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Michael Pettis: USSR maximized output under soft budget constraints at expense of value

Michael Pettis: USSR maximized output under soft budget constraints at expense of value
USSR output versus economic value

Michael Pettis, economist, professor of finance, nonresident senior fellow, author, macroeconomic analyst at Peking University; Carnegie Endowment for International Peace, highlights economist Izabella Kaminska's observation that economic systems, such as the former USSR, often prioritized maximizing production when operating under soft budget constraints.

Pettis notes this drive to maximize output did not necessarily translate into economic value-creation, underscoring a critical distinction in economic planning.

Pettis has previously highlighted a consensus among economic policy advisors on China's need to rebalance its economy. He has also flagged concerns about hidden bad debt in China's banking sector. His recent comments follow earlier analysis on structural and financial challenges in the Chinese economy.

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