A new WSJ report exposes the dragon's glaring fracture. The country is racing to catch up with the US in chips and AI, but is funding this by draining resources from the population and creating a trillion-dollar debt.

It's not a question of imminent collapse, it's a choice of priorities: "We will have the best technology, whatever the cost to the people."

See some bizarre stories from the most complex country in the world!

2️⃣ The "Cyberpunk" Scenario (Cutting-Edge Technology vs. Stagnant Life)

China is currently experiencing an economic dystopia:

• At the top: the government has infinite resources to launch the world's most modern aircraft carrier and AIs (DeepSeek) that rival Silicon Valley.

• At the bottom: the middle class sees its main savings (real estate) turn to dust.

The State channels all wealth into the "industry of the future," leaving the present (consumption and services) adrift.

3️⃣ The Black Hole: Deflation

While the world struggles with inflation, China has fallen into the opposite: deflation.

Prices have been falling for more than 37 consecutive months.

Factories are charging less and less because there is oversupply. The reason?

🏠 Real Estate: Prices have fallen 17% since the pandemic. As 70% of Chinese families' assets are in this sector, the "wealth effect" has evaporated.

The Chinese feel poorer and tighten their purse strings, hindering the circulation of money in retail.

4️⃣ The Mountain of Waste (The Case of EVs)

Beijing's order is political, not economic.

The government mandated leadership in the electric car sector, generating a flood of blind capital:

🚗 The Fact: In 2023, there were 129 EV brands in China.

📉 The Reality: The consulting firm AlixPartners projects that only 15 will be viable by 2030.

The rest is capital burned in suicidal price wars, financed by public debt.

5️⃣ The "EV Graveyards" (The Subsidy Fraud)

The market obeyed the order in the worst way: creating phantom supply.

Satellite images revealed gigantic fields with thousands of brand-new EVs abandoned and rotting.

Why? To defraud the subsidy.

Car manufacturers produced cars, "sold" them to shell companies, pocketed the government money, and left the car in the bush.

Of the ~500 brands that emerged in 2019, most have already disappeared.

6️⃣ "Zombie Companies" (The NIO Case)

The WSJ highlights the EV manufacturer NIO as the symbol of this model.

Between 2020 and 2024, NIO had losses of US$10 billion. In a normal market, it would have gone bankrupt. In China, state-owned companies injected another US$1 billion to save the operation.

The government prefers to artificially keep loss-making companies alive at the expense of the population rather than admit market consolidation, generating global excess capacity.

7️⃣ The Human Cost (The Mianchi Case)

The most didactic example of distortion: Mianchi, a rural county, decided to act as a state-owned "Venture Capital":

• They increased spending on Tech by 50% to buy stakes in chip factories and create robotics parks.
• But the city's revenue fell by 10%.

As a consequence, the money ran out.

The local government defaulted on the salaries of teachers and garbage collectors to continue funding the tech startups.

8️⃣ The "Big Fund" (Chips) Corruption

Recent success in chips came despite corruption.

The "Big Fund" (state semiconductor fund) received US$50 billion to invest.

The result? In 2022, the government arrested the head of the fund and several executives.

They used the money to inflate the stock prices of friends and invest in shell companies, not in R&D.

Billions evaporated before the government cleaned house and focused on SMIC, the country's largest chip manufacturer.

9️⃣ The Employment Dilemma (Tech doesn't employ the masses)

The government focuses on "High-Quality Productive Forces," but these sectors generate a social problem:

• SMIC (Chips): ~20,000 employees.

• UBTech (Robots): ~2,000 employees.

Meanwhile, in addition to the impaired income factor (as mentioned in tweet 3), 1 in 6 young people in cities are unemployed. Robot factories do not generate jobs for millions of recent graduates.

🔟 Solar Panels: The Toxic Excess

China currently produces twice as many solar panels as the entire world can install.

This has created such a brutal price war that leading companies in the sector (like Longi) have seen their profits plummet.

They built factories to meet a demand that doesn't exist, just to meet local GDP targets and maintain artificial jobs.

1️⃣1️⃣ Echoes of the Past (Mao vs. Xi)

The article draws a historical parallel.

In the 1950s, Mao Zedong ordered the country to obsessively focus on steel production, neglecting agriculture.

The result was famine, with much useless steel production (even today).

Now, Xi Jinping obsessively focuses on chips and AI, neglecting household consumption.

Resources are greater today, but the logic of "political will over economic efficiency" remains the same.

1️⃣2️⃣ The Other Side: The Price of Sovereignty

Despite inefficiency and waste, China is closing the gap with the US. By throwing trillions at the problem, they are forcing evolution through force.

If China reaches the Moon in 2030 (as planned), masters AI, and has the only space station in orbit, all this social and financial cost will guarantee complete sovereignty for the second half of the 21st century.

It's a very long-term gamble.

1️⃣3️⃣ The Final Logic: Security > Economy

Why persist in error?

Because Xi's priority is not GDP, it's National Security.

China accepts doubling its debt (which has reached US$23 trillion) and having internal inefficiency, as long as it guarantees that the US cannot "shut down" its economy with sanctions.

It's the price of insurance against the West.

China is exporting its crisis: lacking domestic consumption, it floods the world with cheap products (deflationary exports), affecting global industries and commodities.