China’s Next Step: “Helicopter Money” Or “Keynes Is Dead”

Depending on whom you ask, China’s economy is either imploding or swallowing the world. The Chinese are masterminds of espionage or bloated central planners creating empty skyscrapers. So which is it?

Last night, to get to the root of the dispute, we gathered two men who have been studying and living in China for decades:

Professor Michael Pettis, who sees Chinese economic contractions on the horizon, renewed rounds of fiscal stimulus by Beijing, and a dominant U.S. hand in the trade war.

Analyst Peter Alexander, who sees continued Chinese global trade dominance and fiscal austerity domestically by Beijing.

Below were the key moments, moderated by the greatMichael Green.

Who needs whom more?

China makes all our stuff. In theory, the U.S. could be flung into poverty in a matter of weeks if the flow of goods were cut off. On the other hand… we are Beijing’s best customer. So is it the case — as Green puts it — that “the customer is always right”?

Pettis and Alexander fall on opposite sides of the coin.

Alexander: “The United States manufactures nothing and China manufactures everything… it is very evident that the majority of the leverage resides with the Chinese.”

Pettis: “I think that’s a misreading of previous trade conflicts in history.”

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— ZeroHedge Debates (@zerohedgeDebate) April 16, 2025

“Too much success”:

From one of the most underinvested economies pre-1980’s to “the fastest growth in investment the world has ever seen”, China has paradoxically run into a problem, Pettis argues:

“China has to bring investment levels down, but cannot bring investment levels down as long as it has excessively high GDP growth targets.”

“Because it cannot bring investment levels down and it cannot bring consumption levels up quickly enough, it’s forced to rely on a growing trade surplus.”

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— ZeroHedge Debates (@zerohedgeDebate) April 16, 2025

Beijing pivoting: Bernanke or Volcker?

Both Pettis and Alexander agreed that the Chinese government is pivoting but differ drastically on the direction of the pivot. Alexander argues that “China is the only large economy globally that learned the lessons of 2008 and 2009” and that no stimulus bazooka will be coming.

Alexander: “Keynes is dead in China.”

Pettis on the other hand says the matter is not even up for debate among Chinese economists. The government is actively looking for ways to goose domestic consumption:

“They’re looking at alternative ways. So various types of fiscal support, often called helicopter money… Last month, there was pressure on banks to significantly expand their consumer loan portfolios. These are all ways of temporarily boosting consumption.” 

“But it’s pretty widely recognized in Beijing that China must boost consumption.”

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— ZeroHedge Debates (@zerohedgeDebate) April 16, 2025

Watch the full debate which lasted over an hour here. Available exclusively to ZeroHedge premium and professional subscribers.