The Fundamental Differences in Core Contradictions

Today is July 30, 2025. This episode wasn’t originally part of the update schedule, but since I’ve received so many similar questions recently, I’ve decided to dedicate this episode to analyzing current hot topics. This episode focuses on three key areas: the Chinese economy, commodities, and the U.S. economy. Due to space limitations, the section on the U.S. economy may be split into the next episode.

These three topics are all vast in scope, so it’s impossible to cover every detail; I’ll only delve into the most fundamental logic. Let’s start with the most critical conclusion: the problems facing the Chinese and U.S. economies are fundamentally different. The biggest concern for the Chinese economy is “low growth”—lingering at low levels for an extended period and being unable to break through the growth bottleneck; the biggest concern for the U.S. economy is “stalling”—suddenly reversing course and heading downward amid the current high-growth momentum.

Breaking this down using the most basic GDP formula (C+I+G+NX, i.e., consumption + investment + government spending + net exports) makes this clearer.

Core Pressures on the Chinese Economy

China’s current core risks lie in the I (investment) and NX (net exports) components.

The lingering impact of the trade war has already directly affected imports and exports, with shrinking foreign trade orders directly influencing the production decisions of private enterprises. Most export-oriented enterprises will not rashly expand production until order uncertainty is resolved, which in turn will further drag down investment growth. This is the core reason behind the continuous slowdown in manufacturing investment growth over the past six months.

The corresponding policy direction is clear: G (government spending) and C (consumption) must be boosted to offset the shortfall. The most typical example on the G side is the recently announced plan to build hydropower stations downstream of the Yarlung Tsangpo River; such mega-infrastructure projects can directly drive GDP growth while stimulating investment in upstream and downstream industries. On the C side, the focus is primarily on various consumption subsidies, birth incentive policies, and targeted industry support measures.

Core Risks to the U.S. Economy

The core risks facing the U.S. economy are precisely the opposite, centered on both C (consumption) and G (government spending).

Current U.S. economic growth is highly debt-driven. The scale of money printing during the Biden and Trump administrations combined already equals the total of all previous presidents. Once government spending (G) begins to contract, it will directly impact household consumption (C). A significant proportion of the U.S. general public relies on government-provided benefits such as food stamps to make ends meet. Cutting fiscal spending will directly impact the spending power of this segment of the population. Coupled with persistently high inflation, the contraction in consumer spending will be very pronounced. The “small government, big business” policy promoted by Trump is, in essence, a deliberate effort to reduce government spending, a process that will inevitably impact GDP growth.

The U.S. response is also clear: boost I (investment) and NX (net exports) to offset the shortfall. Recently, Trump has pressured allies such as Japan, South Korea, Saudi Arabia, and Europe to increase investment in the U.S. The total pledged investment has reached $3 trillion, equivalent to the sum of the first three rounds of quantitative easing (QE) prior to the COVID-19 pandemic, and also equivalent to the total scale of monetary easing during the pandemic. Essentially, this strategy aims to fill the gap left by the contraction in government spending by attracting foreign investment, while simultaneously boosting net exports through trade protectionist measures.

(Note: Due to ASR manuscript truncation, the analysis of the commodities section will be supplemented in the next issue.)