From ‘Growth Country’ to ‘Debt Country’: GDP Below 5% While Military Spending Surges

Hello everyone, welcome to today's show. I'm Li Muying. These past few days, the big show in Zhongnanhai has started again. On March 5th, the 14th National People's Congress fourth session opened in Beijing. State Council Premier Li Qiang went on stage and gave his third government work report since he took the job. As soon as this report came out, many sharp watchers smelled something unusual. Li Qiang in the report openly admitted that China's economy faces big problems like not enough demand inside the country, real estate in a slump, and high local debts. The most eye-catching part is the GDP growth goal lowered to 4.5% to 5%. You all need to know, this number is not simple. It's not only lower than the 5% bottom line people got used to in the past three years, but it's the lowest goal since 1991, which is 35 years ago. What does this mean? It means the Chinese Communist Party's official growth machine has totally stopped working. They have to admit out loud, the time when they could get double-digit growth just by borrowing money and building stuff is gone forever, like an old story. Today, let's look closely at the words in this report and break it down. How did China go from a proud, growth country full of energy to a debt empire that barely hangs on by borrowing more? And in this big change, how are the local governments and regular people caught up in this machine that can't slow down, getting worn out badly? Li Qiang said in the report that 2025 is an unusual year. It really is unusual, because China has been stuck in deflation for the fourth year in a row. Last year's retail sales grew only a sad 3.6%. Factory prices kept dropping, and fixed asset investment saw a rare drop in decades, down 3.8%. And the biggest drag here is real estate. Last year's numbers show it clear. Real estate development investment fell 17.2%, new building starts dropped 20.4%, and sales money shrank more than 12%. Do you remember the three red lines in 2021? That was Zhongnanhai's own noose around real estate's neck. The excuse was to cut leverage, but they pushed too hard and caused a debt crisis and unfinished building mess across the whole industry. In these years, house prices have fallen about 40% from their highs, and in many small cities, they've been cut in half. But the most ironic part is, Li Qiang in the report says to work hard to steady the real estate market, and even encourages local governments to buy empty homes to use as cheap housing. This sounds like saving the market, but deep down, it's a sneaky plan. The government's help for private real estate companies is super slow, almost like they're on purpose squeezing out their last drop of blood. This is basically a full state-advances-private-retreats scheme, using the crisis to wipe out private companies so state-owned ones can take over cheap and control land and housing completely. When private business loses its last safe spot, when middle-class people's money turns to nothing in those unfinished buildings, steel and concrete, the whole society spirit is gone. What's even scarier is the money logic behind this report. For a long time, Beijing has kept deficit rate no more than 3% as a line they can't cross to show the world China's finances are solid. But these past two years, that line has been stepped on hard. For 2025, the deficit rate is raised to 4%. And for 2026, Li Qiang says the deficit size is 5.89 trillion yuan, a new record high. But that's just the tip of the iceberg. Li Qiang also says to issue 1.3 trillion yuan in super long special national bonds, plus 4.4 trillion in local special bonds, and even extra 300 billion special bonds to add blood to Let's add it up. This year, the Chinese government plans to borrow new debt of almost 11.89 trillion yuan. Nearly 12 trillion. What does this mean? It's a crazy thing rarely seen in human finance history. This is classic debt addiction. When real estate, that cash machine, stops working, when population bonus turns to population burden, when foreign and local money leaves and taxes dry up, the Chinese Communist Party's huge machine can only keep running by printing money like mad and borrowing like crazy. It's like a sick person who used to live by eating food, but now has no food and has to keep getting strong shots to keep a fake heartbeat. To hide risks, they need growth. For growth, they need debt. And to pay back debt, they have to borrow even more. What's worse is local debt. Li Qiang in the report calls fixing hidden debt an iron rule. But really, because local governments are so poor, they can't even open the pot. For the past 20 years, local officials used land sales plus financing platforms to build like crazy, making big empty roads, empty tech parks, and things like bridges, airports, and the empty Xionganyu area. Now land won't sell, bills are due. Estimates say nationwide hidden debt is tens of trillions. Who pays in the end? Li Qiang's plan is, make special national bonds normal, meaning the central government borrows to fill local holes. In simple words, this is moving risks around, taking local bad sores, and putting them in the nation's bones. It's slow suicide, because when the nation's credit is used up by debt, that huge credit bubble will burst in a second. In Li Qiang's report, there's also a super weird contrast, like magic but real. On one side, Li Qiang tells the National People's Congress reps to live tight days, cut normal spending hard, even suggest schools have spring and fall breaks to boost spending and make paid time off at different times. What kind of silly ruling logic is this? People have no money to spend because of no jobs, pay cuts, and no hope for the future. Giving a few days off, does money fall from the sky? This is treating people like toys you can play with anyway. But on the other side, look at the defense budget. When the growth goal drops below 5% for the first time in history, China's defense budget still grows 7%, total 1.9 trillion yuan. What signal is this? It means in Zhongnanhai's power balance, the regime's safety feeling always comes before people's happy feeling. For the past 30 years, China's military spending grew faster than GDP, and the base is already huge. Now the growth is a bit lower, not because they don't want more, but because they really can't find more money. But in this near-empty finance situation, still throwing money at weapons shows deep ruling worry. To grow demand inside, first people need money. But now in China, the middle class is going through a group return to poor. Why return to poor? Because the backbone of the middle class, private business and foreign companies, is being destroyed by the Chinese Communist Party's own rules. Foreign money leaves in big waves. Factories move to Vietnam, India. Private companies can't get up. Bosses think about how to run out. Stats show China's investment is about 20 points higher than world average as share of GDP, but people spending is nearly 20 points lower. This is a super weird setup. Government invests like mad in bills that don't pay back, while regular folks hold tight to wallets and won't spend. Now in China, there's a super bitter word, unfinished kids. Kids study hard from young and tough competition. Parents empty six wallets for school district homes, but after college, they jobless. Either deliver food or stay home as full-time kids. Chinese families have 70 percent of assets in houses. If prices fall 30 percent, many face selling house not enough to pay loan. Middle class to poor is everywhere. This is not just scary talk. There's a Shanghai software engineer, 300,000 yuan a year, bought house then wife quit for baby, but he got laid off. House from 4 million fell to 2 million, loan still 2.8 million. In the end, house auctioned for 1.5 million, he owes bank 1.3 million. Couple both on credit blacklist. I also saw a story of a programmer in Shenzhen big company, 35 years old, millions in house loan. Last year, laid off by company, unemployed. Didn't dare tell wife and kids. Every morning, pretend to go work. Really go to library, sit all day. Lunch only cheapest box meal. When this becomes common in China, you still hope a little boost spending special fund can save the economy. This is not just economic rule problem, it's the system setup problem. As long as that one ruler power setup doesn't change, as long as this debt pull thinking doesn't change, no matter how much money thrown in, it's like meat buns to dogs, gone forever. If we compare this government work report to a doctor's note, then China this giant has bad debt addiction sickness. Past China economy miracle relied on a simple formula, builds plus real estate plus loan growth plus GDP growth. This formula pushed fast growth, but now it hits three walls you can't pass. Population collapse, real estate break, investment zero return. China's money system now is like a machine that can't slow down. When economy slows, it needs more debt to keep going. When debt grows, needs more growth to hide risks. Beijing now relies on national credit, money controls and high savings to stay stable. But long-term, an economy held up by debt has to face the hardest question. When new debt can't bring even a little more growth, how does this machine fix itself? Maybe the real problem isn't if China will become a debt empire, but when an empire starts using debt to keep that bit of stable dignity, how long can it walk on that thin wire? Li Qiang lately says everyone should live tight days, and that's true. But why do days get tight? Who took the wealth that should be for the people? Who led a growth country to debt deep hole? Every Chinese feeling pay cuts, no jobs, stopped loans cold wave. Every home buyer looking at unfinished builds but still paying bank loans actually knows deep down. When a country's ruling logic changes from help people to keep power safe, when debt becomes the last straw to hold rule, this time's sad story is already set. What we see is not just numbers dropping, but the slow fall of a whole old time. Okay, thanks for watching today's show. If you think today's stuff is deep, welcome to subscribe, like and share. Staying awake in the dark is our only choice. See you next time.