Xijing Research Institute dean Zhao Jian: "For years, the conventional wisdom was that China’s economy was held hostage by its real estate sector. Today, Beijing faces a new, equally perilous predicament: an economy dangerously overreliant on exports. The core issue is not that Chinese manufacturing is too competitive, but that this advantage is essentially subsidized by the severe compression of domestic consumption and labor costs. Rebalancing is no longer optional; it is urgent." Interesting Caixing article. I wouldn't say this is the policymaking consensus yet, but the speed with which similar views have been spreading in public suggests that we may be nearing a turning point in the narrative.

FT: "“I had thought that it was perhaps only towards 2030 that China would get up close to 40 per cent,” said Eskelund. “That of course also means that the imbalances are growing very, very considerably.”" via @ft

Why the gold adjustment to China's current account is essential -- imports are set to go from 0.5 to 1.5 pp of GDP, with a considerable impact on the reported current account (and possibly the net export contribution)

SCMP: "Beijing should expand central government borrowing and accelerate local debt restructuring, as China’s relatively low price levels offer a rare window for stronger fiscal support to bolster demand, according to some prominent Chinese economists." As always, this is pretty confused. It makes sense for businesses and households to borrow when interest rates are low because lower financing costs can raise net returns. Governments are different. Government borrowing is largely a transfer from one sector of the economy to another. In China’s case, “cheap” borrowing reduces the returns to net lenders, mainly households, in order to subsidize net borrowers. Yet Beijing knows that sustaining long-term growth requires doing the opposite: increasing the household share of GDP. The problem is that this has proved extraordinarily difficult, and the confusion over borrowing costs helps explain why. Lower interest rates are not necessarily good for China. They can actually deepen the imbalance by reducing the income of net savers, largely households, while making it cheaper for borrowers to sustain additional investment, much of which is already generating diminishing returns. Beijing should therefore not be looking for clever ways to tax households so that it can borrow more cheaply. It should be looking for ways to raise household income and discourage further misallocation of capital. via @scmpnews

WaPo's David Lynch: "Anemic job growth has pushed more than 280 million Chinese into gig economy jobs, up 75 percent from 2019, according to the China New Employment Forms Research Center."

Former WTO head Pascal Lamy still prefers negotiated rebalancing to protectionism, but he now acknowledges that if China will not rebalance, European governments may be forced to implement protectionist tariffs.

More supply-side support: "China will accelerate efforts to identify and nurture promising small and medium-sized enterprises, shifting from waiting for companies to apply for support to proactively seeking out firms with strong growth potential."

Li Xunlei, Chief Economist at Zhongtai Financial: “The conclusion is clear: the places that built the most expressways were often those where freight demand grew the least.” The East is Red has translated an article by Li Xunlei on how China’s infrastructure spending may have served the economy poorly, something he seems to have been worrying about even longer than I have. He attributes local officials’ enthusiasm for infrastructure partly to the belief that “if you want to get rich, build roads first,” and partly to the tendency to measure performance by highly visible projects rather than underlying problems such as population outflows and weak local industries. The underlying mistake is common, and not just in China. Policymakers too often treat infrastructure spending as a source of growth, so that when an economy faces institutional, demographic or other constraints that keep growth below expectations, their response is to increase infrastructure spending in order to goose economic activity. But this often has it backwards. If those constraints limit productivity growth, the value of additional infrastructure is likely to be lower, not higher. Infrastructure spending, in other words, is not a source of growth. It is a cost of growth, and it makes an economy richer only when the productivity gains it generates exceed the cost of building and maintaining it. Otherwise it makes the economy poorer. And the fact that local-government debt has grown so much faster than provincial GDP for nearly two decades suggests how years of overinvestment can leave less productive regions deeply indebted, with spectacular infrastructure but inadequate economic activity to support it. It is encouraging that more and more Chinese economists and policy advisers are questioning this model. But changing it will be difficult. Infrastructure projects reliably produce a short-term boost to activity, making them especially tempting when growth slows and unemployment rises, until debt constraints finally make further spending impossible.

Lingling Wei: "Earlier this year, I put a blunt question to an adviser to China’s central bank: With the property bust grinding into its fourth year, how likely was it that the country’s strained financial system would finally crack into a full-blown crisis?"

Caixin: "The onshore Chinese yuan strengthened past 6.7 per U.S. dollar on Friday to touch its highest level in more than three years, defying expectations of depreciation following the Federal Reserve’s latest interest rate hike. The rally was steered in part by the People’s Bank of China, which set its daily benchmark fixing stronger for eight consecutive trading days to guide market expectations." With the Trump–Xi summit scheduled for September 24, this probably doesn't come as a surprise.

Interesting Xinhua article on China's determination to expand its share of global manufacturing: "Defying intense pressures at home and abroad, China's manufacturing sector has forged ahead, with China's manufacturing value-added accounting for nearly 30 percent of the global total. That is no accident. It is the result of the insight and leadership of Chinese President Xi Jinping over the past years."

I just finished Logan Wright's new book on the Chinese economy. It provides a great deal of data to support the claim that China’s enormous credit expansion is running out of room, leaving Beijing under growing pressure to rely on exports to keep economic activity from declining.

Bloomberg: "The deepening pullback in government spending partly explains the persistence of weak domestic demand in August, when consumption growth almost ground to a halt and investment continued to slump."

Interesting piece by Steven Randy Waldman on the costs to the global economy of persistently unbalanced trade, and why the best way of balancing it would be through capital account restrictions rather than trade account restrictions.

For those wondering why Setser strips gold imports out of China’s trade data, the reason is that gold can be purchased for two very different purposes. You can buy it for jewelry or manufacturing, or you can buy it as a store of value, much like buying a gold ETF, government bonds or property. The former is clearly a current-account transaction; the latter, when the asset is foreign, is a financial-account transaction. The official balance-of-payments rules, however, do not make this distinction for physical gold. Nonmonetary gold is recorded as a good whether it is used for jewelry or held as a store of value. A foreign gold ETF is unambiguously an acquisition of a foreign financial asset, but an imported gold bar can be an almost perfect economic substitute and is nonetheless recorded as an import of goods. This matters for China, especially in recent years. Chinese jewelry demand has collapsed relative to investment demand: in the first half of 2026, bar-and-coin demand reached a record 314 tons, more than twice the 136 tons of jewelry demand. So Setser is making an analytical adjustment. Much of the recent surge in Chinese gold imports appears to reflect a shift in household and investor portfolios toward gold rather than a comparable increase in demand for goods and services. That is why stripping gold out of the trade balance can give us a better picture of the underlying goods imbalance.