China Morning Missive

This, right here, is what occurs when a government makes the decision to starve an economy of leverage. Bitter medicine, and why it is the Xi Jinping has been telling his people for two years that it is necessary to “eat bitterness”. Hard choices were needed, and hard choices were made.

Watching the western business media lose its mind during this period has shown me that the G7 nations aren’t anywhere close to taking the same measures. Largess from the governments will continue. Fiscal dominance appears to be the only way out.

What remains to be seen is whether this Chinese policy of aggressive, systemwide deleveraging will, ultimately, prove successful. There is pain throughout. Small and medium sized businesses are closing at an accelerated rate while household sentiment remains at very low levels. Will China be able to power through and get to the other side? That is the question. In fact, that is the only question that matters. 2025 could be highly consequential.