Thanks Paul, agree on all your points, and do share the piece once it is out (and if publicly available).

So I don't really fully buy the real esate way out. The real estate boom merely masked low consumption between 2008-2018, it did not address the underlying excess savings issues.

Swinging back from export-led growth back to real-estate growth does not seem like a very good idea (nor plausible)

More the same is a fair assumption.

See the 15th Five-Year Plan (2026-30)

The ECB blog is here: www.ecb.europa.eu/press/econom...

...oversupply. Cleaning up the real estate sector could return a semblance of consumer confidence for Chinese households. But it's not enough.

The key lever to boost demand and consumption is fiscal policy and buidling a social welfare state in an environment where households anxiously save.

7/7

One priority for the G7 is ensuring the IMF gets its policy advice to China right.

The IMF is too focused on monetary easing as the way to stop China's deflation. Lower rates rates may accelerate industrial lending, which may prove more rate sensitive than consumption, and exacerbate...

6/

The best way to stop the second China shock? China raises domestic demand, and especially consumption.

But China shows little to no willingness to do so. So the EU and other trade partners have little choice but to respond with second-best tools like trade barriers and industrial policies.

5/

The ECB warning here is key: "In Q4 the average monthly value of domestic sales was around 4x higher than total exports and over 28x larger than exports to the US. This suggests the pool of goods that could be redirected to the EU is much broader than trade data alone would suggest."

4/

"...as the drag from low levels of domestic household consumption is no longer masked by a turbo-charged property sector."

Still, the ECB is 100% right to say diversion from US tariffs isn't the core issue - China's explosive exports predate the second Trump administration (see nice chart).

3/

As CER wrote in Jan "Industrial policies on their own would only generate successes in some sectors – they would not typically generate a big rise in China’s overall trade surplus. The second rise in China’s trade surpluses also reflects renewed surging internal imbalances in China’s economy.."

2/

But after an Italian and a French head of the #ECB, the argument for a northern one is strong. Which is why Klaas #Knot is probably the best candidate, he knows his stuff, is outspoken, very experienced and has the political nous to steer the ECB through potentially quite turbulent times.