中共經濟為何像同時轉七個瓶盖:利率不敢降、匯率不敢貶、經濟不能不托,三件事互相打架成死結。本期拆穿七個瓶盖全拴在房地產這一個錨上,以及那條最反直覺的鐵律,放水根本救不了已經咬住自己尾巴的級聯崩塌 – Transcript

00:00Official narratives are often unwilling to acknowledge reality. Half the year has passed, so what have all the CCP's economic policies over these past six months been like? It's just like that circus performer juggling balls— you've all seen that, right? The CCP’s current state is exactly like that performer. They are frantically spinning several bottle caps at once.

00:15As long as those caps keep spinning, things look fine on the table; everything seems perfectly fine. But it’s a simple issue: a person only has two hands. The more caps you try to spin, eventually you’re going to get tired, right? As soon as one cap falls, the whole rhythm is ruined. And what happens? It hits the next one, which hits the next, a chain reaction, and the whole table collapses in an instant . In fact, it’s exactly like a row of dominoes. So, what is it that I want to share with you all today? I want to talk about how the CCP’s current macroeconomic policy and their situation are exactly like that

00:43bottle-cap-spinning game. Many people, upon seeing the RMB or the exchange rate, think, "Oh, this is just an exchange rate issue." But in truth, this is absolutely not just a simple exchange rate problem or a debt issue. The CCP has now completely chained its internal and external economies together, creating a very delicate and terrifying balance. This balance can indeed hold for a while, but it can’t last long because the cost of maintaining it is simply too high. So, how exactly is it dangerous? And what are these various bottle caps, exactly?

01:06To understand the CCP’s current system, we first have to look at the most superficial phenomenon: how much policy room does the CCP actually have left? The CCP’s policy space is currently constrained by three things, and these three factors mutually restrict each other, leading the CCP into a "three-don't-dare" situation. What is the first "don't dare"?

01:21Regarding interest rates, they don't dare to make big cuts. Everyone, think about this: what does the current Chinese economic environment need most? Regardless of the sector, it desperately needs cheap money. The real estate supply chain has already collapsed, ordinary people are unwilling to borrow money to leverage up, private enterprises dare not invest , and local governments and their financing platforms don't even need mentioning. They are all burdened with piles of bad debt and are just waiting for lower interest rates to keep them on life support. So, looking purely at the current environment, whether it's cutting interest rates or lowering reserve requirements, keeping rates pushed downward is an absolute necessity. But what is the problem?

01:46Well, once you cut rates, you hit an external constraint, and that constraint is the exchange rate. Let’s look at the issue of the interest rate spread between China and the U.S. As of June 2026, the U.S. real bond yield. It's around 4.5%, while China's real bond yield has fallen back to near 1.7%, hitting a new low for the year. The Chinese central bank has started restricting banks from buying bonds, but what does this actually mean ? It means China's interest rates are a full 2.75 percentage points lower than the U.S. What does this indicate? It represents a rate inversion between an emerging market and a developed market.

02:13You don’t need to doubt it; whenever there is such an inversion, capital will definitely flow out because money naturally chases higher returns. That is the rule; that is the law. With interest rates inverted like this, capital naturally wants to flee toward the U.S. dollar. Furthermore, the current Federal Reserve is still run by a hawkish chair. The stance at the last Fed meeting was very, very clear—they are holding a hard line. The market now generally expects that in 2026, not only will the U.S. not cut rates, it might even hike them once more. Looking at this situation, with U.S. rates still trending upward while China's economic pressure continues to mount,

02:41is it possible for this interest rate gap to widen even further? It is highly likely, which will further increase the pressure for the yuan to flee. Therefore, China's central bank can only move forward in tiny steps, engaging in structural easing; there is no way to achieve the broad-based monetary easing the market hopes for.

02:55Moreover, their path for liquidity injection is very specific—using the three major policy banks to funnel funds directly to local governments. Where does the second "dare not" naturally lie? It naturally lies in the area of exchange rate control. Under the current circumstances, the optimal strategy would actually be for the yuan to depreciate slowly and in a controlled manner, which could relieve some internal economic pressure and slightly improve the profits of export companies. But what is the CCP really afraid of? It's not afraid of the currency hitting any specific level; what it fears is a shift in market expectations. Once people switch from the mindset that "the exchange rate is undergoing a normal adjustment" to " this is a trend of capital flight,"

03:24that is a situation the CCP, in its current weakened state, simply cannot handle. This triggers a chain reaction: exporters earn foreign exchange but refuse to convert it, importers rush to buy foreign currency in advance, and ordinary citizens max out their personal quotas to allocate assets into US dollars through various channels. Once such a one-sided expectation forms , exchange rate management shifts from a price adjustment issue to a gamble on volume, at which point the CCP's policies will suddenly spike. And what is the final "dare not"? It is that the CCP dare not stop propping up the economy, otherwise it will further devolve into a political and existential issue. But this brings us

03:52back to the first problem: you lack the tools for a floor, and the CCP dare not engage in large-scale liquidity injections, nor does further interest rate cutting do any good. Therefore, the CCP's money can only circulate idly within the financial system. So, have you noticed? These three "dare nots" are actually fighting against each other. Lowering interest rates suppresses yields, so to stabilize the exchange rate, one must hold back and avoid large-scale, indiscriminate stimulus, yet to stabilize the economy, one must release liquidity. So, what does this create? An unbreakable structural deadlock, so where does the CCP push all these costs? They push them to the administrative side.

04:20Because the CCP wants to achieve all three goals, they continue to shift all the costs onto the grassroots level through administrative means. Before 2018, China's macro-adjustments could rely on stepping on the gas pedal; why? Because real estate, local debt, and bank debt could form a powerful cycle. Once you stepped on it, the economy would likely pick up. But now, these channels themselves have become carriers of risk. It’s fine if you don't stimulate, but once you do, the situation only gets worse. So, the job the CCP can do now is no longer stepping on the gas, but what is it instead? It is carefully adjusting

04:47water pressure in several broken pipes, but this is a job the CCP cannot handle ; the result will inevitably be a mess, and the CCP's policy dilemmas go far beyond these three. The CCP is currently using its hands to press down on several lids at once, and each lid is holding back a build-up of pressure; individually, they might be manageable, but once they interact, it gets extremely interesting. Let's take a look at which bottle caps the CCP is pressing one by one; we can see these seven pressure sources, each actually connected to the others. The first cap is the RMB exchange rate; what exactly is it holding down underneath? It is the expectation of capital outflow. The

05:16second lid is still the same old thing: real estate. It suppresses the household balance sheet and the income side of GDP. You need to remember these two specifically, as they are the core of the entire system. The third lid is local government debt and LGFVs. It suppresses government credit and infrastructure investment. The fourth lid is the banking system. It can be said that banks are the final reservoir for all risks. The fifth lid is employment and income expectations.

05:36What does it suppress? It is the question of whether ordinary people dare to spend money and whether they dare to take on leverage. The sixth is capital controls. It suppresses the volume of capital flight and the question of whether new money dares to enter. The stricter your controls, the less likely new money is to enter, because, let alone profit or loss, even protecting the principal is a question.

05:51In such a situation, who would ever dare to come? The seventh lid is the current confidence issue in the CCP's stock market and capital markets. What is it linked to? It is the current wealth effect of residents and the narrative of CCP technological innovation. Look, the pressure from these seven lids—what does a healthy system look like? It doesn't require someone to stare at every valve. Right now, someone has to forcefully hold down every single lid, which precisely illustrates a problem: just how fragile this system has become. So the question arises: why is it such a difficult task to hold down these seven lids? Why does the CCP not dare to loosen them and let

06:20them liquidate? Actually, on the surface, these are seven separate issues, but in essence, it is the collateral cycle of China's growth model over the past 20-plus years. Once it enters the phase of contraction, frankly, it all comes down to one thing : real estate. What role did real estate play in the past? It was the common intersection for household wealth, local finance, bank collateral, LGFV financing, land finance, and the demand of the entire chain. Therefore, it was the anchor for everything. These things can be said to all be anchored by real estate. So you now understand that the problem the CCP faces is never a single-point issue, but an entire set of collateral devaluing simultaneously.

06:48Currently, the core of all CCP policies can actually be summarized in five words: the first is "drag"(to stabilize ), the second "drag"(to delay), followed by "control,""swap," and " suppress." Stabilize asset prices, extend debt maturities, control capital flows, swap debt structures, and suppress the spread of risk. However, all the methods used by the CCP are administrative, rather than market-based. Doing so comes at a cost, and that cost is enormous; it means the resilience of the entire system will become lower and lower. Here, I must point out a particularly counterintuitive rule: monetary easing does not equal credit expansion; they

07:16are actually two different things. If we look at the real economy from a financial perspective, what exactly is it? The driving structure of the real economy is the monetary engine. Many people think, if the economy is bad, shouldn't the central bank just print more money and inject more liquidity? It's not that simple. During a balance sheet recession, the assets in everyone's hands are shrinking, so what happens to your relative debt ratio? It will rise passively; this is very easy to understand. For example, if you have a house worth 1 million with a 500k loan, your debt ratio is 50%—total debt divided by total assets. But once asset prices fall, your total debt

07:44remains 500k, yet your house is now worth only 800k, so your debt ratio immediately jumps from 50%to 62.5%. Therefore, the deleveraging process involves a specific factor: asset prices. Because leverage ratio itself is a ratio—the ratio of total debt to total assets—the leverage ratio is also a relative indicator. At this point, even if the central bank provides funds to banks, banks may not be willing to lend. Even if they are willing, businesses and individuals may not be willing to borrow. Even if the cost of borrowing is kept very low, as long as asset prices continue to fall and orders remain insufficient, borrowing money is simply not

08:13cost-effective. At the same time, your leverage ratio passively rises, and it spirals downward; this is where the scissors gap between M2 and M1 comes from. The essence of this scissors gap is the sharp contraction of the real economy, which has shattered the collateral and various data for both the government and banks. Most of the CCP's M2 is just filling the balance sheets of these zombies. Just because you issue more money doesn't mean credit has expanded, because under current conditions, credit lacks an anchor for economic expansion. In the past, there was real estate. For example, what might the anchor for future U.S. dollar credit expansion become? It could become investments in semiconductors or energy infrastructure

08:42, because credit must enter the economy to complete its value sublimation; otherwise, money itself has no value. It only becomes valuable when it turns into computing power or electricity. So , what is the phenomenon everyone saw in the first half of this year? The stock of debt has already reached 400.45881 quadrillion, a year-on-year increase of 7.7%. It might not look like much, but what is rising the fastest? It is the government debt. Why is this happening? Isn't it simply because the CCP holds the power? They can rely on the central bank's power to print money to delay things, but for the common people and private enterprises, they don't have an infinite money-printing safety net, so they can only bear the brunt of liquidity contraction. So the truth of

09:10the matter is, it's not that there isn't enough money, but that borrowing it yields no return and creates no value. If asset prices continue to fall , we can only passively continue to deleverage, which is not the same thing as just printing money. Alright, here comes the most crucial part today, the one you should remember most: the chain reaction. I mentioned the problem of these seven lids earlier. The issue now is that if any one of them falls off, the pressure won't just stay put; it will spread along banks, local finance, capital flows, the RMB exchange rate, and asset prices. The relationship between these things is not linear but

09:39a network, making it extremely complex. Look at this network diagram. What is a linear relationship? It's like standing in a line, where one pushes the next. But what is a network relationship? It's where these seven nodes are all interconnected and feed into each other . What is the most ruthless part of a network system? It looks stable most of the time, but if any lid falls off, it will affect the entire network. Take the exchange rate as an example: if it collapses, how does it spread? Let's walk through it. First, price signals fail. At this point, once the RMB breaks a key threshold, the market will react instantly, and what will they

10:07conclude? They will conclude that the CCP can no longer defend the exchange rate. Once this thought emerges, everyone's behavior shifts immediately. For example, exporters who earn dollars will refuse to settle them, while importers scramble to buy foreign currency. Companies will either accelerate repaying foreign debt or simply keep their money offshore.

10:22Ordinary people will also rush to use their foreign exchange quotas to convert currency. Once the flight of capital accelerates, the CCP's policies will only tighten further, bank audits for currency purchases will become increasingly stringent, and offshore RMB liquidity will be drained to strike at those who are shorting. Even such major banks will be forced to enter the fray. But what then? The more you force it, the worse it will hurt, because it’s simple: foreign capital isn't stupid. They see the cost of exiting rising, so what do they do? They simply decide to add a higher risk premium to RMB assets. Once they see the exchange rate falling further, they find other

10:50ways to get out, leading to the final, hardest blow. This pressure bites back at the CCP's own policies. To stabilize the exchange rate, the central bank dares not cut interest rates, yet to stabilize the economy, they need to inject liquidity. So, going around in circles, the room for economic recovery is actually squeezed even tighter by their own actions. This is a closed loop. No matter where you start, it always circles back. You see, this is something that is simply self-defeating . The exchange rate is just one example , or should I say? This is only one contagion path for the exchange rate.

11:15There are also local government debts, banks, and capital controls—several contagion paths, each eventually circling back to corroborate the others . What’s most brutal? It’s when multiple factors resonate together. For instance, if expectations of depreciation rise, while property prices remain unstable, local debt spreads widen, banks tighten credit, and the stock market continues to fall, the risks no longer play out independently but rather confirm each other. The RMB is falling, which indicates a weak economy. A weak economy means property and local debt are more dangerous, which in turn inevitably increases bank risks. As soon as banks contract, credit cannot expand, which in turn continues to

11:43suppress the economy and the exchange rate. This is the complete picture of the snowball effect. Seeing this, you might ask: the CCP has so many tools in its hands, are they really completely useless? Let’s take a look, and it will be clear. In fact, every tool has two capabilities: one is the short-term ability to keep a lid on things to maintain stability, which I think they can still sustain for now; the other is the strategic capability to truly reduce pressure and repair the economy, which you can basically forget about, as that is already almost entirely depleted. Let’s go through this quickly: cutting interest rates is constrained by the exchange rate, as mentioned before. If it’s just lowering the reserve requirement ratio or reverse repos, it only solves

12:11interbank liquidity, not the demand for credit in the real economy. It’s just another game of pushing on a string. As for real estate policy, the toolbox is basically empty. Every trick has been tried: lowering down payments, easing purchase restrictions, and hyping things up—it’s all been done. Will the situation improve a little? I think it might improve somewhat. Are there people being fooled into it? I think there are. But in the long run, it cannot change the expectations regarding demographics, income, or the downward trend of housing prices. In the past, real estate was the absolute engine of credit creation for the Chinese economy. Now, even the CCP itself has given up; you can see it in their rhetoric—from "seeking progress while maintaining stability" to what?