Alice Han

10 years ago, those numbers would have been flipped.

You would have seen an economy that was more driven by fixed asset investment rather than exports.

But certainly as we've discussed previously, James, the fact that they've had to crack down on fixed asset investment on the real estate sector, on local government debt, has all contributed to the need to ramp up and juice up

the export machine.

And so I think we're seeing a China in 2025 that is heavily imbalanced and skewed towards supporting its exports rather than finding more productive areas to invest.

One last data point that I thought was pretty interesting was the fact that private investment, which is again a good indicator for the domestic confidence of investors and businessmen, private investment fell 6.4%.

And this is in lockstep with households who, in the latest PBOC data, have increased their propensity to save rather than to spend.

And again, reinforces this point that as long as this economy remains really imbalanced, they're going to have to use either fixed asset investment and or exports rather than domestic consumption to drive growth.

They could easily fix this if they decided, and this is Michael Pettis' point, which I agree with, that they weren't going to do growth targets every year in the March National People's Congress and the government work report.

But the fact that they are wedded to these, say, 5% growth targets means that they need to invariably keep juicing the economy.

And this brings me to the March NPC meeting, which should be held in the first week of March.

My sources seem to tell me that it's going to be a 5% GDP target, so the same as last year, that the fiscal deficit will be at least 4%, if not higher.

Now, that is a historic high for Chinese fiscal balances.

And every indication points to the direction of the central government taking more debt on its balance sheet.

which again by global standards is pretty low at around 20%.

So they have the fiscal space to do so.

But that means invariably I think that there will continue to be support for the export sector.

But I also think that there will be more support through some of these local bond programs for fixed asset investment because I think if I were in Beijing's seat right now and I looked at the economic data in both Q4 but also 2025 as a whole, I'd be very worried about the huge fixed asset investment slump.

and worried about the property investment slump, which we also have talked about.

Property investment dropped 17.2%.