Hey friends! Every crisis has a timeline.
And when you reconstruct China’s economic trajectory from 2020 to 2025, one thing becomes clear:
This was not a downturn. This was controlled demolition.
Today, I want to walk you through how China’s economy collapsed step by step — not because of bad luck, but because of five specific, fatal decisions that turned a once-vibrant economy into what insiders now openly call:
“A zombie system.”
This isn’t a natural disaster.
It’s a man-made crisis.
Let’s break down the five turning points that brought us here.
THE REAL ESTATE SELF-DESTRUCTION
NARRATOR (V.O.)
Remember 2020?
“Houses are for living, not for speculation.”
Sounds righteous — until Beijing massively underestimated how much the entire system depended on land finance.
CUT TO — 2025 REALITY CHECK
- Tier-1 cities (Beijing, Shanghai, Guangzhou, Shenzhen): down 20–30% from 2021 peaks
- Tier-3 and tier-4 cities: down 50%+ — total wipeout
- 70% of household wealth evaporated
People say: “I’m not selling my home, so who cares?”
But wealth isn’t about selling — it’s about confidence.
When your net worth collapses, you stop spending. You clutch your wallet. You shut down.
And it gets worse.
Local governments — the backbone of China’s infrastructure, pensions, transit — relied almost entirely on land sales.
Now their revenue collapsed.
RESULTING CRISIS MONTAGE:
- Buses Cut
- Hospitals Can’t Buy Medicine
- Staff Salaries Delayed
Then November 2025 exposed the bomb:
Even after a “10 trillion yuan rescue,” local financing vehicles still had 24 trillion yuan in hidden debt.
And then Beijing gave the order:
“No bailouts.”
Liquidity died overnight.
Confidence died with it.
Some insiders whisper that crushing real estate wasn’t economic — it was political.
If true, it means:
Beijing was willing to amputate the economy to consolidate power.
“COMMON PROSPERITY” AND THE CRACKDOWN ON PRIVATE BUSINESS
NARRATOR (V.O.)
China’s real growth never came from SOEs.
It came from:
- Private Entrepreneurs
- Platform Companies
- Tech Giants
- Service Industries
Beijing crushed them — one by one.
FALLOUT:
- FDI Down 15% YoY
- $2 Trillion Wiped From Tech Valuations
- Entrepreneurs Disappearing or Fleeing
- Foreign Investors Daying:
“China is uninvestable.”
And the biggest victims?
Young people.
Official youth unemployment is 18.9%, but in reality: 30%–46%.
The sectors that once hired millions — tech, tutoring, services — were smashed.
The new “strategy”?
Stuff them into factories. 1,000 applicants for one job.
This isn’t policy.
This is desperation.
Beijing’s obsession with shifting from “virtual” to “real” ignores one truth:
An economy is an ecosystem.
Kill platforms → kill demand → kill adoption → kill innovation.
This second blow severed China’s job-creation engine.
WOLF WARRIOR DIPLOMACY & THE TECH FANTASY
NARRATOR (V.O.)
China went into geopolitical beast mode — years before it had the capability to back it up.
Older folks watching state TV feel proud.
But pride doesn’t pay the bills.
INSIDER REALITY:
- 7nm & 5nm Chip yields: Terrible
- Production costs: 4–5× Higher than TSMC/Samsung
- Government (taxpayers) Footing the Bill
EXTERNAL CONSEQUENCES:
- Mexico & Vietnam Overtake China as America’s top Import Partners
- Export Factories Shutting Down
- High-end exports banned or tariffed
- Solar, EVs, Batteries Blocked Abroad
China isolated itself exactly when it needed allies.
This third blow severed global demand.
LETTING DEFLATION TAKE OVER
NARRATOR (V.O.)
With exports dying and private business crushed, the rational solution would’ve been:
- Boost Domestic Demand
- Give People Money
- Strengthen Social Safety Nets
Japan did it.
The U.S. did it.
Europe did it.
Beijing refused — insisting handouts create “lazy citizens.”
The price? Deflation.
2025 REALITY:
- CPI ~ 0% or Negative
- PPI Negative 30+ months
- Record Household Savings (from fear)
Why aren’t people spending?
- Homes Collapsed in Value
- Jobs Feel Unsafe
- Prices Expected to Fall Further
Deflation froze the system.
Factories drop prices → lose money → cut workers → workers save → demand dies → prices fall → repeat.
A doom loop.
THE BLACKOUT: TOTAL POWER CONCENTRATION
NARRATOR (V.O.)
This was the most fatal mistake — the foundation of everything else.
After the 20th Party Congress, the technocrats were purged.
Replaced by:
- Loyalists
- Ideologues
- Yes-men
RESULT
No one tells the truth.
Everyone reports good news.
The top leader lives in a sealed bubble.
OUTCOMES:
- Faction Warfare
- Policy Paralysis
- Bureaucracy Lying flat
- Security Paranoia
- Reforms Killed Instantly
- Trust between Military and Leadership Collapsing
When the men with guns stop trusting the man giving orders, you no longer have “stability.”
You have a minefield.
THE SOCIAL CONTRACT HAS BROKEN
Young people have stopped:
- Dating
- Marrying
- Buying homes
- Having kids
Not out of laziness — but hopelessness.
Immigration explodes:
Families fleeing to the U.S., Japan, Singapore.
Some walking across the jungles of South America.
When the middle class flees, the system is collapsing.
WHY 2026 COULD BE WORSE
It’s not a cycle — it’s structural:
- Population Collapse
- Exhausted Finances
- Negative Wealth Effect
- Shrinking Global Demand
- Overcapacity
- Declining Productivity
- Weak Welfare Funds
Local governments are broke.
So they invented a new model:
“Fine economy + retroactive audit economy.”
Short-term revenue.
Long-term destruction of trust.
THE BIG PICTURE — FIVE BLOWS, ONE DESTINY
- Three Red Lines → destroyed household wealth
- Common Prosperity → destroyed private business
- Wolf Warrior Diplomacy → destroyed external demand
- Ignoring Deflation → destroyed consumer confidence
- Total Power Concentration → destroyed self-correction
These aren’t separate mistakes.
They feed each other.
They lock the country in a downward spiral.
Insiders call this era:
“Historical Garbage Time.”
Reforms impossible.
Feedback impossible.
Recovery impossible.
Economic winter is here.
And hope is not a strategy.
CLOSING SCENE — NARRATOR
When you understand the five fatal decisions that led us here, you stop making wishful bets.
You stop falling for slogans.
You stop walking blind.
History moves in cycles.
Some eras sprint forward.
Some sink into the mud.
Right now, China is sinking into an economic freefall.
Fade out.
— Written by Ken Cao
