Hello everyone, welcome back to Xiao Cui Current Affairs & Finance. Today is November 13, 2025, Eastern US Time.
Today, Reuters suddenly broke the news that Wu Qing, Chairman of the China Securities Regulatory Commission, had submitted his resignation due to health reasons. However, Chinese officials promptly released photos of Wu Qing on an overseas visit, seemingly refuting the rumor.

Regardless of whether this matter is true or false, at least one fact can be confirmed: the current generation of technocrats in China is having a very difficult time. This is evident not only at the China Securities Regulatory Commission but also at the People's Bank of China (PBOC).
The PBOC was recently exposed by Bloomberg for alleged technical fraud in its financial system's loan data. Coincidentally, the PBOC has just released its third-quarter monetary policy implementation report, which boldly expresses pessimism about the Chinese economy and even admits its inability to boost aggregate social financing growth.

This could very likely displease "our Emperor" (referring to China's top leader, Xi Jinping). I anticipate that PBOC Governor Pan Gongsheng might also soon offer his resignation. Working under "our Emperor" is indeed extremely challenging.
So, in this video, let's delve into the PBOC's latest monetary policy implementation report and see just how "treasonous" its contents truly are.

In the first special column of its report, the PBOC foreshadowed that China's overall financial aggregate growth would decline in the future, with loan growth also being slightly lower. The PBOC's stated reasons are that China's economic structure and financing channels have changed, and the base figures are increasingly high, leading to sluggish growth in loans and social financing.
The report specifically highlighted four concrete reasons, which are highly noteworthy because the PBOC is effectively speaking "in reverse," thereby revealing the true face of the Chinese economy.

Firstly, the PBOC states that future loan growth will decline because China's financial system is no longer as reliant on bank loans as before. In the first three quarters of this year, the proportion of loans in aggregate social financing (ASF) decreased to 48.3%, while direct financing, such as corporate bonds and government bonds, increased its share in ASF to 44.4%.
In other words, the PBOC seems to be telling us that direct financing will become more prevalent in the future, and the real economy will naturally reduce its demand for loans. However, anyone with a basic understanding of finance would find the PBOC's reasoning preposterous. The PBOC appears to suggest that China is learning from the United States, with its financial system gradually shifting from bank loan dominance to a capital market-led model, implying a more developed Chinese capital market, hence the reduced share of loans.

But this path has long been proven unfeasible in China. China's capital market direct financing simply lacks the capacity to replace bank loans. This year's data clearly shows that only the government is issuing bonds, with ASF almost entirely supported by government issuance. Direct financing through capital markets should ideally be a channel for private enterprises, yet this year, we see almost no private enterprises increasing their leverage.
Therefore, the true reason for the decline in loans is not that direct financing has replaced loan demand, but rather that government bond issuance has crowded out loans.

The second question is, the PBOC did not tell us how bank profits would be sustained if loan demand declines. 70% of China's banking industry revenue relies on net interest margin; there is simply no possibility of transitioning to an investment banking model.
This can be seen from the asset structure of Chinese households: their assets are primarily concentrated in real estate, and real estate is backed by loans. This differs from the United States, where household assets are mainly in stocks, which are backed by capital markets. Therefore, Chinese banks cannot transform into investment banks.
The first reason provided by the PBOC is completely illogical from an economic perspective. In my view, it is merely a very weak defense, perhaps even intended solely for "our Emperor," as no one else who understands the situation would dare to expose the logical paradox within it.

Next, the PBOC provided a second reason: this year, local governments issued 4 trillion yuan in special refinancing bonds, 60% to 70% of which were used to repay bank loans. Consequently, bank loan balances decreased because loans were replaced by government bonds.
This reasoning is still illogical. Not only is there a logical flaw, but the PBOC even exposed the local governments' true situation. Superficially, the PBOC states that bank loans underwent structural adjustments, and local governments repaid their "messy" loans. However, what the PBOC actually tells us is that local governments were forced to repay their loans out of desperation. Their decision to repay bank loans was not a proactive choice but because the risks could no longer be contained.
This was a forced debt restructuring, which is why the central government provided local governments with additional bond issuance plans. Local governments have fallen to a point where, without these additional bond quotas, their loans would "explode" (default). Do you agree with my interpretation?

Next, the PBOC offered a third reason. The PBOC informed us that another reason for the decrease in bank loan balances is the accelerated write-off of non-performing loans. Last year, banks wrote off 1.3 trillion yuan in bad loans, and in the first nine months of this year, they wrote off over 1 trillion yuan more. The more write-offs, the corresponding reduction in loan balances.
Does this reason still sound strange to you? I'll tell you a conclusion: the more bad debts banks write off, the harder it becomes for them to issue new loans. Therefore, the true meaning the PBOC intends to convey with this reason is that there are too many bad debts in banks now, leading to a decline in lending capacity, which is the real cause of the shrinking loan balance.
Writing off bad debts directly harms a bank's capital adequacy ratio and sacrifices its profits. When a bank's capital is tight, it becomes even more reluctant to lend. If it cannot lend, loan growth will naturally decline. This is not a healthy deleveraging but a vicious cycle, the beginning of systemic risk. The PBOC certainly knows the truth but chooses to use "reverse speech" to deceive "our Emperor."

Next is the final reason. The PBOC states that because asset-light industries are now rising, they have a lower reliance on loans. Therefore, they cannot offset the decline in real estate loans, leading to a natural decrease in the overall loan balance.
This statement is essentially the PBOC "laying its cards on the table" with us. The PBOC's implicit meaning is that after the decline of the real estate sector, China can no longer find an industry that can replace real estate in absorbing such a large volume of loans. This signifies that the era of credit expansion in the Chinese economy has ended, and the future will be a long-term structural downturn characterized by weak credit, weak investment, and weak growth.
Therefore, the decrease in loan balances is a negative outcome, not a positive one.

If the PBOC's first special column was explaining to "our Emperor" that the decline in loan growth was not due to a worsening economy but rather an optimization of the nation's financing structure, then the subsequent second special column is the PBOC preemptively finding excuses for the future decline in M2 growth.
Note that the order of these two columns is no coincidence; it's a carefully orchestrated "double insurance narrative" by the PBOC. The first column defends why loans would fall, and the second column preemptively "whitewashes" the issue of why even M2 would fall. The true mission of these two columns is singular: to stabilize "our Emperor's" psychological expectations and prevent him from realizing that the Chinese economy is entering a credit recession cycle.

For a central bank of such stature, it's an easy task to deceive "our Emperor," who is likened to a "primary school student." However, our channel's audience, whose intelligence far surpasses "our Emperor's," surely knows the real reason for the future decline in M2 growth. It's simply the inevitable credit multiplier degradation that occurs during an economic downturn: falling housing prices, depreciating collateral, platform defaults, household deleveraging, corporate reluctance to invest, and banks unwilling to lend—the entire money creation chain is broken. How could M2 *not* fall?

However, the PBOC told "our Emperor" a fairy tale. The PBOC told "our Emperor": "Your Majesty, the decline in M2 is not a bad thing, but a good thing. This is not a sign of our economic recession, but rather a manifestation of our financial system's greater maturity."
The PBOC's story is specifically constructed as follows:
1. Because there is no linear relationship between base money and M2, a drop in M2 has nothing to do with the PBOC, thereby disclaiming its own responsibility.
2. Actions such as banks buying bonds and changes in asset prices can also cause M2 to change. Therefore, a decline in M2 growth does not indicate economic weakening. "Your Majesty, please don't misunderstand."
3. China now has more direct financing, so the mechanism for money creation has also changed. The decrease in M2 is merely a reflection of diversified financing and has no relation to economic recession.
4. A slower M2 growth rate is a sign of a more mature financial system. "Your Majesty, don't worry, developed countries are all like this; we are just more developed, not in recession."

Now, I've summarized the rhetorical templates used by domestic technocrats to mislead "our Emperor":
* If loans fall, they say it's structural upgrading.
* If M2 falls, they say the financial system is more mature.
* If domestic demand declines, they say it's an inevitable manifestation of high-quality development.
* If real estate "explodes" (defaults), they say it's the financial system proactively deleveraging.
In any case, there is no bad news in China; in China, there are only good things, no bad things.

If we connect this with the news of China's loan data fraud exposed by Bloomberg in the past couple of days, we can fully understand why the PBOC is willing to abandon its insistence on loan growth and start finding various structural reasons for the decline in loans and M2.
Bloomberg's report clearly states: to meet the loan assessment targets set by regulatory authorities, banks are willing to use their own money to pay interest for clients, just to "boost volume and inflate data." What does this mean? The market has no demand, but bank targets must be met; companies don't want to borrow, but banks must show loan growth; with no real projects to fund, banks can only "self-lend and self-repay" to inflate data.

These loans have no real demand from enterprises; they are "hollow loans" created by banks purely to cope with assessments. Doing this once or twice might be acceptable, but year after year of "boosting volume" would be unsustainable for bank profits.
Meanwhile, regulators continue to rigidly assess banks' loan sizes, and this year even added a "private enterprise loan allocation ratio assessment." It would have been better not to assess; once assessed, banks are forced to resort to deception again.
Therefore, the PBOC knows better than anyone how much "water" (exaggeration) is in the current loan growth figures. To prevent banks from "playing themselves to death," the PBOC might as well let "our Emperor" accept the fact of declining bank loans and provide a reason that can fool "our Emperor." In reality, this is to save the commercial banks under its purview.

Currently, China's technocrats face immense difficulties working under "our Emperor." This is because they are confronted with a dual challenge that is almost impossible to fulfill simultaneously:
On one hand, they can never speak the truth. Every day, they must report upwards that "the situation is excellent," packaging every problem as an achievement and portraying every risk as an opportunity. This is a fundamental requirement of the system—they must ensure "our Emperor" hears good news and that the macro-narrative always remains positive.

But on the other hand, they must deal with the real economic mess: real estate "explosions" (defaults), local government debt pressure, deteriorating bank assets, weak consumption, and tight employment. These problems are real and unavoidable. One misstep could lead to severe incidents like the Evergrande default, wealth management product defaults, or the Henan Rural Banks incident. As soon as such an event occurs, "our Emperor" will be the first to hold them accountable.
Therefore, the pressure on China's technocrats is indeed immense. Whether it's the Chairman of the China Securities Regulatory Commission or the Governor of the PBOC, despite their high positions, who knows when "our Emperor" might apprehend them? The financial system is truly a "high-risk profession" for everyone.
Thus, I believe that Comrade Wu Qing's desire to resign might be genuine; it's just that whether he can resign is not up to him. Perhaps PBOC Governor Pan Gongsheng is also constantly pondering how he can make a safe exit. After all, times have changed.
Alright, that concludes today's program. If you like my show, please remember to like, comment, and share. This would be very helpful to me. Thank you all for watching, and we'll see you next time.