Investors lost faith in China’s recovery. Beijing is simply trying to fend off deep financial problems in the banks that keep funding everything they are told to fund.

Investors lose faith in China’s recovery; $18 trillion in wealth destroyed. China iPhone shipments fell by 47% y/y.

🚨INVESTORS LOST FAITH IN CHINA'S ECONOMIC RECOVERY🚨

China's 10-year government bond yield fell below 1.6% for the FIRST TIME EVER.

CSI 300 index FELL for the 3rd STRAIGHT day in the worst start to a year in 10 YEARS.

Stimulus fails to prop up the sentiment.

DISASTER pic.twitter.com/jfVIgzttGI

— Global Markets Investor (@GlobalMktObserv) January 3, 2025

⚡APPLE'S NOVEMBER #CHINA IPHONE SHIPMENTS FELL BY 47% Y/Y, CAICT DATA SHOWED.
Domestic Chinese brands shipped 26.571 million phones in Nov(89.7% of the total), while foreign brands shipped 3.051 million units(-47.1% y/y), with Apple dominating.$AAPL #iPhone pic.twitter.com/ee5IuSsXmC

— CN Wire (@Sino_Market) January 3, 2025

🇨🇳 China sees a major economic downturn coming. Look at their 10 year yield! 👀

We've never seen this before. https://t.co/gPNaI6whGJ pic.twitter.com/ChDB0BjTPQ

— Financelot (@FinanceLancelot) January 3, 2025

CHINA is going to be forced to devalue its currency sooner or later… pic.twitter.com/oWVKBvX5Qb

— Michael J. Kramer (@MichaelMOTTCM) January 3, 2025

2/10
monetary policy towards prioritizing “the role of interest rate adjustments”. By "quantitative objectives", the PBoC means its policy of "guiding" Chinese banks on how much they should expand different sectors in their loan books.

— Michael Pettis (@michaelxpettis) January 3, 2025

4/10
This basically meant that much of the support for growth in the economy came from PBoC instructions to banks to provide supply-side support in the form of new loans to various targeted industrial sectors.

— Michael Pettis (@michaelxpettis) January 3, 2025

6/10
And because these interest-rate and credit subsidies came directly and indirectly at the expense of households, it was also a very important part of the transfer mechanism that made Chinese production globally very competitive while also making Chinese consumption so weak.

— Michael Pettis (@michaelxpettis) January 3, 2025

9/10
fiscal spending fully takes up the slack. Left to themselves, and without government guarantees, Chinese banks will not provide nearly enough credit expansion to the supply side of the economy for Chinese economic activity to grow at the targeted rates.

— Michael Pettis (@michaelxpettis) January 3, 2025

China's 🇨🇳 Debt as a % of GDP is closing in on 300% pic.twitter.com/wIwe9oRm1h

— Win Smart, CFA (@WinfieldSmart) January 3, 2025

🇨🇳PBOC VOWS TO CUT RRR, INTEREST RATES AT APPROPRIATE TIME.

PBOC POSTS STATEMENT ON QUARTERLY MONETARY POLICY MEETING.

PBOC TO STRENGTHEN 'STRENGTH OF MONETARY POLICY CONTROLS'.

PBOC REPEATS VOW TO KEEP YUAN EXCHANGE RATE BASICALLY STABLE.

PBOC VOWS FIRM ACTIONS AGAINST THOSE… pic.twitter.com/Ar4b4leBw2

— CN Wire (@Sino_Market) January 3, 2025

How Dire Is the Situation of Chinese Banks?

Though no official reason is given for why China has been spending large sums of money regularly on shoring up banks, the official whisper campaign is that in 2025, Beijing will unleash stimulus forces to get the economy going again. While anything is possible, it seems much more likely that Beijing is simply trying to fend off deep financial problems in the banks that keep funding everything they are told to fund.