force-china-compromise-its-zero-covid-policy?utm_source=rss_feed Wed, 13 Apr 2022 08:30:19 +0000 Markets continue to underestimate the effects of the Ukraine war, and will be shocked again in the coming weeks. The odds of financial collapse and a global recession are rising rapidly. The world didn’t believe that Russia would really invade Ukraine; that, in the event of an invasion, there would be significant consequences, because the West would calibrate sanctions to minimise domestic impact; and that an invasion would result in anything but a swift Russian victory. These expectations have... https://www.scmp.com/comment/opinion/article/3169676/ukraine-crisis-could-spell-drawn-out-war-will-hit-financial?utm_source=rss_feed https://www.scmp.com/comment/opinion/article/3169676/ukraine-crisis-could-spell-drawn-out-war-will-hit-financial?utm_source=rss_feed Wed, 09 Mar 2022 14:15:24 +0000