China Won't Allow Depressions - It Will Be Their Doom

Written by George Blackburne | Sat, Oct 18, 2025

The Chinese Communist Party ("CCP") won't allow an economic depression. They don't dare. As a result, they are screwed.

The CCP has a contract with the Chinese people. The people gave up their freedom of speech, their freedom of movement, and the right to choose their own political system.

In return, the CCP promised to improve the economic lives of the Chinese people every year. For decades, the CCP delivered on this contract. The economic lives of the Chinese people has improved considerably.

Since the Chinese Communist Party (CCP) took power in 1949, and especially after Deng Xiaoping’s market reforms in the late 1970s, China lifted over 800 million people out of extreme poverty.

GDP per capita grew from $89 in 1960 to $12,500 by 2023. Access to consumer goods, housing, and technology (e.g., smartphones, high-speed internet) has surged.

Urbanization has increased, with over 60% of the population urban by 2020, up from 20% in 1980. High-speed rail networks (over 40,000 km by 2023), modern cities, and electricity access (near 100% by 2020) have transformed daily life, especially in rural areas.

But China has a BIG problem. They need a good economic depression.

Great recessions, like forest fires, are necessary for an economy's long-term economic growth. Great recessions clear out the financial deadwood - zombie companies, over-leveraged companies, and inefficient ones.

A zombie company is an unprofitable business that generates just enough revenue to cover its operating expenses and interest payments but lacks the funds to invest in growth, innovation, or pay down its principal debt.

Zombie companies, often burdened by debt, rely on continued borrowing and external financing from banks or investors to remain in business. They are characterized by financial weakness, stagnant operations, and poor long-term prospects, posing a risk to the economy by consuming resources that could be used by healthier firms.

A great many Chinese companies are now zombies; but the CCP won't allow these companies to fail because they provide employment to tens (hundreds?) of millions of workers.

In a great recession, these laid-off people would almost certainly riot. They already resent and hate the CCP. All it would take would be a spark to send millions of furious protestors into the streets and over the walls of Zhongnanhai.

Zhongnanhai (Joe-nan-hai) is the central headquarters for the Chinese Communist Party and the State Council. It is a walled imperial garden where China's top leaders, including the General Secretary, conduct their daily official duties. It also serves as the official residence of some of the highest members of the CCP.

So China is doomed to an ever-falling GDP and stagnant corporate innovation. The CCP will need to fall before the financial logjam can ever be cleared.

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