Wang Linpeng, the owner of Juran Home, has jumped off a building for the sixth time this year.

I remembered a saying in the financial world: deflation is scarier than inflation, deflation can kill.

In 1933, after experiencing the Great Depression and personal bankruptcy, Irving Fisher proposed the "Debt-Deflation Theory": when prices continue to fall, the real burden of debt sharply increases. Because the purchasing power of money strengthens, borrowers need to use more "valuable" money to repay their debts, leading to a wave of bankruptcies, corporate liquidations, and a surge in unemployment, further depressing demand and creating a vicious cycle.

This is the famous "deflationary spiral": delayed consumption because people expect things to be cheaper tomorrow; stagnation in investment due to uncertain returns; declining wages as corporate profits evaporate. Ultimately, the entire economy sinks like a leaking ship into the abyss of despair.

The current situation in China is exactly the same as Fisher's nine stages of deflation (as shown in the table).

Faced with such clear symptoms, any rational doctor would prescribe the same remedy: insufficient demand, so stimulate demand.

Nobel Prize winner Paul Krugman said that the Chinese leadership is "inexplicably unwilling" to shift towards domestic demand.
Almost all economists at home and abroad agree on one point: the core issue of the Chinese economy lies in the excessively low proportion of household consumption in GDP, and the pie of household income is too small.

The diagnosis is so clear, and the treatment plan should be the same. However, what we see are absurd "therapies."
The official prescription is "supply-side structural reform". This is like trying to solve a hungry person's problem by giving them a more advanced pot.
Injecting more supply into an economy suffering from demand exhaustion—whether it's photovoltaic, electric vehicles, or other "new productive forces"—will only exacerbate the quagmire of deflation and direct the disaster of excess capacity towards the entire world.

Behind this seemingly irrational policy lies an extremely rational yet cruel political calculation.
Due to China's growth model over the past few decades, its foundation is based on lowering interest rates (penalizing savers), suppressing wages, and weak social security (forcing the public to save), systematically transferring wealth from households to the production sector (especially state-owned enterprises and local governments).
Therefore, real structural reforms—which involve increasing residents' income and establishing a strong social safety net—mean a complete overhaul of the distribution pattern of power and interests. It means that local governments will lose funding for lavish image projects, and state-owned enterprises will no longer enjoy the feast of cheap capital. The central government may need to loosen its control over economic policies.

This is not a mere adjustment of economic policy, but a reallocation of power. The reason the government is reluctant to "medicate" the ailing demand side for a long time is that this medicine would undermine the foundation of the national Leviathan.

They would rather sacrifice the private sector than defend the interests of the national sector's fortress. The so-called "supply-side reform" without implementing "demand-side reform" is, after all, just to avoid a thorough "system reform" and to protect the firewall of vested interests.