Nobel laureate Paul Krugman said China’s leaders were “strangely unwilling” to use more government spending to support consumer demand rather than production.
“The fact that the Chinese seem to have a complete lack of realism is a threat to all of us,” Kluman told Bloomberg TV’s Sheri Ahn and Heidi Stroud-Watts on Monday. Japan Benefits of a weak economy and yen.
Kluman responded to criticism from U.S. economic officials, including Treasury Secretary Janet Yellen, that China cannot simply export its way out of trouble. The comments come as the United States and Europe renew concerns about China’s overproduction and dumping of heavily subsidized products overseas.
“We cannot absorb, and the world will not accept, everything China wants to export,” Kluman told Bloomberg TV. asian trade program.
He added that China’s entire economic model was unsustainable due to a “serious shortfall” in domestic spending and a lack of investment opportunities. He said Beijing should support demand rather than increase production.
Another well-known economist, Stephen Roach, expressed his views on the Chinese economy on Monday. He said that during his recent visit to Beijing, he found that the local atmosphere was grim, especially among entrepreneurs and students.
“I found that Beijing really didn’t have the energy that I was used to from traveling in Beijing over the years,” Roach said in an interview with Bloomberg TV. “Certainly, the best I can say is a sense of grim resignation,” said the former chairman of Morgan Stanley Asia, who now teaches at Yale University.
Li Daokui, a permanent policy adviser to the Chinese government, expects more policies to support the economy will be rolled out in the coming months. In an interview with Bloomberg Television, the Chinese economist called on Beijing to issue more central government debt to compensate for the inability of cash-strapped local authorities to spend money and boost economic growth.
About Japan
Looking outside China, Kluman said it was difficult for him to understand why Japanese authorities would be alarmed by a weaker yen that would help boost economic demand.
“I have to say, it baffles me why Japan is so worried about the yen depreciating,” Kluman said.
“A weaker yen, after a slight lag, is actually good for demand for Japanese goods and services,” Kluman said. “It’s puzzling why a weak yen is causing so much panic.”
Kluman spoke after a government report on Friday showed Japan has spent a record amount over the past month to defend its currency. Following the government’s action, there is growing belief that the Bank of Japan may raise interest rates by July to ease pressure on the yen.
Kluman, now at the City University of New York, isn’t entirely convinced that Japan is finally facing sustainable inflationary pressures.
“There’s still a long way to go”
“I hope so, but I’m not convinced by trying to look at Japanese data,” Kluman said. “I still don’t see that underlying force. Japan’s long-term weakness has a lot to do with demographics, very low fertility. Although Japan is at least more open to immigrants than before, that hasn’t changed. But the path Still very long.
Japan’s economy shrank last quarter, extending a period of no growth since the middle of last year. This underscores the lack of economic momentum even after the Bank of Japan ended its massive monetary easing program in March and raised interest rates for the first time in 17 years.
The biggest driver of the yen’s weakness is the huge interest rate gap with the Federal Reserve. While few expect the Fed to cut rates anytime soon amid high inflation, Kluman reiterated his view that it’s better to cut rates sooner rather than later because of the likelihood that inflation will accelerate again if the Fed does. It looks small.
“I would support a rate cut, even if just to signal that, hey, you know, we’re not asleep, we’re not going to dwell on inflation until it’s at the level where we really should be seeing it,” Kluman said. : “We’re constantly focused on the crash in front of us.”
