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Another year has come and gone. Our researchers grappled with inflation, Russia’s invasion of Ukraine, climate change, and more. The world economy is recovering from pandemic shocks, but shifting geopolitical tensions are starting to rewire trade and investment relationships.
Here are the most read pieces we published in 2023. A list of pieces ranked by pageviews can be found at the bottom of this page.
Green energy
Chad P. Bown explored the Biden administration's response to European displeasure over the Inflation Reduction Act (IRA): a regulatory tweak that allowed a foreign-assembled electric vehicle to receive a tax credit provided the vehicle is leased, not purchased. The leasing decision weakens the incentive to foster US jobs and discourages reliance on China; Europe's fundamental concern remains over diverging US and EU approaches to tackling climate change, as the IRA disadvantages energy-intensive European industries like chemicals and steel.
India's lithium discovery could boost green energy but creates problems in the region
Cullen S. Hendrix wrote in February about India's discovery of lithium reserves, among the world's largest, in its most politically volatile region, Jammu and Kashmir. A lithium boom could generate employment opportunities and expanded road and rail infrastructure while boosting the Indian economy. But the risks of environmental costs from lithium mining are high and highly localized. Large infrastructure projects are often catalysts for conflict in areas where ethnic or religious minorities seek autonomy or self-determination.
US debt and interest rates
Secular stagnation is not over
In January, Olivier Blanchard argued that interest rates will return to low levels once central banks have tamed inflation; neither the pandemic nor recent inflation has reversed the structural factors that created the low demand, low investment environment known as "secular stagnation."
Watch his March debate with Lawrence H. Summers on the future of interest rates here.
Breaching the debt ceiling is not the same as a government shutdown. Its consequences could be dire.
During the US government debt ceiling showdown in the spring, Lucas Rengifo-Keller explained that a failure by Congress to raise the debt limit in time, causing a default on US debt obligations, would severely weaken trust in the federal government in global financial markets, raise borrowing costs, and damage the US economy. Find a graphic explainer here.
Updating his earlier projections, Olivier Blanchard in November noted that long-term interest rates have persisted, and he called on advanced economies to reduce primary deficits over time to zero with the goal of stabilizing debt ratios. Reducing primary deficits to zero cannot be done quickly in Europe or the United States, Blanchard said. A drastic, immediate consolidation would most likely be catastrophic, triggering a recession and provoking political protests. What must be avoided is debt explosion, which would occur if primary deficits do not go away.
China’s trade
Five years into the trade war, China continues its slow decoupling from US exports
In the most read piece published this year, in March, Chad P. Bown and Yilin Wang found that US exports to China, which cratered during President Donald Trump’s trade war of 2018–19, were continuing to suffer, with China shifting some purchases of foreign goods away from the United States. Even where US exports appeared to perform well—US farm sales to China in 2022 hit record highs—worrying signs have emerged. Much of the agriculture gains were not the result of increased shipments but simply higher prices and concerns over global food insecurity associated with the Russia-Ukraine war.
US imports from China are both decoupling and reaching new highs. Here's how.
This PIIE Chart from Chad P. Bown illustrates the above point: Neither the “decoupling” narrative nor the strong top-level import figures fully encapsulate the state of US-China trade. Trade in products still facing trade war tariffs remains depressed, while products never hit with tariffs show few signs of decoupling.
US-led effort to diversify Indo-Pacific supply chains away from China runs counter to trends
The Biden administration launched the Indo-Pacific Economic Framework for Prosperity (IPEF) in 2022 to improve US trade relations in the region, strengthen supply chains, and—not least—reduce its members' economic reliance on China. In September, Abigail Dahlman and Mary E. Lovely found that as of 2021, China was still the top source of manufactured goods for all IPEF countries except Brunei and the top export destination for manufactured goods for half of IPEF member countries.
China’s economy
How serious is China's economic slowdown?
Going into the fall of 2023, there was growing consensus that China’s economic slowdown portends a far more serious long-term problem, derived from flawed communist-party policymaking in response to COVID, with likely adverse consequences for the global economy. Nicholas R. Lardy wrote in August that those views are likely premature and, at least in part, perhaps simply wrong.
China’s state vs. private company tracker: Which sector dominates?
This semiannually updated PIIE Chart by Tianlei Huang and Nicolas Véron found that the share of China’s state sector among the country’s 100 largest listed companies continues to advance, rising to 61.0 percent in the first half of 2023. Companies that are majority-owned by the Chinese state accounted for nearly all of this increase. The share of the private sector in the first half of 2023 dropped below 40 percent for the first time since end-2019. The private-sector share was only 8 percent at end-2010 and had reached a peak of 55.4 percent in mid-2021.
PIIE’s top pieces of 2023 ranked by pageviews
- Five years into the trade war, China continues its slow decoupling from US exports
- How serious is China's economic slowdown?
- Secular stagnation is not over
- India's lithium discovery could boost green energy but creates problems in the region
- Breaching the debt ceiling is not the same as a government shutdown. Its consequences could be dire.
- If markets are right about long real rates, public debt ratios will increase for some time. We must make sure that they do not explode.
- US imports from China are both decoupling and reaching new highs. Here's how.
- China’s state vs. private company tracker: Which sector dominates?
- US-led effort to diversify Indo-Pacific supply chains away from China runs counter to trends
- Industrial policy for electric vehicle supply chains and the US-EU fight over the Inflation Reduction Act
Data Disclosure
This publication does not include a replication package.
