Demystifying China's macroeconomic policy. Sign up for free updates read by the World Bank and J.P. Morgan: https://xitter.cf/t.co/sZ5LRckG8j
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A wave of fund withdrawals can force bond sales, which can trigger yet more withdrawals. Beijing is preparing a new central-bank backstop to break that cycle.
It is also weighing an overnight policy rate and opening onshore FX trading to more offshore RMB banks.
The 2026 Financial Street Forum put wider market access and safeguards against financial stress on the same agenda.
source: buff.ly/h3ObzuI
This does look good.
Thought-provoking, perhaps controversial, and certainly worth reading!
"The Fiscal Fed: How the US Central Bank Funds Government" by Will Bateman.
link.amazon/B0hxhFjYG
"Bateman combs Fed meeting transcripts, staff notes, financial accounts, and legal documents to trace loans and public-debt purchases since the central bank’s founding. The result is a milestone work that reveals how, for most of the Fed’s history, its transactions were aimed at government financing—either by providing cheap credit to close budget gaps or by manipulating yields on government debt. The Fed’s support for government finance is a feature, not a bug, of American economic institutions."
Éric Monnet: "A revelatory counter-history of the central bank and its independence. The Fiscal Fed is essential."
link.amazon/B0hxhFjYG
China Banking News retweeted
The National Data Group 国家数据集团 puts the state at the centre of the PRC’s data economy. Unlike US tech platforms, which hold vast private data stores, it could link data across provinces and industries, widening access for firms and AI. Can it make data pay?
Our earlier coverage: buff.ly/YWuMhXi
#PRC #ChinaPolicy #NationalDataGroup #DataEconomy #DataGovernance #StateOwnedEnterprises #DataInfrastructure #DataMarkets #ArtificialIntelligence #DigitalEconomy
China Banking News retweeted
Highly relevant!
"The heterogeneous bank lending channel of monetary policy" by Jorge Abad, Saki Bigio, Salomon Garcia-Villegas, Joël Marbet, and Galo Nuño.
"How does heterogeneity in banks’ interest-rate risk exposure shape monetary policy transmission? We develop a quantitative macroeconomic model of heterogeneous banks to answer this question. We establish an irrelevance result: differences in interest-rate risk exposure between fixed- and variable-rate banking systems matter for transmission only when bank solvency concerns become relevant. Calibrating the model to the euro area, we show that idiosyncratic default risk pushes a substantial share of banks toward the solvency threshold, making heterogeneity quantitatively important. When policy rates rise, fixed-rate banks suffer net interest margin compression—funding costs increase while legacy loan income stays unchanged—eroding capital and triggering sharper deleveraging. The lending elasticity to monetary policy is one-third larger in fixed-rate economies. The effects extend to financial stability: tightening raises bank failure rates in fixed-rate systems while lowering them in variable-rate systems. The results provide a rationale for macroprudential and monetary policy coordination and for monetary policy gradualism."
ecb.europa.eu/pub/pdf/scpwps…
China Banking News retweeted
Who answers when a car drives itself in the PRC? A draft law puts manufacturers and importers first in line when automated vehicles break traffic rules. National standards and local approvals shape what reaches the road. Our explainer maps the rules.
source: buff.ly/innrh2c
#PRC #AutonomousVehicles #AutomatedDriving #RoadSafety #TrafficLaw #VehicleRegulation #AutomotiveIndustry #SafetyStandards #ChinaPolicy
China Banking News retweeted
Nice article on Perry by @s1moncox @TheEconomist
The late Perry Mehrling explained the hierarchy of money
economist.com/finance-and-ec…
from The Economist
China Banking News retweeted
I just finished Yoichi Funabashi's very detailed history of the events and negotiations surrounding the Plaza Accord and the subsequent Louvre Accord. What is especially interesting is that this was published in 1988, at the peak of the Japanese economic boom and at a time when its economy was growing by well over 5%. There is no discussion of debt and no hint of what was to happen over the next two decades.
China Banking News retweeted
Thiel n'est rien de plus qu'un autre asset manager mis en place par les grandes fortunes anonymes de ce monde, celles qui par prudence et sagesse préfèrent l'anonymat au classement Fortune500, et laissent volontiers le titre de "génie" sorti de son garage à ces types qui sont le Hollywood 2.0, la nouvelle manufacture semi-automatisée du consentement.
J'ai écrit il y a quelques temps un article sur ce nouveau star-system pensé pour remplacer Hollywood :
open.substack.com/pub/lauren…
Peter Thiel n'est pas un clown médiatique.
C'est un homme qui lit Girard, Carl Schmitt et Tolkien. Après avoir acquis la conviction que la démocratie libérale s'effondrait, il a placé ses pions en conséquence : Palantir pour la surveillance, Founders Fund (17md$ d'actifs sous gestion) pour la guerre technologique, Vance pour le pouvoir politique.
Il construit des villes autonomes au Honduras, cherche des terrains en Patagonie, et théorise le katechon, ce qui contient l'antéchrist, comme cadre pour penser la régulation de l'IA.
C'est sans doute terrifiant, mais bien moins que le VIDE axiologique que la Vieille Europe, irrespectueusment assise sur son propre héritage, se montre capable de lui opposer.
elpais.com/ideas/2026-10-18/…
Reading through a hundred page outline of the ongoing evolution of the China's monetary policy system under PBOC governor Pan Gongsheng, published by state-owned investment bank Guosen Securities.
About a tenth of it is dedicated to Modern Monetary Theory, and its relevance to the coordination of monetary and fiscal policy in both China and the rest of the world in the wake of the Covid pandemic.
@StephanieKelton
@billy_blog
@wbmosler
@mikenorman
@MMTpodcast
China Banking News retweeted
Food for thought!
"Liquidity, Government Bonds, and Sovereign Debt Crises" by Francesco Molteni.
"This paper studies the Eurozone sovereign debt crisis through the lens of funding liquidity in government bonds. Using newly collected data on repo haircuts from LCH Clearnet Ltd, the paper identifies liquidity shocks with a high-frequency structural VAR, separately from sovereign risk shocks, and shows that reductions in funding liquidity substantially increased yields on peripheral government bonds. To explain these effects, a general equilibrium model with financial frictions reproduces the empirical dynamics of a liquidity shock, capturing the rise in bond returns, the flight-to-liquidity, and the contraction in aggregate activity during the crisis. The model further highlights how liquidity and sovereign risk interact, generating a feedback loop that amplifies market stress. Evidence from the COVID-19 pandemic, including ECB haircut reductions, corroborates the role of this funding liquidity channel."
papers.ssrn.com/sol3/papers.…
China Banking News retweeted
Investing in securities requires extraordinary trust that complete strangers will use your money in your interest with integrity and the obligations stated in the issuing prospectus will be performed.
Securities are not physical goods or tangible wealth but insubstantial legal claims—pieces of paper or digital entries that merely entitle their holders to streams of interest, principal repayments, or dividends from an issuer. Their entire value depends on the credible promise that these claims will be honored, which in turn requires trust in the rule of law, independent courts, and the consistent protection of property rights. Absent a political and legal order that reliably enforces contracts and prevents fraud and arbitrary expropriation, such claims collapse into worthless abstractions, revealing that modern capital markets are sustained less by the securities themselves than by the legal and institutional framework that makes them enforceable.
A century of globalising securities markets is at risk if legal protections and assurances no longer hold because managers would rather defraud and politicians would rather steal than uphold basic principles of securities law.
Markets fail when return OF your money becomes a bigger worry than the return ON your money.
I used to supervise Euroclear and Clearstream so this @FT story caught my attention. @MESandbu suggests Euroclear is too big to destabilise and Belgium is to small to bear the risks of $360 billion restoration costs if ever the Central Bank of the Russian Federation succeeds in regaining rights to frozen or expropriated assets - which it will regain in any settlement of the Ukraine war.
What he fails to address entirely is Rule of Law and Private Property Rights. Sure these are inconvenient to thieves, but they are essential to global securities markets. Securities are called securities because they convey secure property interests and claims to their owners at law.
What will destabilise Euroclear is global perception that $44 TRILLION in securities assets under custody are now UNSAFE because the EU can decide to steal them.
Also, it’s irritating to see him suggest ECB can force Euroclear ‘to split off the risky part of its balance sheet into a separate entity’. That is just another form of theft.
Euroclear is licensed as a bank, but its core business in its charter and under specific Belgian legislation is as a fiduciary or trustee of OTHER PEOPLES’ ASSETS. Because it is so central to European and global markets, it is forbidden to take normal commercial risks. Fiduciary, custodian, and trust assets under Euroclear custody are NOT on Euroclear’s balance sheet because 100% ownership remains with the depositors. Even if Euroclear goes bust, customer assets will NOT form any part of the insolvency estate and can be reclaimed by depositors.
I designed and modernised the laws protecting Euroclear and Clearstream depositors. I pray they withstand these lawless attacks by would-be thieves.
Break Rule of Law and Property Rights and you break global securities markets.
China Banking News retweeted
Wide income gaps constrain demand, argues Jiang Xiaojuan 江小涓. Local tax breaks for high earners pull against common prosperity. Her case for inclusive reform is worth reading. A veteran policymaker and economist, she is a voice we track closely.
Read our context note and summary: buff.ly/JbRxXDT
original article: buff.ly/zptAcOD
#JiangXiaojuan #PRCEconomy #EconomicReform #CommonProsperity #IncomeDistribution #Consumption
China Banking News retweeted
I would argue that the first chart below is probably the single most investment-relevant chart for Chinese markets right now.
Strong exports have been the key factor keeping Chinese growth resilient this year, thereby reducing the urgency for policymakers to stimulate domestic demand.
But as the chart shows, roughly 40% of that export strength has been driven by the global AI build-out, particularly in the US. Any slowdown in AI capex would therefore disproportionately hurt Chinese exports at a time when domestic demand is already in recession.
In other words, bad news for AI could actually be good news for the Chinese stimulus trade: it would increase the likelihood of a stronger policy response from Beijing to shore up domestic demand, particularly consumption.
For global investors looking to hedge against a potential AI selloff, I believe Chinese consumer stocks are becoming increasingly attractive, especially following this year’s selloff.
China releases Q3 GDP tonight. In nominal terms, AI is a big part of China’s export boom. Chips and computers account for more than 40% of the recent export increase. But on a net basis, AI trade is weighing on China’s trade surplus. The surplus growth comes from vehicles and other machinery.
The chip export boom is also mostly about prices. In September, China’s chip exports rose 136% in value from a year earlier, but the number of chips rose only 1%. Most of that is memory chips, where the global shortage has driven up prices. So AI trade isn’t adding much to real export growth. If net exports boosted real GDP growth in Q3, it wasn’t because of AI.
China Banking News retweeted
I spent 35 years building banking systems for banks worldwide, including central banks. I know how banks decide where their money goes.
When you build systems, you have to make them work, so you have to know how they work.
The Basel Committee de-industrialised the countries that adopted its rules. It's that simple: I explain the whole complicated mechanism in my essay. They simply regulated it away because that was the most profitable thing to do. It was implemented in such a systemic global way, and nobody seemed to notice
Capital is what a bank must hold before it can lend, the way a manufacturer or miner must hold supplies before it can sell. No miner doubles their costs to serve one group of customers. But that's what the banking system does to miners and manufacturers. Since 1988, the Basel rules have required banks to hold twice the capital against a factory loan as against a home loan, and under Basel III the gap reaches five times. So banks lend less to industry and more against houses. It should be stopped tomorrow.
Manufacturing's share of GDP fell in ten of the eleven countries I examined. In Australia it fell from 13.7% to 5.4%. Every other country that followed fell as well. The only truly crafty ones were the Koreans, who did a good job of offsetting it.
Regulators were warned in writing that the rule would steer credit, and they adopted it anyway. No parliament voted for it, and it's simply too dumb to keep doing, but we do . Not today; there is no justification. Yet from India, across Europe, across the US, including Australia, sanctions against industrial capacity. Financialization has gone too far it needs to be reviewed .
The charge is manslaughter by gross negligence. The mechanism is proven.
Same Rules, Different Ruins:ctindale.substack.com/p/same…
China Banking News retweeted
Oh look at that,
a Chinese Open Source model is basically at parity with American frontier labs models merely a month after it was said this was supposed to be impossible now,
something something no moat,
something something the current absurd AI Capex is justified somehow,
something something we need some regulatory layer to protect American enterprises.
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China Banking News retweeted
Caixin: "The government is seeking to bring private companies into a massive infrastructure push centered on “six networks,” covering water, power, logistics, computing power, next-generation communications and urban underground pipelines. But the challenge is to create a financing and regulatory framework in which companies participate because projects offer genuinely attractive and stable conditions for investment, operation and returns."
caixinglobal.com/2026-10-16/…
China Banking News retweeted
Good of Michael to highlight this piece by @adam_tooze
I was so fortunate to sit next to Perry in our INET office. Because my background was finance (as a fund manager), we saw the world of markets much the same way (although I would never be presumptuous enough to suggest that my knowledge remotely approached Perry's genius). I was a huge fan of Kindleberger, so we had a lot of great discussions about Perry's findings (Mehrling was an extremely diligent scholar and was never happier than when he was digging about in archives). The distinction that Adam draws here between Kindleberger's transnationalism (and, by extension, Perry's) and Dornbusch's internationalism, is crucial because the former rightly posits the central role of the USD in global finance and the key role the Fed played as counterparty of last resort in terms of alleviating/arresting the crisis. Perry in effect rebutted the doomsday analyses that presupposed an imminent demise of the dollar. Likewise, Perry recognised that the euro would not be in existence today without the Fed's active support via the provision of dollar swap lines and de facto uncollateralised lending to the ECB. Perry understood this intuitively.
Good Adam Tooze piece on Perry Mehrlin's very important work on money. There is a very big difference between a global view of national economies and a national view of the global economy, and in what Dani Rodrik calls our "hyperglobalized" world, the former provides the much greater insight.
@adam_tooze adamtooze.substack.com/p/cha…
