【RedGPT】Similarities and Differences in the US-China Economic Crisis

烽火Flame · December 23, 2025, 8:38am

As Marxists, we have always acknowledged that capitalist society inherently contains contradictions — the contradiction between the private ownership of the means of production and the socialization of production. This inevitably manifests as the contradiction between the expanding scale of reproduction and the shrinking consumer purchasing power of the people, as well as the contradiction between the organized, planned production of individual enterprises and the anarchy of socialized production as a whole. The ultimate result of this inherent contradiction is expressed as an economic crisis. However, nowadays, the complex terminology of bourgeois political economy tries hard to distort this essence, erasing the term “economic crisis” and replacing it with “financial crisis,” claiming that economic crises have been eliminated. The Chinese revisionist group even declares that they are practicing a “socialist market economy with Chinese characteristics,” claiming that there are no economic crises. We must break through this lie, defend the truth of Marxism, and expose the bourgeoisie’s myth that capitalist society will last forever. To do this, we need to understand how today’s economic crises appear in a transformed form, and what characteristics China’s economic crisis has. After communicating with GPT, I explained in as simple language as possible the mechanisms of the economic crises in the US and China, as well as their similarities and differences, for everyone to understand and learn.

烽火Flame · December 23, 2025, 8:41am

First, the version of chatGPT that uses bourgeois terminology analysis, which contains many toxic elements. Many terms are completely inconsistent with Marxist positions, but the analysis content and logic are roughly correct. Please be aware of the distinction.

1. What is the essence of the “Chinese version of the subprime mortgage crisis”?

In Marxist terms:

The root cause of the capitalist cyclical economic crises is: the anarchy of production + capital pursuit of profit, leading to overproduction (excess for capital, lack for people).
The so-called “subprime crisis” in the US in 2008 was merely a manifestation of this crisis in the form of real estate credit + financial securities packaging.
China’s current problem is essentially long-term reliance on real estate and infrastructure bubbles to support growth, accumulating a large amount of “false capital” that cannot realize value, but:
- Has more administrative measures (purchase restrictions, window guidance, extension of urban investment bonds, etc.)
- Has stronger financial regulation (capital account controls, bank nationalization)
- Has comprehensive control over statistics and public opinion

Therefore, the “Chinese version of the subprime crisis” is not about whether it will explode, but:

When, in what form, and who will bear the consequences.

It is most likely to manifest as:

Large-scale real estate projects defaulting or devaluing
Local government financing platform (Chengtou, LGFV) debt risks surfacing
Non-performing assets in banks/trusts/insurance surging
Small and medium-sized banks, shadow banking products exploding
Residents’ assets (houses, wealth management, insurance) shrinking collectively

Is there “subprime securitization”? Yes, and it is already happening:

Various “mortgage-backed securities, consumer loan securitization, asset-backed notes, packaged and resold chengtou bonds,” essentially the same as the US packaging of junk loans into AAA MBS: disguising unpayable debts as sellable “assets”.

2. Similarities with the US subprime crisis

1. Relying on real estate and credit to delay the crisis

In the US:

Using low interest rates + financial innovation to push many non-repaying people into the housing market;
Packaging junk loans into securities (MBS, CDO), selling to global capital;
Rising house prices → refinancing → continued consumption;
Ultimately, house prices collapse, loans default → chain reaction in the financial system.

In China:

Relying on “house prices only rise, never fall,” “land finance,” “urbanization” as economic growth pillars;
Local governments selling land + borrowing (chengtou bonds) for infrastructure and image projects;
Residents forced to pour most of their savings into houses, wealth management, trusts;
Financial institutions securitize loans, receivables, fee rights, even defaulted projects into wealth management/asset management plans/ABS and sell to society.

Common point:

The contradiction of capitalist overproduction is packaged within real estate + financial products, ultimately erupting as debt crises.

2. Both involve a process of “financial innovation + rating fraud + regulatory default”

In the US:

Junk loans rated AAA
Regulatory agencies default to self-restraint of financial capital
Investment banks create structured products, layer risks outward
On the surface, the entire system profits, but in reality, it is building a grave.

In China:

Various chengtou bonds, real estate bonds, asset securitization products (ABS), wealth management products often rely on implicit guarantees or “full repayment expectations” from local governments;
Banks, trusts, securities firms, rating agencies are all part of the same chain;
The appearance is “low risk, high grade, government support,” but behind are projects with no cash flow, unsellable houses, false profit forecasts.

Common point:

Capital and rating agencies collude, continuing to disguise bad debts that should be exposed as “assets.”

3. Both are inseparable from the basic logic of the imperialist era:

Capital pre-finances future surplus value through debt, and when over-prepaid, it collapses.

In the US: exports US debt and dollar assets to the world, which takes on the burden.
In China:疯狂 leverage on domestic workers and local finances, pre-financing decades of labor and taxes.

3. Fundamental differences from the US subprime crisis

October Wind comrade pointed out two key points:

China has stronger regulation and administrative measures;
China has the capacity to direct the crisis elsewhere, rather than letting the entire financial system explode immediately.

I will compare based on these.

Difference 1: Financial structure and national capacity

US:

Most banks are private capital/shareholding banks + investment banks;
The monetary and financial system is highly marketized;
The state mainly controls indirectly through “interest rates + regulation + lender of last resort”;
Lehman Brothers’ collapse was because the state initially refused to bail out, later resorting to TARP and quantitative easing to rescue the market.

China (Middle Repair):

The banking system is highly state-owned, with the Big Four + policy banks controlling the lifeline;
Renminbi capital account is not fully convertible, foreign exchange flows are controlled;
The “Central Bank + CBIRC + SASAC + NDRC + Ministry of Finance” can issue direct administrative commands:
- Extension, no default allowed
- Borrow anew and repay old debts
- Ban on mass sell-offs
- Adjust accounting standards, regulatory indicators
Can carry out “targeted bleeding” rather than a full-scale collapse all at once.

Therefore:

The US crisis is: allowing capitalist logic to explode openly in the market, with the state acting as a backstop for financial oligarchs;
China’s crisis is: the state directly intervening, essentially “Party-government bureaucrats + financial oligarchs jointly designing how to shift bad debts onto the masses”.

Difference 2: Mode of crisis outbreak

US 2008:

House prices plummeted sharply;
Subprime defaults surged, MBS prices collapsed;
Financial institutions went bankrupt or merged;
Stock markets crashed, unemployment soared, consumption sharply declined—typical storm-style financial crisis.

China’s likely rhythm:

Long-term decline in house prices + shrinking transactions, not necessarily a sudden collapse, but “unsellable + unliquidable”;
Banks won’t massively default openly but will rely on extensions, restructuring, debt-to-equity swaps, AMC takeovers, with bad debts slowly rotting within the system;
Local governments continuously roll over new debts to pay old ones, fiscal pressure intensifies, cutting public services, wages, delaying payments for projects;
The real economy, especially small and medium enterprises and workers, bears unemployment, wage cuts, and massive asset devaluation;
Large-scale social discontent is localized and managed through security rather than manifesting as open financial panic.

In short:

US crisis is “financial market explosion, state comes to clean up”;
China’s crisis is more like “the state personally managing bad debts, slowly squeezing workers and grassroots finances over ten or twenty years.”

Difference 3: Position of asset securitization in the system

US:

The real center of financial imperialism,
Global capital is competing for US assets,
MBS, CDOs can be sold to global pension funds, sovereign funds, banks;
Subprime securitization is a global financial product, and its explosion triggers a worldwide chain reaction.

China:

Securitization exists, but RMB capital is not fully globalized yet,
Most asset securitization products still circulate domestically or within small offshore RMB markets;
Therefore, the straightforward form of “China’s subprime explosion” is more likely to be domestic residents and institutions getting badly burned, with less immediate, concentrated impact on the global financial system, instead manifesting indirectly through trade contraction, RMB depreciation, capital outflows, etc.

4. Several typical mechanisms of “Middle Repair” for “crisis transfer + profit for oneself”

Red Wind said very accurately:

“On one hand, the government actually cannot fully control, and there are many ways to exceed limits to provide credit; on the other hand, the Middle Repair government cannot prevent the crisis but only benefits from it during the crisis.”

Here are some current and future more ruthless tactics:

1. Turning financial bad debts into “fiscal issues” and “people’s issues”

For banks: can use extensions, restructuring, capital injections to avoid collapse;
For local finances: can force local governments to backstop chengtou bonds and platform debts, eventually turning into a “fiscal crisis”;
For residents:
- When house prices fall, won’t let you easily default (with administrative measures);
- Wealth management product defaults are first “negotiated,” “discounted,” or “extended”;
- Pensions, SOE employee benefits, public services are cut, covered up by “tight budgets.”

Essentially:

Bad debts of financial oligarchs are transferred layer by layer through state machinery, ultimately burdening grassroots finances and workers.

2. Using the crisis as a reshuffle opportunity—state-owned enterprises / vested interests seize cheap assets

Massive bankruptcies and reorganizations of private housing and enterprises;
State-owned and local state assets, and vested interest-controlled investment institutions, buy high-quality assets at ultra-low prices;
Banks cooperate to lend to “white gloves,” using old debts as collateral, transferring ownership.

This is similar to the post-2008 Wall Street re-consolidation, but in China: bureaucratic monopoly capital + red oligarchs.

3. Using currency devaluation and rising prices to covertly plunder the people

Export side hopes for RMB depreciation to ease pressure;
Foreign debt pressure requires preventing too rapid devaluation;

Between these swings, the common outcome is:

Nominal wages grow slowly, prices rise faster;
Residents’ savings and pension purchasing power are eroded;
Workers pay the price for the crisis, while statistics still “maintain stability.”

4. Ideology + public opinion machinery cooperation

Explaining everything as “cyclical adjustments,” “structural deleveraging,” “growing pains of high-quality development”;
Blaming “unscrupulous entrepreneurs,” “corrupt officials,” or “foreign hostile forces,” hiding the entire bureaucratic monopoly capitalist structure;
Suppressing those who point out the root problems, preventing political or class polarization of the crisis.

5. One-sentence summary (more colloquial):

The so-called “Chinese version of the subprime crisis” is fundamentally about the Middle Repair relying long-term on real estate and debt bubbles to support growth, accumulating huge bad debts that will eventually explode. Like the US subprime crisis, its root is capitalist overproduction, but the US allows the financial market to blow up all at once and then the state bails out Wall Street; China, on the other hand, uses strong state machinery to suppress the explosion, through extensions, restructuring, covert inflation, fiscal tightening, asset disposals, slowly shifting bad debts onto local governments and workers. Asset securitization just makes the crisis more hidden and concentrated, but it cannot prevent the crisis—only determine who gets screwed and when.**

烽火Flame · December 23, 2025, 8:42am

Simplified Explanation of ChatGPT, Also Noting the Issue of Its Language Leaving the Marxist Standpoint

I will explain in five steps, each revolving around a question:

How does this current model actually operate? (The chain of house—location—bank—central)
Where does this chain start to break? Specifically, how does it break?
How did the US subprime mortgage crisis collapse step by step? A comparative view.
How does China use “state machinery + financial means” to slowly push the crisis onto the common people?
How can we explain this to comrades and the masses in the future?

1. How are ordinary people tied into China’s current economic model?

Forget about “asset securitization” and “financial instruments” for now; let’s look at four roles:

Common people — developers — local governments — banks (backed by the central government)

Think of it as a “chain store”:

1) Ordinary People: The link forced into “housing slave” status

For an average urban family, the reality is:

Not buying a house: children’s schooling, marriage, household registration all become difficult;
Buying a house: a lifetime mortgage, working for decades for the bank.

Most city dwellers end up on this path:
First a down payment, then a loan, 30 years. “Even if you don’t want to go up, you have to go up.”

2) Developers: Middlemen helping the government sell land and banks lend money

The essence of developers’ business is:

Using very little of their own funds +大量借来的钱 (a lot of borrowed money), to buy land at high prices from local governments;
Then using this land to borrow more from banks and trusts;
Building → pre-selling → using the common people’s money to pay off part of the debt;
Finally, seeing how long and how much the housing prices can rise.

Developers are essentially:

“Engineering teams and cannon fodder” for local governments and financial systems.
If the houses sell well, they’re glorious; if not, they’re the first to take a hit.

3) Local Governments: Living on “selling land + borrowing”

Where does local government revenue come from?

The central government takes the bulk of taxes;
Local government’s rigid expenses (civil servant wages, infrastructure, performance projects) keep increasing;
So what do they do? Sell land + borrow money.

Thus, local governments hope:

Land prices keep rising;
Houses sell well, making land more valuable;
Developers dare to buy land;
Banks are willing to lend.

They create a path:

Sell land → Developers buy at high prices → Banks lend large sums → Housing prices keep rising → Sell land again.

This is called “land finance.”
Land isn’t used to ensure people’s housing; it’s used as a cash machine for local governments.

4) Banks and financial institutions: The real “meat-eaters” behind the scenes

Banks’ simple tasks:

Lending to developers;
Giving mortgages to common people;
Lending to local governments via municipal bonds and financing channels;
Packaging these loans into various “wealth management products” and “asset management plans,” then selling to wealthy individuals and institutions.

In short:

Banks use others’ money to lend to governments, developers, and homeowners, earning interest and fees, then packaging these debts as “wealth management” or “funds,” and continuing to earn fees.
Behind the scenes, trust companies, brokerages, and insurance companies also participate, slicing these bad debts into pieces, packaging them, and selling them layer by layer.

2. Where does this chain start to break? What are the detailed issues?

The problem with capitalism is never “not making money,” but greed — wanting to make explosive profits.

1) Real estate: Already built to the point of unsellability

Tier-one and tier-two cities: housing prices are too high, young people can’t afford;
Tier-three and tier-four cities: population isn’t enough, many houses are vacant;
Rural areas: new rural development and small-town projects, many are just face-saving projects.

Houses are meant for “living,” but they’ve been turned into:

Layered “shells”:
The housing demand of the people has been met or suppressed, but developers and governments still rely on selling houses to survive.**

2) Local governments: The more money they lack, the more they borrow

Relying on land sales in the past, now land sales are sluggish;
Old debts need repayment, new project funds and wages still need to be paid;
So they start doing all kinds of things: municipal investment platforms, special bonds, government-guided funds…
No matter what they call it, it’s basically: “borrowing new debt to pay old debt.”

You can say:

Local governments are like a bankrupt company, but the boss still bows and borrows outside, saying “Hold on a little longer, we’ll be fine soon.”

3) Banks: Looks good on paper, full of rotten meat inside

Banks face three kinds of unrecoverable debts:

Developers can’t pay back (unfinished buildings, bankruptcy);
Ordinary people can’t pay (default, unemployment, income drop);
Local governments can’t pay (finances bottoming out).

Any large-scale outbreak of these would hurt banks badly. How do they handle it? They use two tricks:

Not recognizing bad debts: Treat them as “normal loans” or “attention assets,” delay as long as possible;
Packaging and selling: Bundle a bunch of bad debts into “wealth management products” or “trust plans,” and sell to companies and middle-class families.

This is the popular translation of “asset securitization”:

Originally a bunch of bad debts, sliced thin, wrapped in red paper, renamed, labeled “safe” and “stable,” then sold.

The problem lies here:

Looks like there are “assets with returns” everywhere;
But in reality, the underlying assets are more and more unpayable, unsellable things.

3. How did the US subprime mortgage crisis collapse step by step? Comparing with China

Let’s use the same four roles: “ordinary people — banks — investors — government.”

The US path:

Low-income families — brought in to buy houses
- Banks give loans to many people without stable income, with initially low interest, which later increases;
- These people can “afford the first year, but can’t last ten years.”
Banks — package these bad loans into “hot commodities”
- They don’t want to bear the bad loans themselves, so they sell them to investors;
- Get rating agencies to stamp “safe, stable, high-grade”;
- Pension funds, banks, insurance companies worldwide buy them.
Housing prices keep rising — everyone thinks “nothing’s wrong”
- Rising house prices hide bad debts temporarily, as they can keep refinancing and borrowing;
- People use houses as collateral to keep consuming. Capitalists are happy.
Housing prices turn downward — the chain breaks
- Houses can’t be sold, prices fall;
- Borrowers can’t pay back loans;
- Those who bought packaged loans find:

These things are worth far less than their initial prices.

Banks start to face huge losses, go bankrupt, and the government intervenes to rescue the market.

So, the US crisis manifests as:

Housing prices plummet + financial markets crash + unemployment surges.

How is China different?

China doesn’t have a fully open financial market, but the logic is similar:

Houses are overbuilt and unsellable;
Old debts of local governments can’t be repaid;
Assets held by banks are hard to recover;
People’s mortgages, wealth management, and insurance are affected.

The difference:

The US lets the financial market explode first, then the state cleans up Wall Street;
China’s system involves the state from the start — both referee and player — designing crises to hit certain targets.

4. How does China “slowly strangle” the common people instead of blowing up the system all at once?

Here are some specific scenarios:

1) For banks: Drag, rename, pretend nothing’s wrong

When debts can’t be recovered, banks use “face-saving debt-avoidance tactics”:

With developers:

“Don’t collapse, we’ll extend the period, keep the project going.”

With local governments:

“Set up another platform company, transfer the debt, and we’ll give you some new money.”

With ordinary people:

“If you really can’t pay, we can adjust the term or change the method, but the loan can’t be defaulted.”

Public data still looks safe:

“Non-performing loan ratio is only X.X%”;
“Capital adequacy ratio meets standards”;
“Financial system overall stable.”

It’s like a person with cancer inside, but the physical exam says “basically healthy.”

2) For local governments: Cut wages, reduce services, keep borrowing

When finances can’t hold up:

Delay or stop infrastructure payments (construction workers and contractors unpaid);
Civil servants’ wages cut, layoffs, reduced staffing;
Public services shrink: schools, hospitals, pensions, social security funds insufficient;
Meanwhile, they keep borrowing new money, rolling old debts over, “to pay later.”

The result:

On paper, it looks stable; in reality, grassroots governments and ordinary people are being choked.

3) For ordinary people: Houses trapped, wealth management shrinks, prices rise

The final impacts:

Houses trapped
- When prices fall, they don’t let you default;
- When prices drop so much they can’t sell, you still have to keep paying;
- Unfinished buildings might give you “postpone delivery” or “lower interest,” but the principal remains unchanged.
Wealth management and insurance “hidden cuts”
- Originally sold as “principal guaranteed and returns,” suddenly become “net value products,” and losses are on you;
- Insurance and pension investments fail, but the government won’t tell you — instead, they will “adjust benefits,” “delay retirement,” or “reduce payouts.”
Inflation + stagnant wages
- Nominal wages may stay the same or slightly increase;
- Prices keep rising, especially for healthcare, education, rent, transportation;
- You’ll find:

Money remains the same, but what you can buy gets less and less.
This is the “invisible tax” and “invisible plunder.”

4) Using propaganda to hide the truth

Official rhetoric always is:

“Economic restructuring,” “housing bubble burst,” “improving quality,” “growing pains.”

When a few companies fail, it’s called:

“Poor management,” “corruption by a few officials,” “isolated risk events.”

Those who truly speak about systemic issues are either censored or labeled “pessimists about China.”

Thus:

The masses only see themselves getting poorer, but don’t see the entire mechanism designed to protect banks, the wealthy, and officials — a system of plunder.

5. How to explain this to comrades and the masses in the future?

Use three basic sentences:

“China’s crisis isn’t about whether it will happen, but that it’s already ongoing — not exploding overnight, but being squeezed out slowly over ten or twenty years.”
“The US crisis is that capitalists first get full, then the system suddenly explodes; China’s crisis is that capitalists + bureaucrats are eating and using the state machinery to share the crisis into monthly utility bills, prices, and wages.”
“The so-called ‘asset securitization,’ ‘deleveraging,’ and ‘stabilizing the housing market’ — in essence, is about: who pays the bad debts? Banks and the wealthy or the working people?”