Eurodollar University China Has Fallen: Here's What It Means for the World
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Aug 25, 2025 China is experiencing a severe economic downturn, with sharp drops in bank lending and retail sales reminiscent of past crises. The government's efforts to stimulate the economy have backfired, exacerbating issues in the banking and real estate sectors. Despite these alarming trends, Chinese stocks are unexpectedly soaring, highlighting a bizarre disconnect between market sentiment and economic reality. The podcast dives deep into these contradictions, questioning the effectiveness of Keynesian economics in addressing China's unique challenges.
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Sudden Summer Downshift
- China experienced an abrupt worsening of its economy in summer 2025 with sharp drops in lending and investment.
- This shift resembles the lead-up to 2015's crash and signals broader global ripple effects.
Bazooka Didn't Fix Growth
- Massive fiscal stimulus ('the bazooka') failed to revive China's economy or banking sector as intended.
- Beijing's heavy bond issuance pushed problems forward but did not solve underlying demand and credit issues.
Demand-Driven Deflation
- Falling industrial demand and overcapacity in Chinese industry drive deflationary pressures, not rising supply.
- Energy-sector weakness (Sinopec results) exemplifies demand-driven contraction across sectors.