How a state machine turns its people into a financial shock absorber
Is China strong? Depends on what you mean by strong.
Is it cruising around in a Mercedes C300, looking sharp? Or is it standing at the pump, turning out every pocket to scrape together 300 in gas money? The first is genuinely strong. The second... is strong in spirit, I suppose. Ha.
So maybe the real question isn’t whether China is strong.
It’s this:
Who pays for China’s strength?
Of course China is strong.
Strong in manufacturing, strong in exports, strong in infrastructure, strong in mobilization, strong in supply chains.
But China’s strength and the wretchedness of the Chinese people are not a contradiction. Under a certain kind of system, each one causes the other.
The parallel-universe magic of the exchange rate
The renminbi has one truly surreal quality:
It wears a different face in every market.
Onshore renminbi (CNY) is the renminbi inside the wall. Offshore renminbi (CNH) is the renminbi outside it.
One currency, living as if in two parallel universes.
To the outside world, it has to look stable, strong, and creditworthy.
At home, it has to soak up the property bubble, local government debt, stressed banks, and the money-printing used to make debt go away.
So the renminbi gets split into two jobs:
Abroad, it’s the national image.
At home, it’s a device for transferring risk and liability.
That isn’t a free market. It’s more like a company that keeps two sets of books.
One for the investors.
One for holding down wages.
“Domestic debt isn’t debt,” translated
People in finance have a saying: domestic debt isn’t debt.
Translated into plain language, it’s ugly:
As long as the creditors can’t run, the debt never really has to be repaid.
You can’t play games with foreign debt. Do that and your international credit is finished.
Domestic debt can be dragged out, rolled over, swapped, or handled by administrative fiat.
Because the people carrying it are locked inside the system. Local government debt doesn’t vanish into thin air.
The property bubble doesn’t vanish into thin air. Bad bank loans don’t vanish into thin air.
They just get redistributed. Onto ordinary households.
Into low interest rates. Into shrinking welfare. Into the purchasing power of the next three generations.
So the heart of “domestic debt isn’t debt” isn’t that the debt doesn’t exist.
It’s that the creditors have no bargaining power.
See the country as an extreme corporation
Picture China as one enormous corporation, and a lot of things come into focus.
This company’s public financials look beautiful:
Complete infrastructure. A powerful military. Vast industrial chains. Staggering export capacity. Sovereign credit that looks rock-solid. But it doesn’t look beautiful because the business carries no risk. It looks beautiful because it has internalized every cost.
Bad debt? Dumped on households.
Local government debt? Dumped on the future. The property bubble? Dumped on family balance sheets. Banking stress? Dumped on depositors and a low-interest-rate environment. Social discontent? Dumped on the censors and the stability-maintenance machine.
An ordinary company that ran itself like this would go bankrupt. But this one has a special advantage:
Its employees can’t quit.
Capital controls stop the money from quitting.
Household registration, censorship, exit restrictions, and social control stop the people from quitting. Control of public opinion stops the narrative from quitting.
So the outside world sees a powerful China.
The people inside are stuck with a China they can’t resign from.
If the Chinese weren’t wretched, would China still be this strong?
Just run the counterfactual. Suppose that tomorrow the Chinese suddenly had full protection of their property:
They could freely convert renminbi into dollars. They could refuse to shoulder local governments’ rotten debts. They could demand that banks pay out in full, exactly as promised. They could move their assets abroad at will. They could publicly question the black holes in government finances.
What happens then? The money runs.
Banks tighten. Local debt blows up. Property gets repriced. The state machine’s funding chain is forced to face real market prices. In other words, the strength of the China model does not presuppose “a prosperous and powerful people.”
It presupposes a people who can’t fully protect themselves.
China’s strength isn’t built on the Chinese being strong too.
It’s built on the Chinese being unable to refuse to absorb risk on the state’s behalf.
The Little Pinks aren’t lying. They just never read the cost sheet.
The Little Pinks, China’s young online nationalists, and the Beijing-bootlicking celebrities chant “China is strong” every day. In a sense, they’re not lying.
China’s exports are strong. Chinese manufacturing is strong. Chinese infrastructure is strong. Its platforms, supply chains, EVs, drones, and e-commerce penetration really are strong too. None of that is up for debate.
The numbers on the books aren’t fake. It’s just that they only ever show you the top line of the income statement: revenue.
And they never let you see the lines below it. Gross profit. Depreciation. Bad debt. Workplace injuries. Low wages. Unemployment. Local government debt. Household debt. Censorship. Social fear.
Their patriotic narrative is, at bottom, an aesthetic of financial reporting that never books its costs. Exports grow? National rejuvenation. The bullet trains are fast? The superiority of the system. The cities look new? The rise of a great power. The products are cheap? Chinese efficiency.
As for what’s behind all that efficiency (whose wages got pushed down, whose welfare got sacrificed, who got trapped by a mortgage, who got bled dry by local debt, who lost all bargaining power), it gets wiped away with a single line:
Be proud of your country. Love your country. China is super-duper great.
This is the shameless-patriotism trade. Not because it’s all lies. Because it uses real achievements to hide real costs.
The blood-diamond model: cheap doesn’t mean clean
It’s like a company whose stock just keeps climbing. Its products are cheap, durable, and ship fast. Investors are raking it in, and customers feel they’re getting a deal. From the market’s point of view, it’s a success. On the financial statements, it looks gorgeous. To the consumer, it’s even good value.
But if its profits come from blood diamonds, forced labor, environmental destruction, poverty wages, and systemic exploitation, is that company still a success?
The answer is awkward. For most people, the moral cost is too far away and the price advantage is too close.
Xinjiang cotton. Sweatshops. Censorship. Labor exploitation. Take your pick. As long as the pain isn’t happening to you, it’s easy to repackage as great-power efficiency.
So the bootlicking celebrities’ job isn’t to explain the truth. Their job is to translate pain into glory. Low wages into diligence. Censorship into stability. Being unable to resist into unity. Being sacrificed into national rejuvenation. Being ground to dust into patriotism. And to censor free speech into “promoting a wholesome social atmosphere.”
So it was 70 years ago. So it is in 2026.
What China wants has never changed
Make the Chinese feel how great China is, then get them to accept being consumed by that greatness. The Great Leader who led the Great Leap Forward and made tens of millions of living people disappear still lies in state on Tiananmen Square, honored as the father of the nation, his face printed on the renminbi to remind you to grin and bear it for the motherland, okay?
The outside cheerleaders’ risk-free narrative arbitrage
China is strong. The only question is who gets to be the beast of burden.
If someone volunteers to be a beast of burden, willing to pour their whole life, labor, freedom, and dignity into a national glory project, I’ll even admit to admiring that kind of devotion.
Learn from Lei Feng, the Mao-era model soldier. Selfless dedication. Burn yourself up. Light up the motherland. That’s his choice, and it’s logically consistent. Except the direction he chose to devote himself to was never his to decide.
Today it’s the Great Leap Forward, tomorrow the Cultural Revolution, the day after that Reform and Opening Up, and the day after that, national rejuvenation. The line changes whenever it likes. But whatever part of him has already burned is gone for good.
What’s truly absurd is the cheerleading squad on the outside.
Holger Chen, the Taiwanese influencer, and the bootlicking celebrities: every day they hype how strong China is, and China really is strong. Its high-speed rail is strong, its manufacturing is strong, its arms industry is strong, its market size is strong, and its capacity for national mobilization is strong.
None of that is in dispute. But they’re not the beasts of burden.
What they’re running is textbook “risk-free narrative arbitrage.”
They go long on the PR story of a mighty China and collect traffic, buzz, emotional payoff, and commercial cash flow. But their bodies are outside, so they never have to post their own lives as margin. When this company’s systemic bad debt finally blows up, they can close out their positions and walk away whenever they like.
The Chinese have to carry low pay and endless overtime, crushing mortgages, shrinking social security, savings they can’t trust, muzzled speech, and life choices flattened to almost nothing.
The cheerleaders outside carry exactly one risk: whether today’s traffic is good enough.
So this isn’t patriotism. It’s more like standing on the edge of the Colosseum, eating a hot dog, and praising the slaves bleeding in the arena for their fine national spirit.
Crueler still, many Chinese aren’t even allowed to mind.
Don’t mind, and that’s patriotism.
Mind, and you’re a hostile foreign force.
Keep quiet, and that’s stability.
Resist, and that’s the catch-all crime of “picking quarrels and provoking trouble.”
And so the machine closes the loop perfectly. The people outside shout that China is strong. The people inside are made to prove it. The shouters get traffic. The ones carrying the load get no way out.
That is the most hypocritical thing about the “rise of a great power” narrative:
It hands the singing of praises to those who pay no price, and the sacrifice to those who can’t refuse to pay it.
Conclusion: China isn’t weak. It’s strong in a way that isn’t normal
Stop asking whether China is strong. Of course it is.
The question is how it’s strong. A normal country’s strength should give its people more choices. A deformed state machine’s strength needs its people to have fewer.
And that is exactly what’s most frightening about the China model:
The stronger the state, the less its people can exit. The less its people can exit, the more risk the state can stuff back onto them.
It’s have-your-cake-and-eat-it-too, a contradiction in terms, and somehow it holds together. Magical realism, live on location.
From the outside, it’s the rise of a great power.
From the inside, it’s unlimited liability.
And the most wretched part for the Chinese isn’t that China is weak.
It’s that China’s strength happens to need them to stay wretched.
Anyway, enough. My Taobao order just arrived. The world rarely runs on morality anyway. And the shipping was free.
First published on Vocus, 2026.05.17.