China borrowed to build, not to spend on wars, and the surplus is now everyone's problem.

China borrowed trillions through local government financing vehicles to build roads, rails, factories and industrial capacity on a scale the world had never seen. It never built the consumption to match. The factories kept running because they had to: stop the machines, and the debt looks unpayable. The excess production is now exported. BYD's Dolphin Surf landed in UK showrooms at £18,675, currently the cheapest new electric vehicle on sale in Britain. Chinese carmakers already account for nearly one in every ten cars sold in the UK.

The BYD Dolphin Surf at £18,675 undercuts every European electric car at entry level. MG's MG4 EV Urban starts at £23,495. Chinese brands can still price 20 to 30 percent below European rivals even after UK import duties of 10 percent, because their manufacturing cost base is structurally lower. The price war has already erased an estimated 69 billion US dollars in revenue across the Chinese EV sector between 2023 and 2025. That loss is being subsidised into your driveway.

Law of the Landlord: the person who controls the asset sets the terms for everyone else. China controls the factory. It controls the battery supply chain. It controls the price. When one party can sell below the cost of production and absorb the loss indefinitely, every other seller in that market is a tenant. European and British carmakers are paying rent on a market they thought they owned. Know this: when something feels impossibly cheap, someone else is carrying the cost. Find out who, and find out how long they can keep doing it.

China's local governments could not borrow directly so they created thousands of financing vehicles called LGFVs, Local Government Financing Vehicles, which borrowed on their behalf to fund roads, bridges, industrial parks and factories. The IMF estimated LGFV debt reached 8 trillion US dollars by end of 2023. Beijing launched a 12 trillion yuan package in late 2024 to clean this up by swapping the hidden debt into official government bonds. By end of 2024, the officially recognised hidden debt had fallen. The debt itself had not. It had moved address.

Total non-financial sector debt in China stood at 290.6 percent of GDP by end of 2024. The bond-swap programme accounts for roughly 20 percent of known LGFV debt and ignores the remaining 80 percent. LGFVs that cannot access normal bank loans are now borrowing from trust companies and leasing firms at interest rates above 8 percent, more than triple the cost of bond-market funding. That is a local government paying loan-shark rates to keep the lights on. Infrastructure investment in China is contracting as a direct result.

Law of Entropy: complex systems built on compounding debt degrade from the edges inward before the centre admits anything is wrong. The Chinese state spent two decades building infrastructure to generate growth, using land sales as collateral, borrowing against a property market that has since collapsed 17 percent in major cities. The collateral is worth less. The debt is the same. The swap programme renames the liability and resets the clock. Know this: when a government announces a debt cleanup, check whether the debt was cancelled or merely moved. These are not the same thing.

China borrowed and built solar manufacturing capacity of 1.8 terawatts annually. Total global solar installation in 2025 was roughly half that figure. The result is a permanent price collapse. Module prices fell from 25 cents per watt in 2021 to as low as 10 cents per watt in early 2026, below the production cost of even the most advanced panels. Six leading Chinese solar manufacturers reported combined losses of 2.8 billion US dollars in the first half of 2025. They kept shipping. China exported 226 gigawatts of modules in the first ten months of 2025 alone, up 11 percent year on year.

Solar module prices at 10 cents per watt are a gift for anyone installing solar right now, UK or US. A 4-kilowatt home solar system using panels at these prices costs roughly a third of what it did in 2021 at the panel-cost level. But this price floor is unstable. Beijing scrapped its VAT export rebate on solar products from April 2026, triggering a 10 to 15 percent price rise. Manufacturers focused on exports like Jinko Solar are adjusting, but the broader consolidation is forcing factory closures and supply uncertainty. The cheap era may already be ending.

Law of the Trap: a market structured around unsustainable pricing conditions draws in buyers and developers who build long-term plans on a cost base that cannot last. Governments and businesses globally have approved solar projects modelled on module prices of 10 cents per watt. When consolidation hits and prices rise, those projects face a shortfall they did not budget for. The trap is not the cheap price. The trap is the dependency built on top of it. Know this: record-low prices in a market controlled by one nation's industrial policy are not a new normal. They are a condition with an expiry date.