Keep pulling the thread on Michael Pettis.
Over a period of 15-20 years, China drove its consumption share of GDP to the lowest level ever recorded in history, which consequently created the highest savings share in history.
China's investment-driven growth model has become obsolete as the country has reached a point where it can no longer generate rapid growth by investing in needed infrastructure and manufacturing.
The only viable way for China to solve its economic imbalances is through wealth transfers from local governments to the household sector.
Michael Pettis predicts China is more likely to follow Japan's post-1990 model of a long period of very low growth rather than experiencing a sharp, crisis-led economic adjustment.
China's banking system is administrative, where regulators directly instruct banks on lending targets for specific sectors, unlike the U.S. where the Federal Reserve influences lending through interest rates.
At its peak, China's residential real estate market was the highest in the world as a share of GDP.
China's real estate sector at its peak was approximately double the size of the U.S. real estate sector as a percentage of GDP, reaching 20-30%.
In China, real estate comprised up to 60-70% of the typical household savings portfolio, compared to a global norm of 25-30%.
If the world abandoned the U.S. dollar as the primary reserve currency, the American trade deficit would contract, which would benefit the U.S. economy and harm the economies of surplus countries like China and Russia.
Michael Pettis predicts China's long-term GDP growth will slow to 2-3% annually as it is forced to reduce its investment share of GDP from its current level of 42-44%.
China's economic model is primarily investment-driven, with high exports and trade surpluses being residual effects rather than the core driver.
In March 2007, then-Premier Wen Jiabao acknowledged that China's consumption share of GDP was too low and made raising it a top economic priority for Beijing.