June Fourth 37th Anniversary｜The 37-Year Arbitrage Reincarnation: From Deng Pufang's "Kanghua Empire" to the Trillion-Yuan LGFV Giant Net! How the CCP's Dual-Track System Looted Three Generations! The Next Social Upheaval Will Have No "Square" or "Leader"—Instead, It Will Be Auxiliary Police Demanding Unpaid Wages, Homebuyers of Unfinished Buildings, and Rural Bank Depositors

This video, released on the 37th anniversary of the June Fourth incident, compares China's economic and social structures in 1989 and 2026. The host points out that 37 years ago, the dual-track price system for commodities and official profiteering, represented by Deng Pufang's Kanghua company, evolved into the current dual-track system of financial and survival elements, centered on land finance and trillions of yuan in local government financing vehicle (LGFV) debt. As land finance fizzles out and stability maintenance finances tighten, future social shocks will no longer feature a unified leader or a square, but will instead evolve into ubiquitous micro-resistance.

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Observe things like a stone, and refuse fragmented cognition. Today is June 4th, West Coast time, which is the 37th anniversary of June Fourth, 1989. Today, let's look back at China's current economic structure and compare it with the structure from 37 years ago—haven't we fucking come full circle? Today we are going to tell a story spanning 37 years, and its core boils down to one sentence: when a system tries to use administrative power to distort prices, it will ultimately be backlashed by those prices. Why is that? Today, instead of talking about anything else, let's talk about the social background and economic structure of the June Fourth movement in 1989, as well as the social background and economic structure of today. Let's make a comparison. 37 years ago, there was a company called Kanghua, which was the absolute totem of official profiteering of that era. And today, 37 years later, what is blooming everywhere? It's LGFVs. It's just that back then they were reselling steel and chemical fertilizer,

while today they are reselling land and credit. The names have changed, but the fucking playbook hasn't upgraded at all—it's still the exact same playbook, because the underlying logic running through it all still relies on arbitrage from price differentials inside and outside the system, which is identical. We will start from the most basic economic law and deduce all the way to what form China's future social shocks will actually erupt in. After all, every generation has its own June Fourth; although the logic is the same, there will still be changes. Let's start from the most basic economic common sense: the Law of One Price. Its meaning is very simple—in a frictionless market, at the same time, in the same place, the exact same thing should have only one price. A catty of steel should cost roughly the same whether bought by Zhang San or Li Si. This is the most basic common sense of a market. However, in the 1980s, the Chinese Communist Party precisely destroyed this law. China at that time was...

A typical shortage economy—well, it means there are not enough goods while demand is huge, so what to do? The Chinese Communist Party came up with a shrewd trick called the dual-track pricing system. For the same material, if it was allocated within the CCP's plan, an artificially suppressed planned price would be used, whereas market circulation used a fluctuating, much higher market price. Everyone sees the problem, right? For the exact same ton of steel, you have the planned price on the left hand and the market price on the right hand, with a huge price spread in between. In economics, there is a special name for this: economic rent. And this rent does not require you to create any value; as long as you hold an approval document in your hand, or the right to allocate materials, you can effortlessly stuff it into your pocket. This was the notorious official profiteering of that era. Official profiteering meant using planned prices and then reselling goods into the market to reap this price difference. Next, let us look at retail sales from 1985 to 1989.

How did the surge in commodity prices get out of control step by step? Inflation in 1985 was 8.8%, and in 1986 it fell back to 6%. Well, it looked manageable, right? But by 1988, it directly surged to 18.5%, making it the year with the fiercest price hikes since 1950. Meanwhile, the peak of monthly CPI went straight to a staggering 28.4% in February 1989. In other words, the money in ordinary people's hands was turning into waste paper at a speed visible to the naked eye. So in this frenzy of arbitrage, who was the super player standing at the top of the pyramid? The answer is China Kanghua Development Corporation. Older viewers may not be strangers to this Kanghua, because it was fucking notorious. The story of Kanghua dates back to 1984; it was originally called China Kanghua Industrial Co., Ltd., commonly known in the industry as Small Kanghua. Well, there was a Big Kanghua later on.

The narrative behind setting up this thing was fucking grandiose. It was said that the purpose of establishing it was to raise funds for the China Welfare Fund for the Handicapped. The chairman of this fund was Deng Pufang, which is to say, Deng Xiaoping's son. Now let's look at the initial setup of this company: back then, the State Planning Commission directly allocated 5 million US dollars in foreign exchange quotas. Foreign exchange also had a dual-track system at the time, which has been explained to everyone previously. Then, it invested 6 million RMB into this fund, and in addition, it held import exclusive operating rights that ordinary enterprises could simply never get, accompanied by extremely rare tax exemption treatments. Just imagine, exclusive operating rights plus tax exemption rights—what did that mean in a shortage economy? It meant this was a money-printing machine. Let's look at Kanghua's profits: Small Kanghua's profit in 1985 was 9.97 million, in 1986 it directly skyrocketed to 17.56 million, and by 1987 it hit 22 million. In three years, its profits more than doubled, fucking doubling and more.

This was not management capability at all; this was institutionalized privilege rent-seeking. Therefore, the CCP could never eliminate corruption, because the CCP's system itself is institutionalized corruption centered on power. What truly turned Kanghua into a behemoth was that upgrade in 1987. At that time, with the support of then-Vice Premier of the State Council Qiao Shi, Zhao Ziyang formally approved the establishment of the upgraded version of China Kanghua Development Corporation, namely Big Kanghua. Its personnel setup was fucking overwhelmingly powerful: the chairman was Tang Ke, former vice chairman of the State Planning Commission—well, that planning economic committee—while the vice chairman was Gao Yangwen, former Minister of Coal Industry, and the president was Han Bolping. The backgrounds of these people were already even greater. But compared to the founder of Big Kanghua, they were simply nothing. Who was it? Deng Pufang, who was directly the eldest son of Deng Xiaoping. Alright, with such a luxurious lineup, what did this personnel arrangement actually mean? It meant that it unblocked the vital channels for mobilizing resources across ministries and commissions. Consequently,

Kanghua began to undergo a crazy fission. Everyone look at this chart: by December 1988, in a short span of just over a year, this Big Kanghua had fissioned into 58 secondary subsidiaries and 113 tertiary subsidiaries, entrenched long-term along the North Third Ring Road in Beijing. Kanghua was the center of this super node. According to recollections from people involved, if people from Kanghua went to handle affairs in local regions, they would casually drop Deng Pufang's name, and that was truly effective. In China, flashing the name of their leaders to suppress others made getting things done particularly easy; everyone surely has personal experience with this point. Not only that, they also frantically meddled in the resale of important foreign trade import materials that were strictly controlled at the time. Kanghua became a living totem of official profiteering in the eyes of the entire society. Well, up to this point, on one side prices were out of control, while on the other side there was privileged arbitrage. The social atmosphere in China at that time was already starting to become increasingly explosive. In fact, there had already been bloodshed in 1984, and there was also some in 1986, though the scale was smaller. The CCP wanted to...

Wanting to suppress this social contradiction, the method of suppression was also very crude: to eliminate the price gap of the dual-track system all at once. This was the breathtaking price reform of 1988. As a result, this matter was also leaked to that fucking Huang Erdeng, who hoarded supplies in advance, causing prices to fucking rise even more severely. According to Zhao Ziyang's later recollections in the course of reform, this decision was made after internal communication among him, Li Peng, and Yao Yilin, followed by a formal report to Deng Xiaoping. After obtaining the approval of this shorty Deng, it was finally decided by the Politburo meeting. Hey, this procedure sounds very complete, right? But the problem precisely lay in its underlying logic. Zhao Ziyang's own reflection was also very thorough; he said that the reason this reform suffered a disastrous defeat was fundamentally not because of the simple inflation problem, but because the basic approach of the reform was fundamentally wrong. Where was it wrong? Zhao Ziyang reflected himself, saying it was wrong because he abandoned the combination of adjustment and liberalization, and abandoned the gradual...

market-determined pricing of the progressive route, turning instead to a government top-down massive price adjustment to artificially wipe out the price gap in one stroke. This is a typical microeconomic misjudgment. Because what is a price? A price is actually a signal generated in real-time by the collision of marginal costs and marginal utilities of tens of thousands of commodities. Administrative guidance simply cannot calculate it, nor is it possible to calculate it; no one can meticulously calculate prices. But at the time, the Chinese Communist Party vainly attempted to use a piece of administrative order to straighten out this price, and as a result, it gave this gang of princelings an arbitrage space. Hey, massively hoarding supplies to speculate on this price made the prices even more fucking out of control. Influenced by the propaganda of these people, the ordinary people got a clear and unmistakable signal that prices were going up, so they rushed to buy. Thus, the tragedy happened: ordinary people frantically began to withdraw money from banks to buy up all visible food. That CPI peak of 28.4% from back then was blasted out just like that. Resident savings in that year

decreased by a full 40 billion compared to expectations, and in 1988, this 40 billion was an astronomical figure. At that time, the per capita wage in the Beijing area was only about 160 yuan, and the entire macroeconomic instantly spun out of control. Zhao Ziyang later also reflected that actually, at the time, as long as value-preserving savings were implemented, letting interest rates beat inflation, this panic could have been stabilized, and there was no need at all to carry out that overly harsh rectification and consolidation later. However, history did not give Zhao Ziyang any chance. After the failure of the price reform, coupled with malignant inflation, and further compounded by the brazen plundering of social wealth by this gang of Kanghua companies, by the spring of 1989, all the resentment finally converged to a critical point. Please note a key fact: the cross-class consensus slogan chanted most loudly in the June Fourth movement back then was none other than overthrowing official profiteering and fighting corruption. In other words, the economic core of the June 4, 1989 Tiananmen crackdown was a collective resistance by the whole society against the dual-track system arbitrage network. The anger of the people superficially pointed to prices,

while deeply pointing to people like Kanghua who used power networks for risk-free arbitrage. How to deal with the demand to overthrow official profiteering directly pushed the line struggle within the Chinese Communist Party to a white-hot stage, ultimately triggering a violent reshuffle of power. The result of the fight was that the shorty Deng ultimately won. What was Deng's final response? It was self-amputation for survival: he wanted to personally dismantle the Kanghua empire at the center of the storm and make a risk isolation between Kanghua and his Deng family. In fact, in October 1988, Kanghua had already been forced to decouple from the Disabled Persons' Federation. What was the cost of decoupling? Actually nothing much, it just lost its tax-exempt status, but all other privileges remained exactly the same, unchanged. But what delivered the fatal blow to Kanghua was the June Fourth incident. By July 1989, Deng Xiaoping formally shut down Kanghua. It can be said that the closure of Kanghua was a blood sacrifice made with the lives of thousands and tens of thousands of ordinary people back then before it fucking closed. So whoever says Deng Xiaoping is a fucking good guy,

I think they really have no idea what kind of bastard Deng Xiaoping is. To put it bluntly, this fucking idiot didn't grow tall because he was weighed down by his own malicious intentions. So the question arises: Kanghua is dead, but is the dual-track system dead? In today's China, quite the contrary, it is not dead; it has simply shed the old coat of physical commodities and burrowed into two more hidden but much larger fields: land and finance. Let's talk about land first. How did the current land finance of the Chinese Communist Party come about? It was after the tax-sharing reform of 1994. At that time, the administrative responsibilities of local governments were getting heavier and heavier, but their fiscal revenues were collected upwards. What did this lead to? Not enough money to spend, so they found a new path to wealth creation called land finance. Note that the essence of this mechanism is exactly the same as the Kanghua of back then. Local governments use powerful administrative expropriation rights on one hand to monopolize land at extremely low compensation prices—this was the plan back then.

On the other side, selling it to developers at high prices via signboards—this is the ghost of the market. The huge price gap in the middle is still an economic rent extracted through administrative monopoly power. This path has been walked for more than 20 years. To what extent has the scale of land finance reached? I have said it countless times before. But to ensure continuity in everyone's content, hey, let me say it again: national land revenue skyrocketed all the way from 2.8 trillion in 2010 to a peak of 8.7 trillion in 2021. But then, once the real estate market collapsed, the engine directly stalled. From 2022 to 2025, it suffered four consecutive years of double-digit declines, and it is estimated that this year won't be any better, likely another double-digit drop. By 2025, land finance was left with only 4.15 trillion, a direct halving from the 2021 peak, evaporating 52%. Meanwhile, local government reliance on land dropped all the way from a peak of 43% in 2020 to around 15% in 2025. This money-printing machine that had been maintained for 20 years?

It stopped running right before our eyes. But what is even more ruthless? It is the dual-track financial system. Because capital is harder to track than land and even harder to effectively monitor. Today in 2026, those state-owned enterprises inside the system, along with the local government financing vehicles (LGFVs) backed by local governments—don't they rely on the implicit guarantee of government credit to obtain almost unlimited low-interest loans from state-owned banks and the bond market? This is a typical planned track. While private enterprises, which actually create the vast majority of jobs, are now fucking dying or severely wounded. Now everyone thinks private enterprises can get loans; they still fucking can't, and the borrowing costs for private enterprises are much higher than those of state-owned enterprises. Moreover, under the current economic conditions, they might not even be able to borrow money at all. Local governments continuously pump money out of the financial system by mortgaging inflated land values, ultimately weaving a giant debt net reaching a scale of hundreds of trillions. To put it plain and simple, this is an unprecedented interest-rate arbitrage guaranteed by state credit.

Its exploitation of leverage and misallocation of resources are far more terrifying and much larger in scale than the official profiteering (guandao) in the commodities sector back then. Just how big is this giant debt net today? Let's take a look using the latest data from the Two Sessions in 2026. By the end of 2025, the statutory debt balance of all levels of government had already surged to 96 trillion. By the end of this year, the statutory debt balance alone will break 108 trillion. Coupled with nearly 80 to 90 trillion in implicit debt, this year it will fucking break the 200 trillion mark. Well, when the land engine stalls, the pressure to maintain the operation of the entire the Chinese Communist Party (CCP) will suddenly rush toward the central government, which is a regular pattern of the CCP's organizational model. In 2026, the central government's general public budget expenditure is as high as 15 trillion, and where is this money said to be flowing? The budget says it's for development, industry, or education? But the underlying logic supporting all of this is massive expenditures for risk prevention and stability maintenance.

There is a specific large chunk in the expenditure budget called political and legal work, which corresponds to what? It's the stability maintenance network. Hey, this brings out a very clear characteristic: tens of thousands of county and township governments and community networks in China are simply the marginal nodes of the entire control system. During the golden age of land finance, these nodes could self-fund by selling land, and they could also independently defuse local risks. But today, local blood-generation functions are rapidly drying up, and these nodes have quickly degraded into fragile parasitic nodes. Your grid workers need to be paid, and your auxiliary police (fujing) also need to be paid; these are the funds needed to maintain basic operations. But almost all of these costs are pressed onto the CCP's massive transfer payments. Hey, this is a highly centralized blood-supply system. In the short term, it can still maintain the rigid stability of the entire surface, but in the long run, it is a crazy depletion of the CCP's final financial potential.

Well, now if we put 1989 and 2026 together for a comparison, we can make an inference. What inference? What form will future social shocks erupt in? In fact, the answer is hidden within this network. Look at this comparison chart: the organizational structure of the June Fourth Movement in 1989 was a typical star topology, where mobilization, information, and organization were all highly concentrated in a very small number of super-nodes. For example, the location was Tiananmen Square, and the leaders of the organization were specific university student leaders. The advantage of this structure was that mobilization was particularly fast, and the resonance could also be very strong. But its fatal weakness also lies right here: as long as the CCP is willing to pay the price to surgically eliminate these throat nodes with the highest centrality, the entire network will instantly paralyze. This is why the June Fourth Movement in 1989 could be swiftly suppressed. But the future will no longer be like this. Why? Because of three decisive changes.

The first thing is that the way protests ignite has changed. Hey, in the past, what did you think a protest was? Someone had to stand up and shout slogans, shouting those grandiose ones, yelling directly in the face of the fucking CCP. But in the future, maybe it won't be like that anymore. In the future, it might just be an honest person who saved money his whole life, only for it to be wiped out overnight by some village bank. He wakes up in the morning, hey, it's gone, or maybe he can't move his money, or someone who bought an unfinished property had all six wallets emptied out, the house is fucking half-built and stopped, and yet he still has to pay the mortgage. Or maybe it's an auxiliary police officer who hasn't been paid for three months, or a township teacher whose salary has been delayed for half a year. Are these people trying to overthrow anyone? They don't have that in mind; what they want is very simple: to get back their little bit of money. But have you noticed? Just this single sentence, "I want back my own money," hey, that's the hardest thing to handle, because you can't pin any labels on them, and you can't talk them out of it either. Then the second thing is actually what makes the CCP the most terrified, which is that stability maintenance costs fucking money.

The reason the stability maintenance system can operate twenty-four hours a day isn't because people fucking believe in that bullshit, nor is it because of high ideological awareness; this entire stability maintenance system is built purely by piling up money. Think about those grid workers knocking on your doors and the auxiliary police officers at the town entrance—why are they able to show up for work on time? Isn't it because there's a salary at the end of the month? Fine, but now the CCP's pipes are completely overwhelmed by deficits. If one day the CCP's financial capacity is hollowed out, and money can no longer reach the grassroots level, guess what will happen? This group of people at the bottom will first start to slack off and pretend not to see anything, and after a while, they just won't do it at all, and to make matters worse, they might even turn around and bite back. This group of people was originally a buffer cushion in the middle, but once this cushion is pulled away, any trivial friction at the bottom will flare up on its own if no one manages it or suppresses it, spreading from this thread to that thread. These three things are also what the CCP finds most headache-inducing: this time you can't even find a leader, there are no leaders, no squares, and no single place where these CCP bastards can surround everyone and wipe them out in one fell swoop.

News and that sentiment are running wild across all those encrypted grassroots channels; you block this route and they take that route. Isn't the CCP's favorite trick to capture the leader first? This time, fuck me, they're dumbfounded—thieves are everywhere, but not a single leader can be picked out. You suppress this one, and that one pops up. To put it bluntly, it turns into what? It turns into a game of Whac-A-Mole that never ends. The populace, instead of knocking down China with a single punch, hey, they just wear you down day by day, and what's being worn down is precisely the stability maintenance money bag that is the fastest to snap. And let me tell you a very simple truth: whether it's deflation or inflation, what actually gets damaged is the purchasing power under the ordinary people's real incomes. Everyone thinks inflation damages purchasing power, but does deflation not? Well, the destructive power of deflation is even more enduring, and the CCP will continue to consume the purchasing power of ordinary Chinese people's already dropping wages by raising the prices of survival goods. These monopolized resources, like water, electricity, and gas, are essentially just a bunch of Kanghua-style companies.

And the scissor gap between current administrative pricing and market pricing is actually a dual-track system created by the CCP as well. Your income is dropping, business risks are rising, but the cost of basic raw materials is fucking skyrocketing. What is this? Isn't this just what a dual-track system is supposed to look like? So looking back at these 37 years, the entire logical chain is actually crystal clear. In 1989, China fostered a super rent-seeking network represented by Kanghua in micro-pricing, and ultimately this structural economic injustice and despair over the reform path ignited the anger of the Chinese populace centered around overthrowing the bureaucrats. This is the economic background of the outbreak of the June Fourth movement. In the end, the CCP could only end this movement through slaughter and violent suppression. And today, 37 years later, although the tangible dual-track system for commodities has exited the historical stage, the CCP has constructed other dual-track systems. As long as the CCP exists, there will surely be a dual-track system; this is a historical law. What is it now? What is the dual-track system now? It is a dual-track trap jointly constructed by the monopoly of survival elements and the monopoly of financial resources, and it is even larger and more covert.

After all, over the past few decades, what on earth has the local government relied on through this crazy leveraging of urban investment funds? It means spending all the money of the next few decades in advance! Fuck, and spending it all down to the last penny. So actually, this matter isn't that mysterious; it is just the most rudimentary principle. Prices are something you can suppress for a while, but not for a lifetime. In 1988, they suppressed commodity prices, and today they suppress urban investment interest, while also manipulating the rise of living necessities. In essence, these are all the same thing—using administrative power to distort prices. But no matter how you distort them, sooner or later they will bounce back or crash. Moreover, the longer you wait, the more expensive the bill for the bounce-back will be, and the more it will squeeze into social conflicts. Now, the time to slowly pay back this bill has finally arrived. Furthermore, they share a commonality: this kind of price distortion has already slowly permeated into society. As for the current mode of resistance, it's just like the rotting skeleton of the the Chinese Communist Party (CCP); sigh, current resistance isn't about trying to swallow the the Chinese Communist Party (CCP) in one bite, but rather taking a bite whenever there's a chance, taking a bite whenever possible, and the reasons are utterly righteous.

When you demand unpaid wages, what can they say? When you demand project funds, what can they say? At most, they'll just slap you with a label of malicious wage-demanding or malicious debt-collecting. Sigh, this is what makes the the Chinese Communist Party (CCP) hurt so fucking much. Even if they want to cure it, they don't know where to treat it, because the the Chinese Communist Party (CCP) itself is that very host. Alright, I'll wrap up my sharing with everyone here today. If you like my program, click the link below. If you'd like to support me, you can join the membership channel. The membership channel upgrades its program every four episodes. Welcome to join the crew. See you in the next episode.