China's banks are trapped in a "zombification" process. To avoid recognizing massive bad loans, they must keep lending to insolvent borrowers. This prevents necessary recapitalization and traps capital, making a true economic recovery impossible.
Beijing's focus on AI, EVs, and batteries is primarily a national security strategy. Growth in these sectors is six times smaller than the decline in traditional industries like property, meaning they cannot offset the broader economic collapse.
The idea of China's economy inevitably surpassing the U.S. is no longer plausible. China peaked at 18.5% of global GDP in 2021 and has since declined. The systemic economic competition with the U.S. is "basically over."
With its domestic, investment-led growth model broken, China has pivoted to an export-heavy strategy. This significant shift creates new vulnerabilities as it must fight for a shrinking pie of global demand amid rising protectionism.
China reports 5% real GDP growth while experiencing persistent deflation. This is historically unprecedented for an investment-led economy, with the only possible parallel being the 19th-century U.S. The inconsistency suggests official growth numbers are not credible.
By using its most powerful trade weapon—control over rare earths—early in its conflict, China incentivized the world to develop alternative supplies. This move provides short-term gains but likely diminishes China's long-term strategic leverage.
Due to budget cuts at the Bureau of Labor Statistics (BLS), roughly 20% of all prices in the CPI are now imputed, up from just 2-3% a year ago. This increases the margin of error and reduces confidence in official inflation statistics.
Despite US tariffs, China’s trade surplus reached a record high. This is because China diversified exports to emerging markets, utilized transshipment through other countries, and key allies have not joined the US in a broad trade war.
An expert from Rhodium Group assesses the probability of a physical military incursion onto Taiwan in the next year as "virtually zero percent." Such an action would represent a complete failure of China's policy of achieving its goals without costly force.
Independent research firm Rhodium Group argues China's official GDP data is unrealistically stable and overstates growth. By analyzing expenditure-side components, they estimate recent growth has averaged closer to 2-3%, reflecting the severe property sector collapse.