The recent monetary data released by the central bank is quite intriguing.

China's M2 now stands at 340.29 trillion yuan, an increase of 3.3 trillion yuan compared to one month ago. At the same time, new bank loans in 2025 have reached 16.27 trillion yuan, with a surge to 910 billion yuan just in December. What do these numbers indicate? They suggest that this is not a growth driven by natural demand, but rather a policy-driven injection of liquidity into the system.

To put it simply, fewer people are borrowing. Companies are reluctant to expand, and ordinary people no longer want to buy houses. The central bank has no choice but to increase money printing to stimulate demand. But the problem is—when borrowers disappear, these funds can only circulate within the financial system, leading to asset shortages or bond market bubbles, and they simply do not reach the real economy.

Interestingly, China has also achieved a record nearly 1.2 trillion USD trade surplus. What does this mean? It indicates that the excess liquidity cannot be contained domestically and must spill over into the foreign exchange market. As a result, overseas capital flows will change, including expectations for allocations in global stock markets, commodities, and even cryptocurrencies.

Let’s look at how the US is doing. After the Federal Reserve stopped bond purchases in March 2022, the Nasdaq plummeted by 27%. This is a typical "pulling the rope effect"—when liquidity is abundant, the market is euphoric, but once the pace slows down, sentiment instantly reverses. The speed of panic selling often exceeds expectations.

China’s current situation is similar. Continuous M2 expansion is merely to maintain the status quo, but data shows this cannot last long. Once the credit gap is exposed, a reset is only a matter of time—and it may happen faster than expected. The core issue of this cycle is not the growth outlook, but how a large, structurally distorted economy manages debt and the pain of transformation.