Crypto News: Economics Daily: The big China flip

I'm Shawn Donnan, a senior writer for economics in Washington. Today I'm looking at the strategic implications of China's slowdown. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X, the social media platform formerly known as Twitter, via @economics. And if you aren't yet signed up to receive this newsletter, you can do so here.

China cut the amount of foreign currency deposits banks must hold as reserves in an effort to prop up the under-pressure yuan.
That step followed more moves to aid the ailing property sector.
Coming Up: Economists are projecting a rise in US payrolls of 170,000 for August, which would mark the smallest gain since 2020.

China's slowdown has been one of summer's dominant economic stories.

But if the rise and potential fall of property developers like Country Garden Holdings and the response of Xi Jinping and his cadres to a potential multiheaded crisis make for compelling reading, there's an equally fascinating tale unfolding in how the faltering of an $18 trillion economy is being interpreted outside of China.

That's the story colleagues and I dive into in today's Bloomberg Big Take, for which we've been speaking with officials and analysts in Washington and other G-7 capitals. The common theme: Policymakers are convinced that what is unfolding in China isn't just symptomatic of bigger long-term problems like its aging and declining population but also what ought to be a shift in strategic thinking.

No one was quite as punchy as US President Joe Biden, who at a recent campaign event declared China a "ticking time bomb." But it's clear that remarkably quickly there's a new narrative emerging on China.

No longer are economic policymakers planning for China's inevitable rise. The conversation now is venturing increasingly into whether the Chinese slowdown marks a sign its power is peaking prematurely. And that the hard work now should be to prepare for a declining rather than a rising China and all its consequences.

"The conventional wisdom seems to be flipping from a concern with the unstoppable rise of Chinese power to a worry about the irrevocable decline of China's economy and population," is how Richard Fontaine, chief executive officer of the Center for a New American Security in Washington, puts it.

You can certainly debate the validity of that shifting consensus and plenty of people (including inside G-7 governments) will point out that China has confounded dire predictions many times before. But the change in thinking that Fontaine and others identify is important.

There are already signs it is influencing policy in western capitals. And if the change lasts, this could be the summer that an economic narrative that for decades has guided the flow of capital and government assumptions and policies around the world flips on its head. That's certainly a potential moment worth recording.

Related Reading:

Manufacturing activity in Asia's major export powerhouses slumped further in August as weak demand persisted.
Japan's businesses cut spending for the first time in five quarters in a sign of concerns over the global growth outlook.
The downturn gripping the UK housing market steepened in August.
Chinese President Xi Jinping is planning to skip next week's Group of 20 summit in New Delhi.
Italy's factories have started to cut their workforce as the country's manufacturing recession shows no sign of a let-up.

It's increasingly clear that opioid use disorder (OUD) has been a significant factor in depressing US labor-force participation rates, according to Mary Burke, a senior economist at the Federal Reserve Bank of Boston.

As much as around 20% of the long-term drop of men working or looking for work could be explained by OUD, according to studies cited by Burke in a recent podcast on the topic. The good news is that findings from data analyzed by Burke and colleague Riley Sullivan suggest that certain treatments of OUD are helpful in boosting people's job-finding rates.

That's encouraging considering not just the job-market effects of opioid addiction, but a range of costs that it also imposes — including healthcare and law enforcement, along with reduced tax revenue because of fewer people working.