Debt financing, local government fiscal pressure, subsidized investment promotion, export controls, offshore USD arbitrage — these may seem like separate issues, but they are all interconnected. They all trace back to one fundamental question: How is your country’s fiscal cycle, industrial capacity cycle, foreign trade structure, and currency repatriation mechanism actually designed?
It’s not that attracting investment is bad, or that foreign trade is flawed, or that local debt issuance for economic growth is wrong. The real issue lies in how the entire cycle is structured — specifically, whether the economic gains are retained for internal distribution or end up being subsidized outward.
Otherwise, it’s hard to explain why the stock market remains stagnant for years domestically, while in the West, markets keep rising even without apparent effort. Without fundamentally changing this structure, a country will remain a “blood bag” — working tirelessly while gaining little, appearing globally significant yet feeling increasingly strained at home. At its core, this is a distribution problem — both internal and external. If external distribution is flawed, no amount of internal tinkering will bring real gains.
The Real Trigger for a U.S. Market Decline Lies in China’s Economic Restructuring
The real beginning of a U.S. stock market collapse would likely stem from shifts in China’s fiscal cycle, industrial capacity cycle, and foreign trade framework, not from domestic U.S. political noise. Why? Because the essence of stocks is dividends and returns on capital — the gains generated by massive productive capacity. The key is: where are these gains ultimately distributed?
The U.S. has seen its industrial capacity decline, yet its stock market enjoys a long bull run. Meanwhile, China, which has relentlessly optimized and expanded its production capacity, struggles with diminishing returns. Why? Many export-oriented firms receive local fiscal subsidies, sell goods abroad, yet do not repatriate their liquidity, choosing instead to park profits offshore for arbitrage. In essence, those profits ultimately flow into U.S. capital markets. How could U.S. stocks not keep rising?
If this cycle isn’t broken — for instance, by enforcing mandatory foreign exchange settlement, especially for subsidized exporters — local debt problems will persist. Specifically, export firms that benefit from subsidies (whether in the form of environmental cost waivers, land use discounts, or other supports) should be required to settle a corresponding share of foreign exchange earnings domestically. Without this, continuous investment promotion and capacity expansion only mean exporting economic gains abroad. No amount of collateral-based financing can sustainably support such a leaky system.
Even if GDP numbers appear strong, without profit repatriation, these firms effectively become zombie enterprises — large in scale but net drains on local fiscal health. The harder they “work,” the poorer the local economy becomes.
The High-Tech Paradox: Innovation Without Income
Without reforming the internal-external distribution mechanism, even high-value, technologically advanced industries may fail to generate real domestic returns. High-tech sectors often emerge from substantial fiscal subsidies and are undeniably hard to build. They may appear highly profitable on paper, but if those profits aren’t brought home, the result is high technology, low real returns — or more precisely, high profits that never settle domestically.
When losses are socialized internally while profits are shifted offshore, such “high-tech” development becomes a net loss for the national economy. This is why there’s a growing emphasis on managing enterprises through capital oversight. Pledges and handshakes with entrepreneurs are not enough — if profits aren’t repatriated, there’s little recourse. Only through board-level influence and capital allocation control can the flow of dividends be directed. Should profits be distributed domestically or abroad? The difference is vast. The former allows local subsidies to be recouped; the latter nurtures enterprises that benefit from national support but contribute little back.
A telling example is Wahaha — a highly profitable beverage company, yet much of its profit outflow meant limited local fiscal benefit. This pattern is far too common and warrants serious scrutiny.
Why Is the U.S. Imposing Heavy Tariffs? The Real Reason Isn’t What You Think
The Trump administration’s heavy tariffs and proposed expensive port fees for Chinese vessels signal a deeper shift: China is gradually restructuring its fiscal supply, industrial cycle, and trade framework to retain more of the gains from its competitive industries. As China begins to keep more of its capacity dividends at home, U.S. capital markets are starting to feel the void.
This is forcing the U.S. to seek alternative ways to capture value — through tariffs and fees — even as it continues to rely on Chinese goods. The level of these tariffs and fees, calibrated to at least balance the books, reveals just how substantial the previous outflow of dividends must have been. It also explains why many in the export sector grew wealthy in the past — by undervaluing domestic advantages and arbitraging abroad, profits were almost guaranteed.
Now, as this model is being recalibrated — with export controls introduced where necessary — the old cycle is being interrupted. A new cycle is forming, one where economic gains are increasingly retained domestically. This shift, more than any U.S. domestic factor, is what’s making American stock markets increasingly unstable.
💎 The Bottom Line:
Economic cycles aren’t just about output — they’re about who captures the value. When the structure of distribution is flawed, effort doesn’t translate into prosperity. Real development begins when a nation’ economic design ensures that the fruits of its labor flow back to its own people.