I took a look at China's GDP for the third quarter today, which recorded 4.5%, surprisingly exceeding market expectations. But looking back at the A-share market, the Shanghai and Shenzhen 300 Index has been continuously declining 10 weeks, setting a record in nearly 10 years! For example The picture! I have been reading macro data and market trends in China recently, and the more I read, the more I feel that many of the logics are very chaotic and worrying. Next, I will talk about the logics involved! Let's take a look at the overall data on the surface: the GDP in the third quarter increased by 4.5% year-on-year, which not only exceeded market expectations but also rebounded from the 4.3% in the second quarter. But everyone knows in their hearts that, aside from the years of the pandemic, a growth rate of 4.5% is still the second worst quarterly performance since 2023, and the underlying driving force of the entire economy is actually very fragile. If we break down the data and look at it, this "tearing feeling" will be even more pronounced: The disconnect between industry and investment: In September, the industrial added value surged to 5.5% year-on-year, looking booming; At the same time, however, fixed assets investment in the first nine months of this year plummeted by 7.2%, including 4.2% in infrastructure investment. How long can the high growth of industrial output be sustained if companies are unwilling to invest money? The disconnect between external demand and domestic demand: China achieved a record trade surplus of $133.5 billion in September, and its current economic growth is almost entirely dependent on exports, especially new energy vehicles and semiconductors, although they seem to be booming. But looking at China, the biggest asset cornerstone of real estate is still falling, and ordinary people are holding their wallets tightly and dare not consume, causing domestic demand to freeze to three feet. The disconnect between fundamentals and the stock market: What is most troubling for secondary market investors is that A-shares have hit a record of 10 consecutive weeks of decline, which is the longest continuous decline in history. The economy is still growing, but the market is voting with its feet and declining all the way. At this point, many partners may ask, since the domestic economy is not ideal and the stock market is so weak, why can the RMB exchange rate still perform so strongly? Isn't this contradictory? In my opinion, this precisely exposes the unique "dual divergence" structure of the current Chinese economy: At present, the "trade surplus" is propping up the exchange rate, with a record breaking $133.5 billion trade surplus supporting everything, meaning that a large amount of hard currency, mainly the US dollar, is continuously flowing in through exports. The central bank and state-owned banks have strong regulatory power in the foreign exchange market, and through the foreign exchange reserves and countercyclical factors brought by the surplus, they have the ability to firmly fix the RMB exchange rate at a relatively strong position. Strong exchange rates provide strong support for net export exchange rates, but do not necessarily indicate any improvement in domestic demand or corporate profits. The stock market reflects' domestic demand and balance sheet ', while the exchange rate reflects' external demand and the will of the central bank'. But the capital market is very smart, it trades future corporate profits and domestic consumption willingness. The real estate market is declining, internal competition is intensifying, and consumption is sluggish. Enterprises cannot make money, and the stock market naturally continues to fall. But the logic of exchange rate trading is different, as it is more driven by the international balance of payments (huge surplus) and the will of policy makers to prevent capital outflows and maintain financial stability. The pricing logic of the two is completely different, naturally resulting in the phenomenon of "the stock market has been falling all the way, while the exchange rate has been strong and resistant to decline". The support of a "strong exchange rate" actually exerts a huge squeeze on the profits of export enterprises, which is an awkward cycle. Domestic demand is not strong, and everyone can only squeeze to engage in exports; But the strong exchange rate of the Chinese yuan has eroded the foreign exchange profits of export enterprises, resulting in "half a day's worth of exports, but still unable to exchange for the real profit growth of enterprises". This further explains why industrial output is high, but asset investment and stock market performance remain dismal. Simply put, the strong manufacturing and record breaking export surplus have given the entire Chinese economy a seemingly prosperous appearance. But this model, which relies solely on external demand and the will of the central bank, has enormous hidden dangers. Not to mention that domestic consumption and investment are rotten in the mud, just looking at exports themselves, with the escalation of friction with major trading partners such as the European Union, the last pillar of external demand may also be under tremendous pressure at any time. So in my opinion, even if China achieves its established GDP growth target and maintains a stable exchange rate, it definitely does not mean that the economic base has returned to health. This can only indicate that the global market is still digesting Chinese manufacturing, while domestic real demand, corporate profits, and balance sheets are still struggling in the quagmire. For us investors, remember not to be fooled by the beautiful GDP figures or strong exchange rate trends. Understanding the real situation of 'external strength and internal intervention' and clarifying the temperature difference between macro data, exchange rate trends, and capital markets is the core of surviving and understanding the direction of the Chinese market at present. And there's no need to rush to switch to U now, RMB will eventually go back to the era of 7! The current core logic is still to embrace high-quality assets from around the world, most of which come from the United States, such as BTC (BTC pricing power has been basically incorporated by the United States), Seven Golden Flowers is still one of the best high-quality assets, and VOO and QQ are still the best investment options for ordinary people. This article is sponsored by @ binancezh, titled 'Binance Buying US Stocks: Global Assets, Zero Second Time Difference, One Click Delivery'!