2 Red Flags Fixed Income Investors Must See

BY BILL GRIFFO

December 10, 2025

Let me start with this — because this should put some urgency in your step.

For decades, investors, CEOs, and politicians all told the same story:
“China needs us just as much as we need China.”

But today we’re entering a world where China no longer wants to import anything it can eventually make itself. And as Robin Harding from the Financial Times opined, when asked what China will want to buy from the rest of the world in 10 years time…

The real answer was: nothing.

And that reality will ultimately fuel a global economic earthquake.

The New Trade Problem: China Doesn’t Want What We’re Selling

China is already:

Building world-class universities
Creating its own luxury brands
Replacing imports with domestic champions
Subsidizing technology until it dominates global market share

And as we saw in our earlier rare earth report — China is increasingly willing to use export controls and supply chain dominance as leverage. Not because it wants conflict, but because it wants self-sufficiency and strategic autonomy.

Today China imports:

Semiconductors
Aircraft
High-end software
Precision manufacturing tools

But let’s be honest…

Those are temporary purchases because the truth is China intends to master (and export) every single one.

This has been China’s “Export-Only Model” since 2008 when they realized they could not rely on the USto uphold the strength of the US dollar.

Why This Is a Global Problem

Global trade works only if both sides have something of value to exchange.

But if China:

Sells everything cheaply
Buys almost nothing
Intentionally avoids foreign dependence

…then how can Europe, Japan, South Korea, and the U.S. maintain their economic models?

Workers need jobs. Exporters need customers. And countries need balanced trade flows to sustain their currencies… Period! Check this out:

As Goldman Sachs recently showed, China’s upgraded growth outlook through 2035 subtracts growth from Germany and other advanced economies. Why?…

Because it comes from increased exports that actually replaces competitors exports, not from their domestic consumption.

This is the first time in economic history that one country’s increased growth forecast becomes a growth subtraction for another country’s growth forecasts.

The Geopolitical Undercurrent

This shift isn’t happening in a vacuum. As we wrote in China Cuts Off the U.S. Military , Beijing feels deeply insecure about U.S. export controls, sanctions, and military posture.

That insecurity is pushing China further toward:

Full supply chain control
Expanded industrial subsidies
Reduced reliance on Western technology
Assertive use of trade as a geopolitical weapon

The end result is a world that trades less — and fights more over what is traded.

The Numbers Back the Logic

The Chart Below illustrates China’s Shift Toward Self-Sufficiency by breaking down Exports vs Domestic Consumption

The bottom line is China’s new no-trade strategy means more inflation, more resource nationalism, and more volatility.

The Investment Impact: A World With Less Trade Is a World With Higher Inflation

If China won’t import:

Germany loses its industrial customers
South Korea loses its electronics customers
Europe loses its car customers
The U.S. loses a major buyer of services and intellectual property

That lost demand forces countries to:

Cut welfare
Deregulate
Boost competitiveness, in other words purposely weaken your own currency to make your exports cheaper relative to China’s.

And when all else fails?

Protectionism.

Tariffs
Industrial policy
Economic fragmentation.

None of these lower inflation… — They raise it!

We’ve been warning for over a year that the world is slowly walking toward a new monetary system and that inflation will be structurally higher (revisit our piece on Trump’s Inflation Strategy ).

China’s strategy accelerates that future. All you need to do to see their strategy in motion is look at the accumulation of Gold by China over the past 10 years:

China’s “all time record trade surplus” in 2024 would have balanced if the west allowed gold to rise to $22,000/oz… At $22,000/oz., China’s 1,384 tons of gold imports equaled China’s trade surplus.

The problem is that gold at $22,000 oz. implies a massive devaluation of the USD and global fiat currencies, and with it, a loss of power for western financiers…

But the truth is less about China not wanting to trade… It is that China understands that western paper currencies are hugely overvalued relative to gold and silver.

Portfolio Strategy: How to Prepare for the “China Buys Nothing” World

Long-term investors should begin reallocating toward assets that thrive when:

Trade declines
Inflation rises
Global supply chains fracture
Geopolitics override economics

Those assets include:

Hard Assets

Gold and Bitcoin — as we discussed in our AI shakeout and inflation pieces — are independent of trade flows and monetary experiments. They thrive when trust breaks down.