Hidden Forces China Shock 2.0: State Capitalism at the Frontier | Dinny McMahon
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Dec 1, 2025 
Dinny McMahon, a seasoned China analyst and author of China's Great Wall of Debt, explores the challenges and changes in China's economy. He identifies a pivotal moment for China as it debates a shift from investment-driven growth to increased household consumption by 2035. McMahon discusses a transformative 'China Shock 2.0', focusing on advanced manufacturing and innovation in tech sectors like electric vehicles and semiconductors. He delves into how trade barriers affect China's export strategy and the implications for Western economies.
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Old Growth Model Has Expired
- China's old property-driven growth model peaked around 2001 and is now exhausted due to shrinking demand and social changes.
- Demographic decline and the middle-income trap force Beijing to redesign the economy for “high quality” growth.
Why 2035 Matters To Beijing
- 2035 is a policy horizon Beijing uses to project economic goals and measure reforms' convergence.
- Xi set a target to double GDP per capita between 2020 and 2035, making 2035 a strategic planning milestone.
China's Capacity To Pivot Unexpectedly
- Western observers often assume China’s systemic problems must end badly, but Beijing can pivot quickly using levers others lack.
- China enforces policy spirit over letter via political campaigns, surprising external forecasts.
