China's economy struggles with weak domestic demand

Michael Pettis, an economist and finance professor, discusses important issues facing China's economy. He has lived in China for over 20 years and taught at top universities. Before that, he worked on Wall Street. In a recent interview, Pettis highlights the gap between China’s high manufacturing output and weak consumer spending. He notes that while China is a leader in manufacturing, domestic demand, especially from households, remains low. China’s government set a modest economic growth target of around 5 percent. Pettis believes the main problem is weak domestic demand, which is crucial for any economy. He explains that China's growth has relied heavily on investments rather than consumer spending. Even if investments were reduced, China would still rank among the highest in the world for investment levels. Pettis argues that the U.S. dollar’s dominance in global trade is not sustainable. He warns that this situation poses significant risks for the global economy, especially amid tensions between the U.S. and China.