1/6
"Companies have joined the scramble [into long-term CDs], adding to the drag on China's economy as it effectively means both businesses and households are hoarding cash rather than investing it, despite lower interest rates."
reuters.com
"Companies have joined the scramble [into long-term CDs], adding to the drag on China's economy as it effectively means both businesses and households are hoarding cash rather than investing it, despite lower interest rates."
reuters.com
2/6
This is a point I have made repeatedly each time the PBoC announces that it will "encourage" banks to lend more to private businesses as a way of stimulating the economy.
The constraint facing private businesses in China isn't scarce or expensive capital. It is weak demand.
This is a point I have made repeatedly each time the PBoC announces that it will "encourage" banks to lend more to private businesses as a way of stimulating the economy.
The constraint facing private businesses in China isn't scarce or expensive capital. It is weak demand.
3/6
Businesses would rather save additional cash, sometimes even in long-term bank deposits, than invest it in expanding manufacturing capacity. This is because they already suffer from excess capacity relative to domestic consumption and export demand.
Businesses would rather save additional cash, sometimes even in long-term bank deposits, than invest it in expanding manufacturing capacity. This is because they already suffer from excess capacity relative to domestic consumption and export demand.
4/6
The "window guidance" that Tokyo exercised in the 1980s, and Beijing today, only works when the demand for capital to fund productive investment projects is high. Supply-side measure work in an economy facing supply-side constraints, not one facing demand-side constraints.
The "window guidance" that Tokyo exercised in the 1980s, and Beijing today, only works when the demand for capital to fund productive investment projects is high. Supply-side measure work in an economy facing supply-side constraints, not one facing demand-side constraints.
5/6
This is a lot like the various supply-side tax cuts Washington implemented aimed at boosting the savings of the rich on the assumption that these would finance additional productive investment. They didn't, mainly because American businesses didn't face savings constraints.
This is a lot like the various supply-side tax cuts Washington implemented aimed at boosting the savings of the rich on the assumption that these would finance additional productive investment. They didn't, mainly because American businesses didn't face savings constraints.
6/6
There seems to be an ideological commitment to supply-side measures that persists regardless of conditions on the ground. Businesses don't expand production just because more capital is made available. They also need to be able to sell the additional production.
There seems to be an ideological commitment to supply-side measures that persists regardless of conditions on the ground. Businesses don't expand production just because more capital is made available. They also need to be able to sell the additional production.
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