China’s economy emerged from the pandemic much weaker than before. Unemployment is up, exports are down and a burgeoning property crisis is having a devastating impact on local government finances.
These changes in the economy are happening very fast, so quickly that it’s difficult for experts to keep pace with what’s happening, much less among those who don’t closely follow Chinese economic trends — particularly in developing countries.
Michael Pettis, a senior fellow at the Carnegie Endowment for International Peace, is one of the world’s foremost scholars on the Chinese economy. He joins Eric this week from Beijing to discuss how the dramatic changes that are now taking place in China will impact countries throughout the Global South.
Show Notes:
- The New York Times: China’s Stalling Economy Puts the World on Notice by Peter S. Goodman
- The Diplomat: What China’s Long-Term Economic Weakness Means for the Developing World by R. Evan Ellis
- CNN: China’s economy will be hobbled for years by the real estate crisis by Laura He
About Michael Pettis:
Michael Pettis is a nonresident senior fellow at the Carnegie Endowment for International Peace. An expert on China’s economy, Pettis is a professor of finance at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets. From 2002 to 2004, he also taught at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs. Pettis worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the sovereign debt trading team at Manufacturers Hanover (now JPMorgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was managing director principal heading the Latin American capital markets and the liability management groups. He has also worked as a partner in a merchant-banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team.
Transcript:
Eric Olander: Hello, and welcome to another edition of the China Global South Podcast, a proud member of the Sinica Podcast Network. I’m Eric Olander in Ho Chi Minh City, Vietnam, and, as always, I’m joined by China Global South’s Managing Editor, Cobus van Staden, always in Berlin, at least for the next month or so. A very good afternoon to you, Cobus.
Cobus van Staden: Good afternoon.
Eric: Cobus, it has been a dramatic past few days, ever since Saturday morning at about 6:30 in the morning, when Palestinian militants from Hamas rolled over the border into Israel in a surprise attack, a dramatic surprise attack. Now, at first, I think a lot of people would probably not see a China angle on this story, but as we found out today in our coverage, there are a lot of China angles into this, and there is actually a lot at stake for China in this war. In particular, Cobus, you and I have been covering over the past year, China’s increasingly ambitious diplomatic agenda in the Middle East. Also, the fact that China has very, very close ties with Iran.
In fact, I think we can safely say that China’s ties with Iran are the best of any of the major powers around the world. And so I think China’s relationship with Iran is going to come under very close scrutiny in the next couple of weeks. And how Beijing handles this is going to be a topic of real discussion. For example, if China is seen to be trying to encourage Iran to pull Hamas back in a little bit, Hezbollah up in the north, and Lebanon back, and to try to de-escalate the situation, then they may be well rewarded for that.
However, if China is seen as enabling Iran or not doing anything in terms of trying to have Iran pull back some of its proxies in these different territories, then I think some of the anger from both the Israelis and the Saudis may come their way, and it’s the Saudis that they need to be most concerned about because of that six-month-old Saudi Iran détente that China helped to broker and that the Chinese are very proud of. So, a lot at stake for the Chinese right now in terms of the reputation in the Middle East.
Cobus: Yeah, absolutely. China wasn’t making a big deal of its diplomatic wins around the Saudi-Iran deal, and now I think China is being hit by the full complexity of what it means to be involved in the Middle East. I think, in addition, just more globally, one of the things that I was thinking when I saw that was happening is like, oh, this is going to take a little bit of heat off China and the South China Sea. I think for the next few weeks at least, the U.S. is not going to be focusing on the South China Sea to the extent that they were until days ago. The situation, the undergoing standoff with the Philippines in the South China Sea was drawing so much U.S. attention, and the Philippines were doing all these military exercises with U.S. and allies that we saw the tensions were ratcheting up. I think attention in Washington will now have shifted to the Middle East quite conclusively for the next few days at least.
Eric: I think that’s a very good point. And just to add onto that, the United States has redeployed one of its aircraft carrier battle groups to the coast of Israel, and that would then, as you pointed out, maybe draw down some of the resources from the South China Sea, or at least the attention from the South China Sea. Clearly, the U.S. has resources to be in both regions at the same time. So, I want to encourage everybody, especially our subscribers, we’ve got deep-dive coverage on this. Nobody’s really doing this level of granularity in terms of the first hot takes on what this means for China. We’re going to have some interviews with leading scholars this week to get their perspectives on it. That is available over on chinaglobalsouth.com. We’re going to try and book some shows coming up to explore this.
We might want to let things settle down a little bit till we know which way the Chinese are going in terms of their diplomacy in the Middle East. Let’s now shift our attention to Kenyan President William Ruto, and news broke over the weekend from his deputy who went onto Kenyan radio saying that when the president goes to China, they didn’t say when he was going, Cobus — I presume that Ruto will be going for the Belt & Road Forum that’s coming up in the next couple of weeks. I’m not entirely sure if he’s going for a dedicated bilateral meeting, but he might be one of the many presidents and heads of state that Xi will meet on the sidelines of the Belt & Road Forum. So, we don’t know exactly when he’s going, but it was a little bit surprising to hear what the deputy president said. So, two things that are going to be on the wish list for President Ruto when he goes to Beijing — Number one is he wants to reschedule some of the $6 billion of loans that Kenya still owes China.
Now, that is not a surprising thing that Kenyans have been asking for this ever since 2021 when the Chinese actually deferred for six months some of their debt, and they got to save $245 million in debt servicing costs. But after that, the China Exim Bank came down hard and said, we are not going to defer anymore, but the Kenyans are struggling to repay some of those loans. Not a big ask, though, Cobus, in the context of the Chinese now restructuring debt all around the world. The next request, and this is the one I want to get your take from, is he wants to ask for a billion dollars in new loans in order to help finish many of the roadworks that were started, but have since run out of money — a billion dollars. What’s your take on that?
Cobus: I think it’s a very long shot. I mean, in the first place, who is going to lend a billion dollars to Kenya now when they’re in such, almost on the brink of debt distress already? I mean, they are in debt distress. There’s rumors of defaults flying around. I mean, that’s is already a long shot. And then China itself is in such debt issues at home that I’d be very surprised if China rolls out a billion dollars for, really, for any global south country right now, and definitely not for Kenya. There’s several other global south countries that will be stronger contenders for this kind of lending than Kenya. I’d be surprised.
Eric: Let me put this in context for everybody. I mean, I really think that William Ruto’s team would benefit enormously, Cobus, from subscribing to our newsletter and listening to this podcast. I really definitely think…
Cobus: Stop trying to sell the newsletter to William Ruto.
Eric: Listen, I’ll give him the student discount, okay? So, if anybody in the Kenyan Ministry of Foreign Affairs wants to subscribe, you’ll get the half off student discount because Lord knows you guys seem like you need. Okay, let me just put this billion-dollar request into context. In 2017, the Chinese lent Kenya $522 million for development finance projects. Now, remember that 2017 was the year after the peak of 2016 in terms of Chinese development finance around the world. So, we were still in those housian days where you want a check, and you get a check, and you want a bridge, and you want a port. All of that was still kind of going on. $522 million in 2017.
The current fiscal year, right now that’s underway, that began back in July for Kenya, $12.7 million of Chinese development finance. So, you mean to tell me that they’re going to go from 12.7 million to a billion? Okay, that is ridiculous. Here’s the second data point that I think is worth considering. Boston University Global Development Policy Center, we had Tarela Moses on, who is the data scientist there, the researcher who put together all of the latest Chinese lending data for Africa, concluded that in the latest year that they tracked, which was 2022, all development finance for the entire African continent amounted to just $922 million. So, you mean to say that now the Chinese are going to loan more than what they did in 2022 to, just Kenya? It’s absurd. It’s absurd.
And I think the problem is, is that there are people advising the president who don’t know anything about what’s going on in China today.
Cobus: I mean, it’s notable that this comes in the same week as William Ruto co-wrote an open letter on the New York Times with people from the African Development Bank and other kind of notable notables, making the point that African countries need a significant debt repayment pause, like a several years debt repayment pause in order to have the resources to deal with the climate crisis, which I think is a good idea. I think if it’s possible, I mean, who knows how to do it, but I think if it is possible to do it, that would be good. Because in order to get Africa across that kind of hump in order to put in the climate mitigation adaptation measures that they need to do, that is what it would take.
But I mean, to call for that in the same week that you’re calling for a billion dollars of additional Chinese loans, when the Chinese loans you already have are so troubled, and the project that you took them out for were so questionable and the contracts were so problematic and so padded, it’s not the way to go. The optics of those two things in the same week, they don’t work.
Eric: What he should have done is he should have aligned his request with the whole small is beautiful agenda that China’s now promoting for the evolution of the Belt & Road. He should have then positioned Kenya as the case study for the new small is beautiful initiative around the world, and then lined up 10 projects at $50 million each that are perfect showcases for small is beautiful, and he would’ve gotten a considerable amount of his request. But right now, this request that he’s making makes no sense because also finishing these road projects don’t automatically generate the revenue that’s needed to repay these loans.
I think if you’re sitting in the China Exim Bank or any of the other lenders he might talk to, they’re going to be like, “Well, listen, if they’re struggling to pay back already what they owe us, how are they going to make this back if these aren’t toll roads and they’re halfway finished projects?” One other point that I want to make before we move on to our conversation with Michael Pettis today, which I am so excited to bring you Cobus, and I’m just disappointed you weren’t able to join us for this, but Ruto rearranged his diplomatic team. He put a ambassador in Beijing, Willy Betty is his name, who’s the former agriculture minister. He used to be the CEO of a seed company, okay? And he used to be the ambassador to India. Very interesting guy.
One critical thing that Willy’s missing, though, Cobus, is China experience. It’s unbelievable. Unbelievable. How is this possible in 2023 that they’re continually putting in people who don’t know anything about China? And so I think, when we look at these boneheaded requests coming from the likes of Ruto into Beijing for a billion dollars, it’s got to be informed by people who just don’t know what’s going on. I mean, I sound cynical here, but it’s frustrating to watch because I think you know what’s going to happen in Beijing. They’re going to present this request, the Chinese are going to be very polite, say, “Thank you so much,” and then they’re going to give them what we call in LA — the Hollywood no, which is they politely just don’t answer calls anymore and they move on to the next thing. That’s my take.
Cobus: Yeah, I think so. The thing is China is always a tricky partner, right? Because as the Indian External Affairs Minister recently said, S. Jaishankar, he was quoted saying like, “One of the great things of working with China is you never know why they do anything.” Everything is always extremely ambiguous at the best of times in working with China, and this is not the best of times. China is incredibly tense, incredibly paranoid. China is at a level of opacity now that’s off the charts even for China. There’s very little hard information coming out even for China specialists. So, to send someone into that, to represent your country into that situation, who doesn’t speak Mandarin, who doesn’t have China knowledge, and doesn’t bring a staff of dedicated people who speak Mandarin and who have China knowledge with them, it makes it kind of seem like you’re not so serious.
It seems like in your dealings with one of your country’s most important trading partners and most important economic partners, you don’t seem like you’re sending the first team, which seems very problematic, I think.
Eric: Yeah, and just to note that in many of the larger governments like the U.S. and the UK, their ambassadors too may not have China experience. But because the U.S. Embassy has a staff of 400 to 500 people in the embassy in Beijing, and you and I know many of these people, there’s a lot of talented China experts that are on that team. And so, even if the ambassador himself doesn’t have that knowledge, he’s being fed or she’s being fed information and provided information, insight and knowledge and intelligence, whatnot. Many of the African embassies in Beijing are quite small, and so they don’t have those staffs underneath that are feeding up that intelligence to the ambassadors. So, something to think about.
The conversation that I had with Michael Pettis, who is the senior fellow at the Carnegie Endowment for International Peace, one of the, really, I think in the eyes of all the China watchers, he is one of the great China economists out there. And his Twitter feed, by the way, and I’ll put a link to it in the show notes, is a masterclass in Chinese economics. And I cannot recommend this enough that you check it out. Every day he is providing new lessons and insights. I was a little bit star-struck, Cobus, to be honest with you, interviewing Michael because he’s a guy who I’ve admired for so long. And so if you’re asking the question — what should somebody like William Ruto know about the Chinese economy today?
I sincerely hope there are people inside the Kenyan foreign ministry, and even the president or the deputy president himself, listen to this interview with Michael Pettis, who breaks down exactly how the current conditions in the Chinese economy impact their engagement with the global south and the world at large. Let’s take a listen now to my discussion with Michael Pettis. Michael Pettis, thank you so much for taking the time to join us. It’s really an honor to have you on the show today.
Michael Pettis: Thank you very much for having me.
Eric: Well, we hear a lot about the Chinese economy in many parts of the Western financial press. We’re reading headlines like the Chinese economy is imploding, it’s coming to an end, the miracle is over. And at the same time, the message coming out of Beijing and economists there is to say, yes, we are experiencing problems, but these are not necessarily structural problems. We’re tweaking the system. And at the end of the day, I’m old enough to remember back in the ’90s when people were talking about the non-performing loan crisis, and that was going to be the end of the Chinese economy. And yet here we are, 30 some odd years later and we’re still moving forward. Let’s start our conversation to get your assessment. As somebody who studies this, and you’re in China today, where are we with the Chinese economy? What’s your assessment of it? I know it’s a big question, but give us the high-level view that you have looking at the current state of the Chinese economy.
Michael: The important thing to understand about the Chinese development model is that, first of all, it’s not particularly Chinese. Quite a number of countries have followed this model. If you care about pedigrees, you can trace it way back to the U.S. in the 1820s and 1830s. But probably in the 1930s, both Germany and the Soviet Union developed the basics of this model. And since the Second World War, at least a dozen countries, perhaps more, have followed this model, although none to the extent that China has. That includes Brazil in the ’50s and ’60s, which was, I believe, the first economy to be called a miracle economy. Japan through the 1980s. the Soviet Union, up until the 1960s and early ’70s when people forget most economists believe that the Soviet Union was growing so quickly that it would overtake the U.S. technologically and economically sometime in the 1980s.
So, this is a model about which we know quite a lot, and we also know how difficult the adjustment process can be. This is going to be a little bit long, Eric, but, basically, the way this model works is it works with countries that are significantly underinvested relative to their ability to absorb investment productively. So, Japan is a classic case because Japan was an advanced economy by the 1920s, but it was completely destroyed during World War II. So, it was hugely under invested relative to what it had been absorbing before the war. The Soviet Union followed this model too. It, too, was destroyed during the Second World War. Brazil was an underinvested developing country in the 1940s and ’50s when it implemented this model and so on.
In each of those cases, the country was hugely under invested relative to what it could absorb. That’s a really important point because some people think being under-invested means having less investment per capita than the capital frontier, which is usually the United States. But that’s not what underinvested means. It means under invested relative to your ability to absorb investment productively. And in the 1970s, China, in many ways, was socially and politically a middle-income country when you looked at it from, in terms of stability, in terms of education, in terms of health, etc., but it was one of the poorest countries in the world. And I think most of us would agree that it was very poor because it had gone through five decades of war with Japan, followed by Civil War, followed by Maoism.
And as a result, China had no infrastructure, no manufacturing capacity, they had basically nothing. So, what China needed, above all, was very rapid increases in investment. Now, the problem with poor countries, with developing countries is that they don’t have very high levels of savings, and you have to fund investment out of savings. So the traditional model has always been developing countries should import savings from the advanced economies, and that’s how it’s worked pretty much until the 1970s. But as we learned in the 1970s, and we learned before that, depending on foreign capital, it’s very risky because the capital from the rich countries increases or contracts based on conditions in the rich countries, not based on the needs of the developing countries.
So, we had, for example, the explosion in financing in the 1970s to the so-called LDCs, the less developed countries, which resulted in the big debt crisis of the 1980s, in which 32 countries in Latin America, Africa, Asia, and Eastern Europe, basically defaulted on or restructured their debt. The argument that developed, and people like Alexander Gerschenkron were very important in developing this argument, is that what you really want to do is fund high levels of investment out of domestic savings. Now, that means increasing the domestic savings rate, and China increased its domestic savings rate to the highest, perhaps we’ve ever seen in history. Now why does China save so much? It continues to have among the highest savings rates in the world.
Well, out of laziness, we tend to attribute that to cultural factors. And we say that China is a Confucian society, and Confucian society’s value savings. That’s not true at all. In the 1950s and ’60s, by the way, many people explain the poverty of East Asia to its Confucian nature, saying that Confucian societies traditionally do not value hard work and do not value thrift. 30 years later, we were saying the opposite, which suggests how flexible the cultural argument is. The way you force up the savings rate, though, every country that has high savings, whether it’s Germany, Japan, South Korea, the Netherlands, China, they all have the same conditions that lead to those high savings, and that is basically, if you take income away from those sectors of the economy that consume and transfer it to those sectors that don’t consume or that consume very little, you automatically reduce the consumption rate.
And the savings rate is just the obverse of the consumption rate. So, you raise the savings rate. And in China, the way they did that is they took income away from the sector of the economy that consumes, which is ordinary households. In every country, most consumption is the consumption of ordinary households, and they diverted it to the rich who consume a very low share of their income, to businesses who consume none of their income. All of their earnings are classified as savings. And to the government that consumes very little, on behalf of people, but it consumes very little. So, China did that more successfully than any country in history. It reduced the household income share of GDP from somewhere in the 70 percentile region, all the way down to something like 50% in the period from the 1980s to the beginning of the century.
This is important because what that meant was that for every $100 of value created by the economy, in the United States, households will get $80. In Europe, they will get $70 to $80. In most developing countries, they’ll get $65 to $75. In China, they were getting at one point as little as $50, right? So, of course, they consumed a very low share of what they produce. Now, is this a good thing or a bad thing? Well, it depends on the underlying conditions. This is true for every developing country. China urgently needed investment. It is safer to fund investment from domestic savings. So, forcing up the savings rate was a very good policy under a couple of conditions. One is that those high savings were controlled and directed into investment, and two, which is really a form of one, that is the high savings were not used by the wealthy to buy assets abroad.
So, you couldn’t take money out of China. So, all of these savings were concentrated within the banking system. The banking system was heavily controlled by the government and directed by the government. And the banking system was forced to lend these savings to make them easily available at very low-interest rates only to investment in manufacturing and infrastructure, basically investment approved by the government. As a result, as China’s savings rate soared, so did its productive investment, and China went from being one of the most underinvested countries in the world to one of the most overinvested. Now that was a good thing.
Eric: Let me just stop you for a little bit here because there’s two key questions that I want to bring up. Number one is this question of investment versus consumption. This is something you talk about a lot. I want to get to that, but first, I want to see if my understanding of this savings issue as relates to the developing world is accurate. Because my understanding was this bulge of savings that you’ve talked about started to peak in many respects in the early 2000s around Hu Jintao and the Zhang Zemin era. And there was this need to do something with this money. Now, they took a lot of that money and they bought American debt, about a trillion dollars of American debt over the years.
But then there was this other thought that says, what if we take some of this money and put it into developing countries to build infrastructures that will help us solve a couple of different problems? Problem number one is we have some overcapacity of our state-owned enterprises at home. We’ll create opportunities for them to build infrastructure abroad. And at the same time, we’ll loan money to countries in Africa, Asia, the Middle East, and we’ll get a return on that investment. So, we’ll diversify away from treasury bills. So, this led in some ways to the boom in Belt & Road lending that eventually came about. But can you confirm or deny my understanding of how those savings played into the surge of lending to developing countries?
Michael: You’re absolutely right. The point of savings was to fund domestic investment. But you can’t really always control these things, and the policies that drove up the savings rate was so successful that in the end, China saved more than it could invest. You’ll remember from your economics classes that when you save more than you can invest, you have to export the excess savings in the form of a trade surplus. A lot of people say that China was an export-oriented economy. That’s not true. It was an investment-oriented economy, to the extent that savings, domestic savings were even higher than domestic investment, which was the highest we’d ever seen in the world, those excess savings had to be exported. China had to run a trade surplus.
So, what China did, when you run a trade surplus, when you export products, the income you receive from them can only be used for two things, either to import goods and services or to acquire assets abroad. For a long time, and particularly reinforced by the 1997 Asian Crisis, the Chinese government mostly acquired very safe, very liquid assets in the U.S. They bought U.S. government bonds. But as reserves climbed and climbed and climbed, they became more amenable to diversifying out of U.S. government bonds and investing in other higher-yielding assets. And that’s when they discovered the developing world. So basically, the huge surge in lending, it was always quite small as a share of older outward flows, but it grew very rapidly in the first couple of decades of the century as a way of diversifying out of low-yield, very safe, but very low-yielding U.S. government bonds into riskier but higher-yielding assets that would also generate political benefits for China.
Eric: And when we look back at that period of investment or loans overseas, one of the things we see is almost a pyramid on the charts where it peaks in 2015 and 2016, and that is the high watermark in Belt & Road financing. And there, it’s a steep cliff down. Now you wrote a post on X, formerly Twitter, “This is a pretty common experience for countries when they first begin investing in developing countries.” So in many respects, what we saw in Chinese lending overseas was exceptional in the scale, almost a trillion dollars, but the actual behavior of it, in many ways, you’re saying is not that out of the ordinary.
Michael: Yeah, and honestly, it was not even exceptional in scale. We’ve seen this before. The classic case that I like to use is the United States In the 1920s. The U.S. first started investing abroad in developing countries in very small amounts in the early part of the 20th century, in the 1900s and 1910s, mostly in the Caribbean and in Central America, small amounts. But after World War I, as you know, the U.S. experienced enormous growth. It started running huge trade surpluses and began recycling massive amounts of money into the rest of the world. And that’s really when the U.S. discovered lending to developing countries. It began lending very extensively into Latin America. And before that, the British-dominated finance in Latin America.
In the 1920s, the U.S. basically pushed the British out of every country, except in probably, Argentina. And we saw what became a very typical pattern as the Americans pushed the British out, the Americans argued, “It’s because we understand lending to Latin America better than those aristocratic Europeans. We’re smarter and that’s why we’re more successful.” The British view, not surprisingly, was quite different. The British view was, “You don’t understand the risks you are taking and you are making some really foolish loans, and that’s why you’re expanding so rapidly. But because this is in the midst of a bubble, everything is going well. Latin America is growing, they’re able to repay you. And so for now, it works.” Of course, what the U.S. discovered in the 1930s was that the British were right that a lot of that lending had been way too risky, very foolish lending, and almost all of it defaulted in the 1930s.
So, what I would argue is that in a way, that’s the basic pattern. When you first go out, you overestimate your ability to understand developing countries. You underestimate risk. In the beginning, it’s very hard not to make tons of money until you reach a point where you have significant repayments, and that’s when you discover it’s much harder than you thought. So, the Soviet Union did this in the 1950s. They went out dramatically into Africa and the developing world. And by the late 1960s, that turned out to be a real big problem. Many of those projects went bust, and the Soviets stopped lending nearly as aggressively as they had. The Arab OPEC nations did the same thing in the 1970s. Japan did the same thing in the 1980s. In every case, a huge expansion of very exuberant lending until some event or series of events made them recognize the riskiness of what they were doing and they pulled back sharply.
In the case of China, I believe it was Venezuela in 2015, 2016, which really sort of woke China up to the riskiness of their lending in Latin America, which is an area I know quite well. They were lending disproportionately to Venezuela, Argentina, and Ecuador — three countries that the rest of the world was very reluctant to lend to because they were so risky. China found it very easy to lend to those countries, not surprising. But in 2015, Venezuela pretty much had to restructure all of its debt to China, and to the rest of the world, and that came as a really big shock within Beijing. That was the first time they recognized what every country takes several years to recognize, and that is that lending to developing countries is quite risky.
When you expand too rapidly, you will probably run into problems. And I would argue that that’s why ever since 2015, 2016, we’ve seen a pretty rapid contraction of Chinese lending abroad. So, I’ve never been a big buyer of the argument of debt trap diplomacy or geopolitical lending because it seems to me that China has followed the same path almost every other country has followed when it first started to go out — exuberance followed by a great deal of sobering up.
Eric: So, if we’ve seen this story play out before, then if you were to advise global south governments, governments in the developing world about what’s coming next in the story, what are you going to tell them based on the economic precedent?
Michael: Well, what I would argue is that they are temporarily and just temporarily in a reasonably good geopolitical position because China, Europe, and the U.S. are really all competing for geopolitical influence. And this is a great time to be able to negotiate. So, they’ll probably do reasonably well negotiating developmental financing from the various blocks. But I don’t think the numbers are going to be nearly as big as they were, even five or 10 years ago, because I think a lot of lenders are very, very concerned about rising risks among developing countries.
Eric: Let’s talk a little bit about how they’re handling the debts that they’re dealing with. First of all, I’d like to get your understanding of if you have any insights on the culture of debt. And this is one of the things that I think a lot of people on the outside looking in don’t fully understand that the Chinese are not necessarily playing by the same rule book as, say, Western creditors did in previous times in the HIPC, the Highly Indebted Poor Countries, debt relief from the ’90s and whatnot, where there was debt cancellations. The Chinese have never shown any interest in debt cancellations. In part what I understand was that after the SARS epidemic in 2003, debt started to pile up at the provincial level, and the Chinese central government came in and started to clear some of the province’s debt, but said, “We’re never going to do this again.”
Fast forward to the current situation right now, and we have very high levels of provincial debt that the central government has said, “We’re not going to clear.” So, think about the politics here that, if Zhejiang or Guangdong or Yunnan Province can’t get debt relief from the central government, then the optics of the Chinese government giving Zambia debt relief just don’t work domestically. And I think there’s still a misunderstanding in the outside world as to how the Chinese view debt, debt relief, and debt cancellation. Can you give us some of your insights on that?
Michael: Yeah, you know, one of my former students ended up working for the part of the government that basically approved all of the lending into Latin America and Africa. And I’ve had this discussion with him many times before. And basically, my argument is that we sort of know how this works historically. You make these loans expecting to be fully repaid. You then discover that repayment is very difficult. You then spend a very long destructive period where you renegotiate and restructure the debt, and ultimately you reach a point where you recognize that debt forgiveness is the only way out. But it’s very hard to get them to that point of recognizing that debt forgiveness is the way out. And in China, they haven’t really learned that process yet. Remember, this is the first time they’ve made loans abroad. So, they don’t have any experience of going through these long, difficult restructurings, with ultimately ending with debt forgiveness.
Now, in China, there’s also, because it’s so centralized and the way in which policymakers and people in the policy sector or a judge tends to be very linear, nobody can make a decision about debt forgiveness except coming from the very top. This is something I heard over and over again. If you propose debt forgiveness, that’s death to your career, right? So, it’s very difficult to do that, and it’s very difficult to sell the ideas you pointed out domestically that we will forgive these foreigners, but we won’t forgive local provinces, etc. So, I think that’s going to be a long struggle.
Now, I started my career in dealing with the debt during the LDC debt crisis of the 1980s. And I remember, even among Americans and Europeans who had forgotten the last really big experience, which was in the 1930s, that ultimately they had to forgive the debt. There was not going to be any growth until the extent of debt was made more manageable from the borrowing country’s point of view. It took them, you know, the debt crisis began in 1982; officially, it actually began in 81, but it wasn’t until 1989 that they agreed on the first formal debt forgiveness under the Brady Plan. So, it takes quite a long time to recognize that ultimately unsustainable debt, by definition, is unsustainable, and both the borrower and the lender are better off once they agree on the right amount of debt forgiveness. I think China still has many years before it gets there.
Eric: Do you get a sense, though, that the Chinese will eventually come around to debt forgiveness or cancellation, even though they’ve issued no indication whatsoever that that’s what they want to do? And to this point also about what you’re talking about in terms of the learnings, that was what former World Bank President, David Malpass said was the problem in the Zambia debt talks was that the Chinese were asking so many questions. And that’s part of the reason why it took two years for them to get to the agreement that they got to back in June on restructuring Zambia’s debt. We’re now in a prolonged process in Sri Lanka as well, where the Chinese aren’t even sitting at the table with the other major creditors. They’re observing. So, we have this disconnect in terms of China’s participation in global south debt restructurings. Do you attribute that to their learning curve or is there something else that we’re missing?
Michael: It’s a couple of things — Part of it is a learning curve, part of it is a real, a suspicion on both sides. Each side is worried that the other side is going to try to take advantage. And I think that makes it much more difficult to come to an agreement. The Chinese don’t want to feel that they are granting concessions that will benefit Western creditors — and Western creditors feel exactly the same way, they don’t want to grant concessions that will benefit China — which makes it very difficult. But when you ask, will they ever come to the point where they recognize debt forgiveness? My response, I’ve had this discussion with some of my Chinese friends, my response is always a little bit blunt, and that is, it doesn’t matter what you think is going to happen. I can tell you what will happen.
Countries that cannot pay, cannot pay. Eventually, you will recognize that just drawing out the restructuring period is bad for both the debtor country and the creditor country. And ultimately, these things always come to debt forgiveness. The sooner, the better for everybody, but unfortunately, it tends to take a long time. China will get there one way or another. Given the extent of their loans and the problems some of the borrowing countries have, it’s very hard to imagine that there won’t be debt forgiveness at some point. And I think one of the points that we need to do on our side is A, push this point home, debt forgiveness is inevitable. It’s just a question of when, and the sooner, the better.
But the other really important point, Eric, that I think a lot of people don’t understand is that the fight over debt restructuring, say between, let’s be neutral and say debt restructuring between the United States and Argentina, to keep China out of this, many people think that this is a conflict between Argentina as borrowers and the United States or United States and Europe as lenders. That’s probably the wrong way to look at it. Remember that every dollar that Argentina earns from exports, and that’s the only way it earns dollars because it’s not getting new investment, has to be recycled back to the rest of the world in one of two ways. It can be recycled in the form of imports or it can be recycled in the form of debt payments.
So, when you ask what is the interest of the United States or of Europe in this debt restructuring process, that’s sort of the wrong question because the U.S. doesn’t have an interest. Europe doesn’t have an interest. It has two very different groups. The creditors, their interest is that Argentina recycled the largest possible amount of dollars in the form of debt payments. But if you are an American farmer or an American business or an American worker, what you want is Argentina to recycle the largest amount of its export revenues in the form of imports, right? So, I think that’s one of the points that we need to be making. The more debt forgiveness these countries get, the better for the economy of the creditor nations. The worst for the creditors, but the better for everybody else within the economy. And I think eventually we’ll get to that point. Again, the sooner, the better.
Eric: Yeah. And let’s hope for those developing countries that are starting to sink under the combination of a weakening currency that’s making the cost of that debt go up and the cost to service the debt is really weighing on their economies quite a bit. We’re seeing that in Africa and Latin America in particular. Speaking of debt servicing, one of the themes that came up at the recent BRICS Summit was this idea of trying to back away from the dollar and to internationalize the RMB or the Yuan. And this has been a controversial topic because it sparked an enormous amount of anxiety in the United States that de-dollarization is going to lead to the end of e economic supremacy for the United States. The problem is, though, is that the RMB is still not a convertible currency.
And as we’ve heard from a number of other economists over the years, there’s nothing stopping anybody right now from trading in RMB if they want to and not using the dollar. But I’d like to get your take on this discussion that’s been going on for the past year now about China’s desire to promote the internationalization of the RMB and what the prospects are of that in terms of presenting a formidable challenge to the dollar.
Michael: There are two separate questions here. One is sort of the de-dollarization of global trade, and the other is the rise of the renminbi. Of the latter, there’s almost zero chance of that. And to understand why, it’s important to understand why the U.S. dollar is the dominant reserve currency. A lot of people think a reserve currency, choosing reserve currency is like choosing a red shirt versus a green shirt and you can just take one off and put the other one on. It’s not like that at all. The dollar is fundamental to the global imbalances that exist today because when countries run surpluses, in other words, when they export more than they’re recycling in the form of imports, they must acquire foreign assets. And so the question is, where do you want to acquire foreign assets?
Well, you want to acquire them in places where they are safe liquid with very transparent governance, etc. So, part of it is, where do you want to acquire assets? But there’s another very important component too, and that is, who will allow you to acquire assets? Because remember, countries that run surpluses are balancing those by acquiring assets in other countries, right? Now, the Anglophone economies, the U.S., the UK, Canada, and Australia are very similar in one sense, and that is they have very open, deep liquid flexible financial markets with the best corporate governance in the world. There are constraints, for example, be sanctions, but generally speaking, it is easier to put your money in those countries than it is anywhere else.
This has a very important impact on these countries because these countries are net importers of capital, not because they want to be, but because countries that run surpluses want to carry those surpluses in those countries. They want to acquire U.S. government bonds, U.S. stocks, or U.S. real estate, whatever, as the counterbalance to those surpluses. So, that’s why the dollar is the dominant reserve currency. And all of the Anglophone currencies punch above their weight. They do so not because the U.S. decided that. They do so because the surplus countries decided that. But this has a big cost to the U.S. economy. It means the U.S. cannot control capital inflows into the country.
Whatever foreigners want to do with their excess savings, that determines how much goes into the U.S. So, you have what seems like a bit of a paradox that when the global economy and the U.S. economy are doing badly, instead of money leaving the U.S., even more money flows into the U.S., because when things are going badly, you want to buy the safest, most liquid asset out there, and that’s always U.S. assets. So, the U.S. cannot control its capital account. That also means the U.S. cannot control its current account because the current account is just the obverse of the capital account. And I don’t want to be too technical here, Eric, but I think it’s a court to understand it.
Eric: Yeah.
Michael: That means, by definition, the U.S. cannot control the gap between its investment and its savings. Right? That gap will always be equal to the net inflows that foreigners pour into the U.S. Now, in the 19th century, when foreigners put money into the U.S., the U.S. investment rate went up, which was good. The U.S. was a developing country. But in the last four or five decades, the U.S. investment rate doesn’t go up. The U.S. savings rate goes down. And I’ll spare you a long explanation of that. It seems counterintuitive to many people, but I discuss it in my book, Trade Wars or Class Wars. So, this is just a long way of saying that the U.S. is the dominant reserve currency because the U.S. has very transparent governance, very liquid financial markets, and is willing to give up control of its capital and its current accounts. So, if you want to replace the U.S. dollar with your currency, it’s simple — you must do the same things.
Eric: And China doesn’t want to do that, of course. I mean, that runs counter to the way the Chinese govern their currency.
Michael: Exactly. In fact, they’re going in the opposite direction, which is why we’ve been talking about the renminbi becoming a major currency for 15 years now. And it’s still only 3% of total transactions, which when you consider China is the world’s biggest trader, that’s a really low number, and it’s not going to change. The only reason for de-dollarization is if the U.S. government decides, and there is some evidence that they’re thinking this way, if the U.S. government decides it no longer wants to play that balancing role and starts imposing capital controls. That’s still many years away. But that could happen, in which case the dollar will stop becoming the dominant currency of the world, but it won’t be replaced by the renminbi. There will be no replacement. The role that the dollar plays in the current global system is pretty unique. And there’s no rule that says if the dollar goes, it must be replaced by something else. It probably won’t be replaced by anything.
Eric: But what do you say to the anguish of finance ministers in developing countries who say that every time the United States Central Bank and the Federal Reserve raises interest rates, it kills us because it just crushes the value of our currencies making imports more expensive, making debt servicing more expensing, fueling inflation? And really, at the end of the day, we’re fed up with this. And there’s really a lot of grievance right now, and that’s again, why I think this idea of the bricks currency is so appealing, whether or not it will happen, it’s a vehicle to express the frustration about the inequity in the system. And there was an interesting paper that was written by Tsinghua University Professor Tang Xiaoyang, who we’ve had on the show a couple of times, and he said at the end of the day, the debt crisis in the global south isn’t China’s fault, it’s the Federal Reserve’s fault for what they’ve done in terms of both raising interest rates and their quantitative easings over the years through the pandemic. And that has just crushed the value of developing world currencies. What’s your take on that?
Michael: Very few people, including very few economists, really understand the way the balance of payments work. It’s true that countries that fund themselves in dollars are now subject to changes in U.S. monetary policy that may have nothing to do with the needs of those particular countries, but that’s not a consequence of using the dollar. That’s a consequence of what’s called the impossible trinity, which is a constraint on the central banks of every country, including the United States. And that is that, basically, if you allow reasonable amounts of capital inflows and outflows into your country, then if you choose to stabilize the value of your exchange rate, you have no control over your domestic monetary conditions.
If you choose to control domestic monetary conditions, you have no control over your exchange rate. It doesn’t matter whether it is a dollar-dominated world or renminbi dominated world, or gold and silver-dominated world. Those conditions always held under the gold standard, gold and silver standards of the 19th century. You had exactly the same problem. The problem is, to the extent that you are a small country that is dependent on inflows and outflows, then you have to choose whether you control the value of your currency or whether you control the domestic monetary conditions. And it’s very hard to know which one to go after. But ultimately, that’s a decision that has to be made. Now, there are countries like Chile, for example, that, in the 1980s, made the huge switch away from the value of the currency, the exchange value of the currency towards the system for managing domestic monetary policy.
And they’ve done pretty well at it. So, the way to solve this problem is not to switch out of dollars into another external currency. The way to solve this problem is domestic financial reform, some of which are frankly quite difficult. And once you’ve done those reforms, then you become less sensitive to changes in the value of the dollar. But switching from dollar to renminbi, if that were possible, and I don’t think it is, but if it were possible, that wouldn’t change anything. The only difference now is that instead of being wrecked by changes in U.S. monetary policy, you become wrecked by changes in Chinese monetary policy. And maybe that’s better, maybe that’s worse. It’s hard to say why would be better or worse.
Eric: I’d like to close our discussion on a topic that’s of great interest in most of the developing world, especially where I’m here in Vietnam, and it’s about manufacturing. And there’s been a lot of discussion about manufacturing in China, both about the whole decoupling, de-risking movement. But even before that, there’s been this concern that China will simply not have the people it needs to power its manufacturing labor force. Again, this is a big surprise for a lot of people that a country with 1.3 billion people actually has a population shortage. But when you see the demographics of China, it’s not favorable to young people working in factories. And so the question is we’ve been waiting in parts of Africa and Latin America for this mass offshoring of Chinese manufacturing that has never come, in part because automation is taking over a lot of it, and also because China’s transitioning out of a manufacturing economy and into a services and technology economy and what they are offshoring they’re putting down here into Southeast Asia.
Can you speak to us a little bit about some of the manufacturing trends that you’re seeing in terms of how they are responding both to the geopolitics coming from the United States and Europe but also, at the same time, the economics and demographics?
Michael: Yeah, I’ve never believed that we would see a massive outflow of manufacturing from China. And by the way, I don’t think China is transitioning away from manufacturing towards services in high tech. Its manufacturing sector is as big as ever, and it’s roughly twice as a share of GDP what it is in other countries. All the surplus countries have very, very large manufacturing sectors, but the strength of Chinese manufacturing is the obverse of the weaknesses, the imbalances that are causing such big problems for China. And this is true not just for China, but we’re seeing this in Japan, we’re seeing this in Germany too. And that is, why is Chinese manufacturing so competitive internationally? Why is German manufacturing? Why is Japanese manufacturing? Why is it Dutch manufacturing? Etc. All these surplus countries, why are they so competitive?
Well, we think that it must be because they’re particularly efficient or a particularly helpful educational system, etc. And that’s not true at all. In all of those countries, the household share of GDP is very low, much lower than in their trading partners. And why is it so low? Because there are a whole series of direct and indirect transfers from the household sector to subsidize manufacturing. In China, those subsidies are by far larger than in any other country. And you can see that in the household share of GDP, which is lower than in any other country. There are direct subsidies or wage restraints, indirect subsidies, difficulty of migration around the country under the hukou system, very low interest rates, which basically force savers who are households to subsidize borrowers who are manufacturers and local governments.
And undervalued currency, which, again, is a transfer in which forces net importers, again, households to subsidize net exporters, the manufacturing sector, and lots of direct subsidies into favored industries, including a spectacular but economically inefficient logistical and transportation network. In other words, China will spend way too much money improving its infrastructure, which may make the overall economy slightly worse off, but will make the manufacturing sector much better off by lowering transportation costs, right? As long as this continues, manufacturers will locate in China because of all of these explicit and implicit subsidies.
And so back in the days of decoupling, I’ve argued for years, that it ain’t going to happen. That manufacturing will continue to remain in China. Different types of manufacturing will shift around clearly, but manufacturers are not going to leave China and go abroad because the subsidies they receive in China are so substantial until those are changed either directly in China as part of this whole rebalancing process, which they need to do, but it’s very difficult to do or they’re changed by trade policies in the United States and in Europe that refuses to accept the entrance of these highly subsidized goods. One way or another, if one doesn’t happen or the other doesn’t happen, then manufacturing will continue to be heavily concentrated in China because that’s where they’re able to be competitive.
And I don’t really see that changing in the short term. In the long term, it probably will change for the same reason it changed in Japan. These subsidies which make manufacturing competitive, leave domestic demand very weak because households can’t consume a large share of what they produce. Ultimately, Japan in the 1980s, like Brazil in the 1970s, like China more recently is forced to continue increasing investment to make up for the very weak consumption part of demand. And once the investment becomes non-productive, as it has been in infrastructure and in the property sector, what you get is more and more debt and more and more instability within the structure of the financial system, until eventually you have to shift away from that model.
So, once China shifts away from that model, we will start to see businesses manufacturing move out of China, but there’s no evidence that they’re going to do so in the next two to three years.
Eric: So, all of the hysterical rhetoric coming out of the United States in terms of the need to separate from China, to decouple from China and not to buy Chinese products anymore are not reflected in the trade numbers certainly. And you don’t think that there’s really any way in the near term within, and we’re defining near term what? within decades, right? Not within years, that they can really unhinge each other, even if they wanted to.
Michael: No, and you get that here in China too, a lot of boycotts for political reasons. Trade is very politicized here. The irony is that it doesn’t really matter what drives trades or the fundamental imbalances of the economy. And as long as the household share of GDP in China is so low, Chinese manufacturers will be far more competitive than manufacturers in other countries. Now, how long will this go on? It’s hard to say because, remember, China’s manufacturing strength is the obverse of its very weak domestic demand, which in itself is the cause for China’s overinvesting in property and in infrastructure. And so, it’s the cause of the surge in Chinese debt, perhaps the fastest growth in debt we’ve ever seen in history.
So, how much longer can this go on? We don’t really know. But within Beijing, it is pretty clear that policymakers are very uncomfortable with the consequences of these imbalances. They’re just not sure how to resolve it without creating short-term pain. And I think it’s really a political question as to when this changes.
Eric: And at the bottom line for developing countries, if you’re an economic planning minister in Southeast Asia or Africa or the Middle East or elsewhere, you’re not going to see a lot of Chinese manufacturing move overseas. The infrastructure and the supply chains just aren’t there to make it cost-competitive, is that right?
Michael: Exactly right. It’s going to take a lot more than window dressing to really change the patterns of global manufacturing.
Eric: Well, Michael, this has been a masterclass in Chinese economics. We really appreciate your time and your insights, and it’s been absolutely fascinating. Michael Pettis is a Senior Fellow at the Carnegie Endowment for International Peace. He’s based in Beijing. He’s one of the smartest guys out there on the Chinese economy. Your Twitter feed or X feed is literally one of the best on the topic. And where can people find you on that social media platform?
Michael: My Twitter address is @michaelxpettis — all one word. Then on the Carnegie website, I do a lot of pretty long-form essays on the Chinese economy if anyone’s interested.
Eric: We’ll put links to some of your writings, also a link to your book and to your Twitter X feed as well in the show notes. Michael, thank you so much for your time today. We really appreciate it.
Michael: Thank you very much.
Eric: Cobus, what a treat to have the chance to speak with someone like Michael who can bring that level of insight into the Chinese economy. And again, it was a little bit wonky, a little bit technical, but this is the hard truth that everybody needs to understand. And at the end of the day, you got to power through some of this very difficult knowledge about the Chinese because it’s tough, it’s hard, it’s not easy, it’s not ready-made. You brought up the point about S. Jaishankar, where you just don’t know what’s going on. But this is one of the reasons why it takes so much time to understand not only what’s happening domestically, but also internationally about the Chinese because it’s such a big place. And I think what Michael said, which was so interesting, was how the trends that we’re seeing today in many ways are not new.
They’ve been building up now over 10, 15 years, and you’ve had to see what happened in the early 2000s to understand what’s happening today. And Cobus, again, it comes back to the real demand for China expertise in many of these foreign ministries, not just in Africa, but in other parts of the world as well.
Cobus: Yeah, absolutely. Because it’s not only knowing how China works and knowing the realities of the Chinese system, which are significant and complicated, but also how China is changing because a lot of these changes are now these kind of world-historical like unique tectonic shifts moving from one kind of economy to a different kind of economy, which is also happening in a moment of peak narrativizing from Western powers. So, you have, on a weekly basis, you have like huge articles in The Economist, in Wall Street Journal, saying, “Oh, China’s over. We hit peak China, etc.”
So, you need to navigate your way through these hot takes that have their own set of agendas and their own set of Western fantasies involved in order to then get through to A, what’s really happening, but also like the fact that what a lot of the Chinese policymakers are dealing with are unique, unprecedented challenges that are going to have unprecedented methods thrown at them or approaches kind of thrown at them. So, it’s a doubly, triply challenging information space at the moment. For that reason, these global south stakeholders really need people who can advise them in a more fine-grained way.
Eric: Yeah. And I thought what Michael said was also very interesting that the decoupling fantasy in the West is never going to happen. There isn’t the capacity elsewhere to make up for what China can do in terms of production. It’s not in their economic interest. He also dismissed the idea of the internationalization of the yuan. It’s what we’ve heard over and over again over the years, that the dollar, for all of its flaws, and for as unfair as it is, still has the transparency of a major currency that the yuan does not have and will not have for a very long time. And because Chinese economic data is oftentimes secret, we don’t know what the unemployment rate is for young people, we don’t know a lot of what these data points are, a lot of investors are going to be hesitant to commit entirely to the yuan.
Very interesting points for Michael there as well. And Cobus, to your point about narratives, and I think this is a good place for us to wrap up our conversation, when it comes to the Chinese economy, I think we hear, as you pointed out, a lot of not only the Western media narratives, but also from Western policymakers as well, that the Chinese economy’s imploding, the Chinese economy’s over, it’s all going to collapse, it’s terrible. And again, I think those are their nighttime fantasies that they have and that, all of a sudden, everything’s going to go back to the way it was, Cobus, where it’s the Western powers and the G7 that’s fully in control. And then you hear on the other side, these Chinese fantasies that says, “Hey, everything’s fine. Don’t pay attention to any of those bad news. We’re not going to talk about the bad stuff.”
And as with so much in the China discourse, the truth is probably somewhere in the middle. And that’s our approach on it, which is to resist these extreme polls and to focus on, again, what the complexity of that middle space is. Final comments to you before we go.
Cobus: I agree that that is what we’re trying to do. We’re trying to walk that line. And what we are increasingly finding is that that middle space is a crowded space. And that is, I think, what multipolarity, as that kind of shorthand, is actually going to mean is that A, China’s going to be around and very important and very influential, but in a kind of a messy and unpredictable way. Not in the neat kind of bipolar, old Cold War way that I think a lot of Western policymakers predict. But then that landscape is further going to be additionally messy with a bunch of other messy global south global powers, where increasingly, there is no contradiction in being both a developing country and a global power. I think that China has shown that.
And Indonesia is showing it. India is showing it. Increasingly, there’s more and more of them, and they’re all very contradictory and they’re all very complicated, and they all have very complicated relationships with China that don’t necessarily involve the West in the way that Western policymakers expect. So mapping that is what we do.
Eric: Yeah, funny thing happened this past week in terms of those polarized extreme narratives. So, we posted a video up on our YouTube channel, www.youtube.com/@chinaglobalsouth. That’s how they do it now with YouTube at that ampersand. That’s the little @ symbol thing. And our Southeast Asia editor, Antonia Timmerman, posted a video taking the new Whoosh, that’s the name of it, the Whoosh High-Speed Railway. And she channeled, in her discussion on the video, many of the concerns that people in Indonesia had about the debt and the amount of time that it took. My goodness, that generated dozens and dozens of skeptical comments from… The snowflakes were triggered, okay? “Why do we hate China so much? This channel’s anti-China. Eric is anti-China. This is propaganda, CIA,” blah, blah, blah. And they said, “Why don’t you make videos that are longer, more balanced, and more favorable to China?”
Which I was like, okay. So then a few days later, we posted a 13-minute video from our Africa climate editor in Njenga Hakeenah in Nairobi, who did a wonderful piece from a number of new energy shows in Nairobi and very complimentary to the Chinese and really exciting about what the Chinese are doing about bringing new energy ideas to Africa. We got two commentators, four comments total, no views, no comments whatsoever. And I think that speaks to just how awful social media is, is that people are just drawn to the negative, and they just want to sit there and complain and yell. And then when you actually do some positive coverage, there’s no mention of it. They don’t pay attention to it.
Cobus: And just to be clear, the climate report we posted wasn’t in response to these comments. We didn’t feel like, oh no, no, we need to put something positive of China out there. That’s not why. China just happens to be a very robust renewable climate, renewable energy partner in many African countries. That’s just a reality that. And so we were just covering that. But then, yeah. That is what social media’s for, it’s for complaining.
Eric: Ugh. And it’s probably also because the algorithms see that there’s negative comments, and so they boost it so it’s seen more. And when there’s not polarized comments, the algorithms don’t promote the clip as much, so fewer people see it. So, it’s not only the snowflakes who are not being triggered or triggered, it’s also I blame Google and the algorithms for their awful way that they make us all hate each other as much as they do. But anyway, so I recommend, if you’re not subscribed to our YouTube channel, we’re going to be posting a lot of cool content there. It’s a little terrifying, I have to be honest, Cobus, that you and I are going to be, after almost 15 years of doing audio podcasts, we’re going to step out. But anyway, the world’s going video. We have a great team. I want everybody to see this great team and to hear from them and to hear the discussions that we have internally.
And so we thought, let’s record it and we’re going to put it up on YouTube. So that’s going to start, hopefully, next week. So, we’ll have some news about that next week. Let’s leave the conversation there. If you would like to join our community and to support the work that we’re doing, we would be so grateful if you would give a subscription to the China Global South Project a try. You’ll get a daily newsletter. You get this brand new search tool that we’ve just installed on our site to make it easier to access some of the thousands of articles on what China’s doing in Africa and the rest of the global south. It’s a great research tool, especially if you do this for work. You also get all of our podcast transcripts and access to our AI bot as well. So, you can sit there and query our ChatGPT-powered bot about what China’s doing. It’s pretty fun, actually.
And so all of that is available if you go to chinaglobalsouth.com/subscribe. Try it out free for 30 days. And if you’re a student or a teacher, send me an email, eric@chinaglobalsouth.com, and I will, again, email you some discount links for half off. So let’s leave it there. Cobus and I will be back again next week with another edition of the China Global South Podcast. For Cobus van Staden in Berlin, I’m Eric Olander in Ho Chi Minh City — thank you so much for listening.
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