Economic Crisis in China Escalates as Implications for Taiwan and US Relations Grow

Kyle Bass, founder of Hayman Capital Management, has warned that China is facing its most severe economic crisis, with no apparent recovery in sight. The nation's exports to the US plummeted by 35% in May, and capital flight reached $500 billion in 2024, signaling a significant economic downturn. Unemployment rates have surged, with the youth unemployment rate hitting 16.9%, highlighting the strain on the labor market. Bass emphasized that the US holds a critical advantage through its control of the global dollar system, which could serve as a deterrent against China's military ambitions, particularly regarding Taiwan. He suggested signaling to China that access to the dollar system would be severed if military action against Taiwan is initiated. This approach, Bass argued, is more effective than direct military confrontation, which could result in catastrophic losses. The Chinese Communist Party's assertive stance on Taiwan, aiming to annex the island by 2027, poses a significant threat to regional stability. Bass highlighted the existential national security risk for the US if Taiwan were to fall under Chinese control, stressing the importance of maintaining the status quo. Additionally, Bass noted that global developments, such as the situation in Iran, may prompt China to reconsider its military aggression towards Taiwan. The potential consequences of such actions could have far-reaching implications, not only in the Indo-Pacific but globally.

Published: 6/28/2025