Logan Wright (Rhodium Group) on ChinaTalk — discussing Broken China — is the most narrative-altering conversation I've heard on China in years. The growth story is over. Not slowing. Over. podcasts.apple.com/gb/podcas… Rhodium projected 1–2.5% growth for 2026. China is now tracking below that, probably negative in Q2 and Q3. This is down from 7–10%. COVID is no longer the explanation. The root cause is the credit boom that followed the 2008 financial crisis — the largest single-country credit expansion in at least a century. Bank assets grew by a third of global GDP in eight years. Credit flowed into shadow banks, property, and local government infrastructure. Property was the trigger, not the cause. Construction is down roughly 80%, sales roughly 60%, and nothing has replaced what was once 20–25% of GDP. Credit growth ran at 18% a year in 2007–16, then 9%, and sits at around 5% now. Consumer lending is shrinking. Wright's answer to the always impressive @Brad_Setser question — why no crash? Leaders chose slow decay over crisis, because in China "the path to crisis is reform." The Japan parallel holds, with one difference. China's binding constraint is fiscal, not monetary (interest rates). The government deficit already sits at roughly 9.5% of GDP. Pushing it higher adds little without fixing the system underneath. They make @michaelxpettis point: Weak domestic demand and the export surplus are one problem, not two. Industries that fed the housing boom now sell abroad at cut prices. The result is persistent deflation and a weaker real exchange rate. Calling it K-shaped misses the structural link. @jordanschneider, playing Xi: power means making everything the world needs and owning the key technologies, even if Chinese consumers pay for this. Wright answers: if most demand is abroad, China can only grow by taking others' export share, "fighting over a shrinking pie." The new strategic industries — EVs, AI, robotics — get enormous coverage but add up to roughly 6.3% of GDP and need capital, not workers. Youth unemployment passed 20% before Beijing stopped publishing the figures in 2023. Beijing appears to treat this as a cyclical problem. It isn't. AI won't close the gap even if its claimed Chinese leadership may think so. China's frontier AI models earn roughly $11bn combined. Its big tech spends roughly $135bn on AI infrastructure this year and roughly $160bn next — 15–20% of US spending — and that spending relies on high share prices. China is short of both chips and capital. Setser's pushback is the important counterweight: exports still grow at roughly 10% a year, twice world trade growth, and supply-chain control creates genuine leverage. Wright concedes this is the real threat — not China becoming number one, but locking in dependence. That distinction matters for how Europe should think about exposure. The conclusion Wright lands on: there is no longer a systemic economic rivalry. China will not outgrow the West. What remains are military and industrial threats — and leverage the West holds but isn't using. China needs Western markets more each year. That asymmetry is a policy tool, and it works better used collectively. One footnote worth flagging separately. Wright cites Kevin Rudd's claim that Beijing sees AI as the state's "visible hand", able to outperform markets. I looked up Rudd's Chinese sources. None of them say that — all preserve a role for markets. Motivated reasoning, or something else? I'll post a fuller analysis of Rudd's framing later.