China doesn't raise rates: its economy is fighting deflation

China doesn't raise rates because it has no inflation: it has the opposite

Why is China the only giant that hasn't moved rates upward? Because its problem is exactly opposite to that of the U.S. and the European Union. While major Western economies raised the price of money to curb post-ELbichito demand inflation and the energy shock, Beijing faces the contrary: a CPI that has been near zero or outright negative for some time, and an PPI accumulating years of deflation.

That is the starting point. Raising rates in such a country would not be monetary orthodoxy; it would be putting the finishing touch on consumption.

Why China cannot raise interest rates

The diagnosis is a recession of balances. The Chinese property market burst—Evergrande, Country Garden and a list that doesn't make headlines—families are buried in debt and, above all, frightened. When a household believes its biggest asset, its property, is worth less and its debt remains intact, it stops spending. Consumption doesn't ignite from a press conference.

And here is the paradox that dismantles the manual: lowering rates doesn't help either. It’s pulling a rope.

Credit won't circulate because no one wants to incur more debt, not because money is expensive.

Can China sink the U.S. by selling its bonds?

The other recurring question is what Beijing does with its reserves. They are managed by the SAFE, and much of it has gone into U.S. public debt, with interest payments reverting to the state. No trickery.

The idea that they could dump hundreds of billions at once to take down Uncle Sam is childish. Such a move would depreciate the Chinese portfolio instantly and spike the rates Beijing pays to finance itself. Mutual deterrence, not a red button. And the detail almost no one notices: the return on that portfolio is peanuts compared to the property hole.

From Yuan to bullion: the fiscal turn of gold

From here, the matter shifts elsewhere. It is argued that gold is the ultimate refuge: bought with ID, without a trace, buried on the plot. The fine print dismantles this narrative. If there is an invoice, selling the metal incurs the same tax as any capital gain, between 19% and 23%, without dividends and with custody costs. If there is no invoice, the problem isn't the armored van; it’s Article 39 of the IRPF (Personal Income Tax), which presumes undeclared wealth based on lifestyle, without needing a shovel.

And one detail that busts the fantasy of the invisible treasury: Law 7/2012 prohibits paying more than one thousand euros in cash. You have the gold, but you can't buy a car with it.

A calculation circulating puts numbers to the other side. 50,000 euros invested in the S&P 500 for twenty years, with an 8% annual return, becomes about 233,000; the tax authority keeps around 41,000. With a 10% return, the amount reaches 336,000 and the tax bill is around 68,000. Between 22% and 24% of the gain, only upon selling.

In the end, the only certainty remains: the rate you pay is signed by someone else every four years, and the stone you bury in the garden still weighs exactly the same.