Italian economist and China expert Michele Geraci explained why, in his view, Evergrande won’t unleash a systemic crisis for China.
“China can manage crises because it controls all necessary macro-economic variables, which have been denied to us.... Here is the list of what they have and what we don’t:
“1. They issue their (own) currency (and we don’t).
“2. They decide at a table the interest rate curve.
“3. They have no deficit constraints.
“4. They decide currency exchange at a table.
“5. They control current accounts through independent trade policies.
“6. They control capital in- and outflows.
“7. They do not have an international currency, thus they are not captive to Wall Street.
“8. Lastly, the key is that they have no big foreign debt.
“…That is why Evergrande won’t be, in my view, a systemic risk….”
The reader knowledgeable in the American System of Political Economy will recognize major features of a Hamiltonian system of credit and trade policies in these Chinese policies.
