Global Economics and Management

Will China Dump US Treasuries?

Robert Samuelson says "No". I agree. If China were to do this, say to retaliate against US moves in the incipient trade war, they would take the risk of a huge capital loss and a weakening of the dollar that will make tariffs look like small potatoes. They would risk rising interest rate that will make the huge indebtedness of Chinese consumers and corporations even more unsustainable. And the US would easily find other purchasers for these treasuries, making the move self-defeating. 

The other issue China faces is: if not treasuries, then what? China has a huge current account surplus. It means they are accumulating claims on the rest of the world. What should they buy? Euro-denominated assets? Foreign stock? Foreign real estate? Are any of these good options compared to treasuries? I can see drawbacks for each of them.

UPDATE: Michael Pettis elaborates.

The Huawei Saga

In the Global Trends course, we will discuss at length the trade war between China and the US. The dispute is multifaceted and not limited to China's trade practices. In fact, a proper account of this issue would emphasize its geopolitical aspects more than its strictly economic aspects. The strategic expansion of Chinese interests, symbolized by China's actions in the South China Sea and its Belt and Road Initiative (BRI), is viewed by virtually everyone in Western elite circles as a major threat to the ongoing influence of US-led coalition of democracies. Countering this threat is the subject of a broad consensus across most of the US political spectrum, for instance. 

One of the major aspect of the economic dispute with China concerns its theft of intellectual property and its successful efforts to effectively shut out Western tech companies from the Chinese market (this, incidentally, is in stark contrast with how these companies operate, quite successfully, in India). It is in this broad context that one must understand the unfolding saga concerning Huawei. For background on this case, which I am planning to discuss during one of the Global Trends campus sessions, see this very insightful Wall Street Journal article. It is recommended reading for anyone interested in the geopolitical aspects of international economic relations.

Gurcharan Das on Narendra Modi

Prime Minister Modi appears to have won a resounding victory in the latest Indian parliamentary elections, and is likely to be India's Prime Minister for the next five years. In this context, my dear friend Gurcharan Das recently participated in a debate at Oxford on Modi's rule, on the theme "should we have confidence in Modi's government?". The positions that Gurcharan takes are eminently reasonable, as are most things he says and writes. Highly recommended, especially for those enrolling in my Fall quarter immersion course on India ("Doing Business in India"):

The Rise of Conservative Populism

This column by Tyler Cowen strikes me as exactly right. The events of recent weeks are but a culmination of a global trend that has been with us for a few years now.

The rise of populism will be a major theme of my Global Trends class this summer.

Readings for Global Trends

As I get ready to teach version 2.0 of the Global Trends course this summer, I am on the lookout for good recent writings on the themes of the class.

In Module 1, we will discuss the ebb and flow of democracy in the world. A recent Wall Street Journal article by my former Stanford colleague Larry Diamond does an excellent job of summarizing the current state of democracy in the world. It is a sobering read, even if the political regime of most industrialized nations do remain democratic. 

In Module 8 of the class, we will discuss the rise of new interests and debate whether the United States is becoming more culturally divided along a wide range of dimensions (the situation is not easy to characterize in this respect). Over at Quillette, Cass Sunstein just authored an essay which excerpts his forthcoming book, Conformity. The essay is excellent - I would even say brilliant. The forces Sunstein describes have a lot to do with explaining cultural divides. What is lacking in his brief account is any reason for why things may have gotten worse in recent times. This is an issue we will discuss in class.

Incidentally, the CCLE website for the course is up and running. You can find it here. As time goes by, I will be populating the website with more material. And the course reader is being readied now.

I will keep posting recent writings on global trends on this blog as I come across them. You can find them all by clicking on "Global Trends" in the list on the left sidebar.

Two Good Reads on India

1) Foreign Affairs on the state of secularism in India.

2) A report on venture capital in India.

Both will be highly relevant for my upcoming India immersion course, entitled "Doing Business in India" (Fall 2019).

A New High-Speed Train in India

What can the new high-speed train line between New Delhi and Varanasi teach us about India more broadly? Read this article, and find out!