For the first time in recent memory, a senior Chinese economic official is really pushing the idea that China needs to control its debt-to-GDP ratio.
In a recent Qiushi essay, central bank (PBoC) Governor Pan Gongsheng laid out why credit growth has to slow.
Trivium made this call back in July, when deleveraging sounded like a wild idea given how weak the economy is.
Dinny McMahon’s take: “We feel quite validated.”
On this quick-reaction episode, Trivium China Podcast host Andrew Polk sits down with Dinny (Head of China Markets Research) to unpack:
The three conditions Beijing needs to enable deleveraging, and why the Iran war and the export boom checked two of them
Where Beijing is already pulling back on borrowing: policy bank bonds, bankers’ acceptances, and special-purpose bonds
Why Beijing cares so much: a debt-to-GDP ratio of 305%, up more than 50 points since 2021, and an aging population that will require borrowing capacity in the future
The “sprint and reset” theory: Beijing is ratcheting investment down to a new base while exports hold up, and Dinny’s verdict that it’s making hay while the sun shines
Transcript
Andrew Polk: Hi, everybody. Welcome to the latest Trivium China Podcast, a proud member of the Sinica Podcast Network. I’m your host, Trivium co-founder Andrew Polk. And today I am joined, once again, but actually for the first time in a while, by Trivium’s Head of Markets Research, Dinny McMahon. Dinny, it’s been a minute. How are you doing, brother?
Dinny McMahon: Yeah, it has been a while. I’m feeling a bit rusty. We’ll see if I can get back into my stride.
Andrew: Yeah, well, you better jump in because the listeners have a high bar in terms of what they expect from you. So we will put you to the test today. We’re going to, today, do another one of the sort of shorter podcasts, quick React podcasts with Dinny. I’ll have a longer podcast with him on monetary policy next week. We actually just got a lot of content coming out, so I hope people are enjoying it.
I wanted to do this quick react podcast with Dinny specifically around this idea of China’s deleveraging, which Dinny has written about before and was really early on in terms of highlighting China’s efforts to deleverage. And then we got the clearest sign yet that is happening from a piece by the PBOC Governor Pan Gongsheng, kind of highlighting some of this stuff. I know we’re going to talk about that in a minute, Dini, but can you just remind us where that piece was in just a quick two seconds on that piece?
Dinny: So, Pan Gongsheng wrote an essay in Qiushi just a few days ago. And broadly speaking, the piece mostly just goes over his talking points from a speech that he gave at the Lujiazui Financial Forum back in June, which was mostly about needing to slow credit growth and allocate credit more efficiently. But what really jumped out at us was that he started talking about specifically the debt-to-GDP ratio. Really, for the first time in ages, any sort of senior Chinese official has really started talking about it specifically. And his take was, look, it’s risen a lot in recent years.
That’s because deflation has pulled down nominal growth, and it’s because Beijing has needed to increase debt to maintain a stable economy. I mean, he didn’t say it explicitly, but the context, of course, is that Beijing or China needs to keep borrowing to fill the hole left by the property market. So that was kind of the unspoken implication of his comments. But the key part that really sort of jumped out at us was that Pan said this. He said that China needs to avoid a situation where credit growth exceeds the needs of the real economy, causes idle and stagnating funds, further pushes up the debt-to-GDP ratio, and makes it difficult to eliminate outdated production capacity and inefficient enterprises.
And broadly speaking, he said, look, he thinks China can maintain a basically stable debt-to-GDP because credit growth is coming down. I mean, we heard that, and we felt quite validated because this is what we’ve been arguing. That China is deleveraging, specifically, it’s bringing down its debt-to-GDP ratio. And there is Pan saying China needs to do it for all these reasons.
Andrew: Totally. So, this is what prompted us to do this quick react pod today. We’ll walk through Dinny’s kind of previous argument, maybe touch a little bit more even on Pan’s essay in Qiushi. So that’s sort of the rundown for today. Of course, I also have to just very quickly do a little bit of housekeeping. Just to remind people, we’re not just a podcast here. Trivium China is a strategic advisory firm that helps businesses and investors navigate the China policy landscape. That, of course, includes domestic policy in China, like, for example, macro policy, which we will talk about today. And it also includes policy towards China of Western capitals like D.C., London, Brussels, and others.
So, if you need any help on that front, please reach out to us at hq@triviumchina.com. We’ll do a little bit more of an abbreviated version of this today. The second piece is just tell your friends and colleagues about Trivium, please. It really helps us out. We know that a lot of you are doing this and super appreciate it. Those word-of-mouth recommendations really help us to grow the podcast, and they help us to grow our business. So, thank you for doing that. Please continue to do so. All right.
So, Dinny, let’s dial back. At the end of July, we put out, and I hit that we hard, the royal we, which was really not the royal we– It was you put out a note saying that China is deleveraging. And, I mean, it was very kind of counterintuitive at the time because growth, well, and even still maybe is so, although, like we said, Chinese officials are clearly acknowledging this more explicitly now, but growth was weak and it seemed not the time to deleverage, right?
Everyone’s saying what China needs is more stimulus, more spending, more borrowing, more investment, more fiscal expenditure, of course, funded by government borrowing. But what you meant was what you already touched on, was that Beijing is actively trying to reduce its debt-to-GDP ratio. That, again, sounded a little bit counterintuitive, maybe even crazy, some would say at the time, especially with household spending barely growing, investment incredibly weak, got infrastructure weak, property manufacturing, everything contracting in terms of investment spending year on year from 2025 levels.
But you also made this argument that there were a couple of things creating the space for them to do this, and those were exports and inflation. So, just talk me through your argument from back in July to kind of level set.
Dinny: Cool. So, the idea was that ultimately to deleverage, you kind of need to fulfill three conditions, right? Or three conditions need to be in place to sort of effectively deleverage. One is you need inflation because it reduces the real value of the debt. And that’s something that China really hasn’t had for the last three years. It’s been struggling with borderline deflation for consumer prices and sort of endemic deflation for producer prices.
And so, it hasn’t really been able to bring down the stock of debt through inflation because it’s been struggling with inflation. But then we had the Iran war this year, and all of a sudden that got flipped. So for the first time in years, we had inflation and laying the groundwork or the conditions where China could conceivably deleverage. The second thing you need is you need a source of growth that isn’t driven by debt. And I mean, in China, the motors of growth over the past 20 years have been mostly debt-driven.
It’s been property investment. It’s been infrastructure investment. Most recently, it’s been investment in manufacturing. So instead, you needed something that would drive the economy, sort of help bolster nominal GDP, but it wasn’t aggressively adding to the stock of debt while they did it. And lo and behold, that’s what we’ve got with sort of the export boom that China’s really enjoyed since, what, the middle of last year, maybe a little earlier, and so with exports going gangbusters, China can generate growth without racking up the debt at the same time.
And then the other thing, the other condition that really needs to be met is that China needs to pare back the borrowing. The state needs to borrow less; firms need to borrow less. And that’s kind of what we’ve been looking for signs of happening as well then. And we’ve been seeing it. Various parts of the economy, certain groups are borrowing less, and some of that has been incredibly surprising given what you just said, Andrew. I mean, we’ve got chronically weak domestic demand in China in this environment.
You would think that the thing Beijing would be doing is looking to ramp up borrowing to sort of get the economy going, and yet some of the levers that would traditionally have pulled, we’re seeing a pullback, a contraction of debt or far less debt being deployed than would otherwise be the case, normally be the case.
Andrew: And now, thank you for letting that out, but now you feel vindicated because of what Pan just said in this Qiushi article. Walk us through that again. I know you’ve touched on it, but maybe tell us a little bit more about Pan’s side, and why do you think he’s coming out saying this now?
Dinny: Yeah, when he gave that original speech at Luijazui in June, the way that I read that was that was the first time that kind of put me onto the idea that Beijing might be deleveraging. He didn’t say it explicitly, but there was a lot of talk about, you know, it doesn’t matter that credit growth is slowing. The important thing is how credit’s deployed. We need to be focusing on efficiency. We need to squeeze out inefficient and misused leverage.
It seemed to be laying the philosophical foundations for why credit growth not just is slowing, but why it should be even slower. And so, when a few months later, he comes out with this Qiushi article, which pretty much makes all the same points, but then goes specifically to the debt-to-GDP issue, talking about how it’s rising, talking about how we can’t continue to let it rise, I’m like, okay, this is clearly what they’ve been building towards.
Andrew: Yeah. So, let’s extend that a little bit further. You said in your report back in July that if China generates 5% real GDP growth and inflation of 2%, right? Nominal GDP around 7%. Now we’ll see what the actual nominal growth numbers are. And, of course, we know there are challenges around the real GDP numbers, but I think it’s safe to say that the government is working off the official nominal GDP numbers. So let’s call it 7%. That if that’s the growth rate, then China can start deleveraging, or at least stabilize the debt-to-GDP ratio if total social financing or overall credit slows to 7% by the end of the year.
And you said that growth might be even slower than that, both on the credit side of like, we could probably look at TSF growing even at 6.9% year and year by December. How is that prediction looking on both sides?
Dinny: Yeah, I think we’re on track. I mean, as you said, the key thing here is what is China’s nominal GDP this year? Because the reason they haven’t been able to deleverage over the last few years is because nominal GDP has been so weak. What is it? 3.5%, 4%. But this year, because of inflation, it looks like we could get 7%, maybe a little bit higher, maybe a little bit lower. But whether China deleverages then or not, a big part is whether, well, is credit growing faster or slower than that pace of nominal GDP. So, if we’re aiming for 7%, can China get to total social financing TSF growth of 7% by the end of the year? Yeah, that is not difficult at all.
August, it was 7.2%. Almost every month, the pace of year-on-year TSF growth is declining by 0.1 percentage points. And so, another four months left in the year, I wouldn’t be surprised if TSF growth in December was like 6.8, even 6.7% year on year. So yeah, I think on the slowdown of the credit side of things is really coming together. I think the bigger question is, will inflation hold up? Will GDP growth achieve a minimum of 4.5% as Beijing was aiming for? I mean, that’s the real questions. Credit growth, no, it’s slowing sufficiently aggressively. That deleveraging is certainly within a shot.
Andrew: Now, we talked about this before on the podcast, I think with you, myself and Joe Peissel, our lead macroeconomist. I mean, you would expect rapidly slowing credit growth to lead to further slowing of economic growth, particularly in real terms. But there is a few things going on here. Talk us through kind of the missing link on what Beijing is expecting to kind of keep economic growth moving in an environment of weakening credit growth?
Dinny: It’s all about exports. That’s really what it comes down to. Consumption is not part of the solution at the moment. They talk about it all the time, but the consumption solution hasn’t changed since the end of COVID, which is unlocking latent demand. They haven’t done anything meaningful to really reinvigorate household spending. And if debt isn’t rising, which really is, you know, you’re not doing anything to reinvigorate investment, it’s a purely a export-led story. So, what you have is an expansion of manufacturing on one side and you have net export growth on the on the other, and those two things are what are driving the economy at the moment and what needs to continue to happen to deleverage.
Andrew: Yeah, and I would also say this is a little bit of a curveball, it’s not exactly on our map for this conversation, but you wrote about it in the past couple days, which is also Beijing is acknowledging that this environment will continue to depress investment, which they are totally fine with and are trying to improve sort of the targeted nature of investment, like what it goes towards. They want to make sure investment goes towards national priorities and boost the efficiency of investment to the extent they can, right? So, would you say that those goals are in concert with the deleveraging agenda?
Dinny: Yeah, absolutely. These are two sides of the same coin. They’re not just like, “Well, we need to reduce debt because we’re worried that it’s getting out of control.” They also have, I guess, a theoretical framework built around why they shouldn’t be investing as much as they used to be, why they shouldn’t be pumping as much credit into the economy. And so, whereas we’ve seen this real shift in the way that authorities talk about the role of investment in the economy, and specifically the role of infrastructure.
So, traditionally, investment and infrastructure in particular, they were ballast for the economy. They were the lever Beijing pulled whenever it felt as though the economy just wasn’t strong enough. And at various times, pulling that lever meant pumping more credit into the housing market. At other times, it meant pushing more credit into infrastructure. Most recently, it involved pushing more credit into manufacturing, but now the way Beijing talks about it is that the point of investment isn’t to create growth the point of investment is to raise the efficiency and productivity of other industries.
And so, that’s a real shift. It means that investment isn’t a lever to be pulled anymore. It’s far more strategic; it is about generating the productivity gains in other parts of the economy, which Beijing sees as being essential to driving growth. And so that’s a real change. They talk now a lot more about needing to improve the efficiency of infrastructure, not generating wasteful investment. And so that kind of very much goes hand in hand with sort of this deleveraging push because, on one hand, it’s like, well, we can’t afford to rack up debt the way that we used to. On the other hand, they’re saying, you know, we don’t even want to do that anymore because the point of investment has changed.
Andrew: Yeah, this also kind of aligns with a kind of piece of analysis that I was telling to our clients when I was in Shanghai a couple weeks ago, which is you’ve made the case that they’re sort of trying to take advantage of this moment of higher inflation and strong exports to sort of create this environment for deleveraging. But I would also say that exports as an outlet for growth in a deleveraging environment, those exports become even more important, right? And so, Beijing’s message or Beijing’s thinking, I think, is the stakes for this model for the export reliance are so much higher, right?
Because we recognize that we need those to keep us growing at this moment. And so, we’re not going to unilaterally disarm. And we’re going to increasingly send the message to folks like this is the model, get used to it. And also, our ability to defend our industrial policy, which is part of what underpins the export machine, becomes more and more and more important, which is why you see Beijing taking such a tough line on trade negotiations, in particular, I think with the EU. There’s additional reasons for them taking such a tough line with the U.S. But I think that need to defend the exports, need to defend industrial policy and the sort of innovative aspects of the aspects of industrial policy that support innovation.
I think the stakes are getting higher and higher and higher for their need to do that. And that’s one reason why you see them being so tough. But that’s just another point I wanted to add in. The question I wanted to ask you, the next question, is why does Beijing care so much about deleveraging? I mean, you know, I think people are pretty familiar with the arguments of why too much leverage can be dangerous. But Beijing seems obsessed with this stuff at times.
Dinny: Yeah, look, I think there’s a few reasons for it. I think it’s a starting point. I mean, what, according to the Bank for International Settlements, at the end of the first quarter, China’s debt-to-GDP ratio for the whole economy, so that includes households, corporations, government, take it all together, debt-to-GDP ratio was 305.2%. I mean, that’s really high. Not the highest in the world. I mean, there’s other countries. France are higher.
But importantly, that ratio has increased more than 50 percentage points since the end of 2021. I mean, that’s a really aggressive increase at a time where China was kind of sort of weaning itself off a debt-led growth model, right? it deliberately popped the housing bubble because the debt was kind of accumulating at a rapid pace. And so, even after the deleveraging campaign, even after deflating the housing market, we had this rapid expansion of debt relative to the size of the economy.
Now, of course, the pace of debt accumulation had slowed down, but so did the pace of growth. And so, the overall burden of debt has increased rapidly. Now, the real issue here is that what happens if it continues to grow at this pace? And realistically, it will surpass Japan’s current level by the middle of 2030 if it continues on its current pace. Now, of course, Japan is actually, its GDP ratio is actually declining at the moment. So, if Japan keeps declining, China continues on its current pace, I mean, they could cross over in the next two, three years. Now, of course, there’s nothing wrong with that. That’s not a real milestone.
But psychologically, I mean, Japan has been the poster child for indebted national economies for the last 20 years. For China to surpass Japan, I think it would be quite a hit to the way China both perceives itself and the way that it presents itself to the rest of the world. So of course, that’s a starting point, right? That’s why I think there’s like, “Mm, okay. This thing is getting a little bit out of control.” The other issue, and this is the real issue, is that at some point in the not so distant future the demands on the Chinese state, the spending demands are going to increase exponentially.
It’s because the population is aging so aggressively, and so healthcare costs are going to go up, pension costs are going to go up. At the very same moment, the population, the workforce is shrinking and shrinking, so the tax base is getting smaller. And so, regardless of what China does with the economy, it seems a pretty sure thing that at some point in the not-so-distant future, fast-approaching future, Beijing is going to have to start spending more and more and is going to have to borrow to meet those obligations.
So, assuming it’s going to have to borrow more for an indefinite period of time in some point in the future, ideally, it needs to borrow less now because every dollar that it borrows now is one less dollar it’s not going to be able to borrow in the future when it really needs it.
All right? So, if it’s borrowing now it’s all about trying to hit an arbitrary GDP target. If it’s borrowing in 15 years’ time, there’s nothing arbitrary about it. It’s borrowing because it needs to pay people’s pensions and meet health care obligations. So, that’s the real difference. And so, what it needs before that point in time comes, it needs more runway. It needs a greater space, greater fiscal space that will allow it to borrow more when it really needs to.
And so, to be in this position at the moment where the debt-to-GDP ratio has racked up 50 percentage points over the last four years, four and a half years, that can’t continue, because if it does, it’s hamstringing itself. Assuming it’s making life more difficult for itself in the not-so-distant future.
Andrew: Yeah, well said.
Dinny: Up to a point. Well said, up to a point.
Andrew: So, one last question then is, I think what everybody’s wondering is what that means for sort of traditional macro policy over the rest of this kind of economic cycle, we’ve been making now for a while that, I mean, for literally for years, like basically since we started this company, that Chinese policymakers are increasingly moving away from the old-style stimulus. You should stop expecting stimulus. I think that’s, like, now everyone understands that that’s not how they manage the cycle anymore.
But I would say this even goes further. In fact, it’s like not just not stimulus, but actually we’re putting on the brakes sort of through deleveraging. So, not only no gas, but actively kind of pulling back through the deleveraging campaign. Is that kind of how you think about macro policy at the moment?
Dinny: Yeah. So, on one level, you’ve got a slowdown in credit growth, and that’s natural, right? It’s slowing down because there’s just not as much credit demand. And then on the other side, you’ve got active government efforts to kind of slow down the accumulation of debt. And so, there’s a few really interesting places that are worth looking at. First is with the policy banks. So, the policy banks have always kind of been the go-to tool, source of, you know, sort of an avenue through which Beijing injects credit into the economy when it needs to stimulate.
And what we’re seeing with the policy banks at the moment is in this moment of relatively weak domestic demand, credit’s going in the other direction. So, the total stock of outstanding policy bank bonds, and bonds are the main source of funding for the policy banks, actually contracted 500 billion RMB in the first half of this year. That is unprecedented. At the same time, PBOC lending, the stock of PBOC lending to the policy banks, also contracted 500 billion RMB.
Now, that’s not so unusual. That PBOC lending has gradually contracted to almost nothing over the past, since 2024. But for that to be happening at the same time that the policy banks are actually retrenching their outstanding bonds, that is incredibly unusual. So that’s one thing. One of the big tools Beijing has always used to stimulate weak growth is being retrenched. Second thing that’s really interesting, but not surprising, is that the PBOC is trying to squeeze out sources of credit that are really not adding anything to the economy. And so, we’ve seen this before during the deleveraging campaign. That was the first thing they tried to do.
We’re deleveraging. This was 2016-17. The deleveraging campaign, first step is we get rid of the credit that’s not really doing anything for the economy. And so, the PBOC is trying the same trick again. And what they’re trying to do is reduce the amount of discounting of bankers’ acceptances that the banks are doing. No point going into details into exactly what that means. But we describe discounting a banker’s acceptances as low-calorie credit. It’s something the banks do when their lending volume in any given month has been particularly weak.
It’s a way to sort of boost their data. And it’s something that the banks have leaned into incredibly heavily this year to make their lending data look better than it is. So, the PBOC has effectively turned around. It’s trying to significantly reduce the degree to which that is going on. And I think the third thing that’s worth noting is what’s happening with how local governments are using special purpose bonds. Now, special purpose bonds were set up as the tool through which local governments funded infrastructure investment. And that is what they were for years.
And then a couple of years ago, Beijing started allowing local governments to use the funds raised from these bonds for other stuff, specifically to pay down hidden debt, which is… I mean, it’s paying down off-balance-sheet loans, stuff that local government financing vehicles have borrowed. So, it’s effectively a debt swap. A debt that a local government financing vehicle has borrowed, gets swapped effectively for an explicit bond borrowed by local government.
And it’s also these special purpose bonds are also being used for land buybacks. And again, this is kind of, it’s almost a debt swap thing going on as well. Local governments issue bonds. They buy back the land from developers that don’t need it. And those developers, more or less, they use those funds to pay down their own debts. And so, these bonds aren’t creating new debt. For the most part, they’re just resulting in the debt being shuffled around the economy. And what that means is that far less is being used to invest in infrastructure.
And so, that’s what we saw in August. I think only about a third of the money raised from the issuance of special purpose bonds actually went into infrastructure investment. Now, we think that’ll improve over the next few months for various reasons, but the underlying force that’s sort of driving this is that Beijing is insisting that infrastructure projects are financially sustainable. And local governments are finding it increasingly difficult to find those sorts of projects.
Beijing could relax those standards if it really wanted to. It could say, “It’s okay. We accept that you know these projects can’t pay for themselves, but in the short term, they’re important to ensure a certain degree of domestic demand and economic activity,” which is something that they’ve been relatively okay with in the past. But they’re not because their priorities have changed. And so, that’s kind of the three big areas where we’re seeing deleveraging at the moment, and we’re on the lookout for more because really I don’t expect this to be the end of it.
Andrew: Yeah, this has been great. Real last question this time is so the last “deleveraging campaign,” which I would call really more of a financial de-risking campaign that we saw started 2017, really kind of ran for three years, 2017 to 2019. Then, of course, the pandemic sort of blew everything up, right? Then kind of required a different policy response. I know they haven’t laid out official documents on this stuff, we’re just kind of at the early the front end of it, but, I don’t know, what’s your sense of how protracted this effort will be and what that might mean for growth over the next couple years?
Dinny: That’s a really good question, Andrew. I’ll be frank, I haven’t thought that far. I mean, my thinking at the moment is that, well, where is the pain point? At what point do they blink because they’re not generating the economic growth that they thought was important. I think we all kind of thought the same thing about the deleveraging campaign back in 2016, ‘17, ‘18, ‘19. It’s like, does this get to a point where they’re too worried about financial stability, they’re too worried about the slowdown in growth, and that they blink? And ultimately they didn’t, they stuck to their guns.
But this time, I really don’t know. I think, for all the reasons we’ve talked about, this is something that they want to do permanently. There’s a recognition that they can no longer lean into debt just to generate growth. Like, one renminbi of debt needs to generate, at the very least, a comparable amount of nominal GDP. That has not been the case for years. For one, additional dollar of nominal GDP has required significantly more debt than that. But that can’t go on indefinitely. So, I think ideally what they’d like to think they’re doing is they’re turning over a new leaf.
They are putting in place a new economy which does not require large amounts of debt to operate. And I think this is why they keep talking about the need for services, not just an expansion of consumer services, but business services to drive the economy. This is why they keep talking about the need for asset revitalization. The idea of taking existing assets and getting more wealth out of it rather than borrowing to create new assets. I mean, this is kind of the background noise to sort of this deleveraging.
They want a fundamentally different economy, and they think they’re putting in place the bits and pieces that will allow them to do it. Whether they can or not is a completely different question. Those sorts of structural changes typically take time. So, I think what they think they’re doing is a permanent thing. It’s just a question of whether the pressures on the economy cause them to blink at some point.
Andrew: Yeah, actually, I think that’s right. But also, let me throw something out there that I was just thinking as you were saying all that is maybe they just stick with it as long as kind of the export wave holds up, right? It could just be like path dependent. And what I mean by that in particular is I was thinking the exact same thing you were in terms of level setting to a new place. Maybe they’re trying to ratchet down investment in a way to a new base. Certainly, they are in the property sector, but maybe even in infrastructure manufacturing as well.
Once you get it down to that new base, which you can do in basically a couple of years, right? And you use the tailwind from exports to sort of reduce like unneeded credit growth and unneeded investment, then you’re at a new base of growth for that, or that new base of activity, and then you can get growth out of that new base of activity, right? You start getting year-over-year GDP growth out of investment because it’s smaller, right? In a way, maybe they’re just trying to reset. They’re trying to sprint and reset.
Not only we’ve seen them for years now doing re-rendering how property’s relationship with the economy. Maybe it’s an entire thinking about overall investments relationship with the economy and debt’s relationship to economic growth. And they think they can sprint through it while exports are strong. What do you think about that?
Dinny: I think you’re onto something, Andrew. I think that might be exactly what they’re trying to do here. They’re making hay while the sun shines, right? They’re making the most of the exports. Because, I mean, realistically, net export growth, the exports cannot continue growing the way that they have indefinitely. I mean, to think that it would even go for another couple of years, good Lord, that would be mind-blowing. But if they make the most of that now, take the pain from accepting a contraction in investment across the board, because that’s what we’re seeing.
I mean, this year we’ve seen a contraction in investment in property and infrastructure and manufacturing. I mean, for them to do what you just said, to reset to a lower level, and then once they’re at that lower level, growth can restart again, albeit at a significantly slower pace, that makes a lot of sense.
Andrew: Well, and it also means you, by definition, increase the size of your more innovative parts of your economy as a proportion of overall GDP. And you get growth from there as well as those continue to grow. So, I mean, it’s a little, I don’t know if Machiavellian is the right word. You know, if they can pull this off and this is what they are thinking, it’s actually quite sophisticated. I guess most people wouldn’t want to give them that much credit, but we’ll see.
I think it also speaks to why, when the IMF comes out and everyone else and says, “What you need at this moment is more fiscal support.” They’re like, “Bro, that’s not what we’re trying to do.” You know what I mean? I mean, maybe they don’t say it in those exact words.
Dinny: Or maybe they do. Maybe they’re like, “You know, mate, we should talk to each other more often. This has been really useful.”
Andrew: Yeah. Yeah, totally. I mean, it is, I mean, helping get my juices flowing for sure. Listen, man, I appreciate you laying this out for listeners. This was super helpful for me. It’s fall now, so we’ll get you back in rotation on the pod. Really appreciate the time today, man. Thanks for walking us through it.
Dinny: No worries, mate. It’s a pleasure as always.
Andrew: And thanks, everybody, for listening. See you next time. Bye, everybody.
