2/6 “What we really need is for the government, including the central bank, to do something major — to repair the balance sheets of households, enterprises, local governments and maybe also the financial institutions,” he said.

3/6 Huang, one of my favorite economists, is right to be worried, but I'd argue that while "the balance sheets of households, enterprises, local governments and maybe also the financial institutions" are indeed in tatters, I don't see this as what needs most to be resolved.

4/6 The real problem, as I see it, is that the growth model that left these balance sheets in tatters hasn't changed. Even if Beijing could figure out how to repair them (does that just mean transferring losses onto the central government's balance sheet?), it doesn't....

5/6 really address the underlying problem, which is that the only way to keep growth high enough to achieve the GDP growth target requires systematically undermining balance sheets by accelerating bad investment. https://www.ft.com/content/630...

6/6 In that case doing "something major" may just mean postponing the real resolution and undermining China's last clean balance sheet. This short-term benefit would likely make the inevitable economic adjustment more difficult. https://carnegieendowment.org/...

@michaelxpettis Can you address this fundamental problem with China’s growth model of past few decades in the context of an aging population and shrinking workforce in the coming years? How do you see this play out if the Chinese government doesn’t address this root problem?