China Signal – Inside the Firewall, February 22, 2026

Supply Chain Decoupling: From Adjustment to Structural Separation

The decoupling of U.S. retail supply chains from China has moved beyond policy rhetoric into measurable restructuring. Verified data shows Walmart reduced its China sourcing from approximately 80% in 2018 to 60–70% by late 2023, with imports from India surging from 2% to 25% over the same period. The company has invested over $6 billion in Mexican distribution infrastructure. Target has achieved a 30% reduction in China exposure but at significant margin cost, with adjusted EBITDA falling from $52.2 million to $3.5 million in Q2 2025.

Claims circulating in Chinese-language media that Hobby Lobby reduced China sourcing from 65% to below 10% could not be independently verified through Tier 1 sources. One industry analysis noted Hobby Lobby’s operations have “not been significantly impacted” by tariff changes due to a domestic sourcing focus, which partially contradicts the narrative. However, the broader trend is unambiguous: U.S. tariffs on Chinese goods have reached 145% in some categories, with re-export penalty measures adding 40% on suspected transshipment countries.

In the automotive sector, the U.S. Department of Commerce’s Connected Vehicles rule banning Chinese-made hardware and software from vehicles sold in the U.S. represents a structural decoupling milestone. Apple’s accelerated “China-plus-one” strategy and Foxconn’s $3.3 billion Vietnam expansion are independently confirmed developments.

Sources: TRADLINX supply chain analysis; Fortune; ainvest.com financial analysis; U.S. Department of Commerce Connected Vehicles rule. Confidence: HIGH for trend; MEDIUM for specific percentages.

EV Sector: BYD’s Fifth Consecutive Monthly Decline

BYD sold 210,051 new energy vehicles in January 2026, confirmed by multiple independent sources including Bloomberg, CnEVPost, and electrive.com. This represents a 30.1% year-on-year decline and a 50% drop from December 2025 — the fifth consecutive month of YoY decline spanning both battery-electric vehicles (down 33.6%) and plug-in hybrids (down 28.5%).

Important context absent from claims circulating in Chinese-language media ecosystems: BYD’s exports remained strong at 100,482 units (up 51.5% YoY), and the January decline reflects the end of NEV purchase tax exemptions (a new 5% tax took effect January 1), expired trade-in subsidies, and pre-Lunar New Year seasonal slowdown. BYD is also managing inventory ahead of major product launches.

Sources: BYD official disclosure; Bloomberg; CnEVPost; electrive.com; CleanTechnica; Yahoo Finance/Zacks

Property Market: S&P Downgrades 2026 Forecast

S&P Global Ratings lowered its 2026 China property sales forecast in February to a 10–14% decline, significantly worse than the 5–8% drop predicted in October. Total property sales in 2025 fell to 8.4 trillion yuan (~$1.15 trillion) — less than half the 2021 peak of 18.2 trillion yuan (~$2.5 trillion). National new-home prices fell 3.1% YoY in January 2026, the 31st consecutive month of contraction.

Claims of “78% price drops” aggregated from Chinese-language social media reflect cherry-picked cases in lower-tier cities, not the national average. Verified data shows national new-home prices are down approximately 10–15% from peak depending on city tier, with second-hand markets hit harder (Beijing secondhand down 8.5% YoY in December). Goldman Sachs estimates values could fall another 20–25% without intervention — severe, but not the extremes claimed.

The foreclosure data is partially verified: reports confirm rising bank auctions of repossessed properties, though the specific claim of 70,000 units and 23 financial institutions listing seized properties could not be independently confirmed through Tier 1 sources.

Sources: S&P Global Ratings (Feb 2026 via CNBC); NBS official data; Goldman Sachs Research; GAM Investments

Gold & Silver: Trust Crisis in Precious Metals

China’s precious metals market faces a cascading trust crisis. Videos circulating on Chinese social media show Beijing Olympics commemorative silver coins stamped AG999 testing as copper-core counterfeits, and investment silver bars from state-owned China Construction Bank reportedly containing tin. Claims that 60 tons of counterfeit silver bars entered circulation have further destabilized confidence.

Separately, the collapse of a major Shenzhen trading platform affecting 150,000 users and involving over 13.4 billion RMB (~$1.84 billion) has been reported across multiple Chinese media sources. In Shenzhen’s Shuibei district — China’s largest gold trading hub — physical cutting of bars has reportedly become the only accepted verification method.

A VAT reform cutting the deductible tax rate for gold jewelry processing from 13% to 6% has squeezed margins across the supply chain. Verified data shows 2025 gold jewelry consumption fell sharply (approximately 30% decline to 363 tons) while gold bar and coin purchases surged over 30% to 504 tons, confirming the shift from discretionary jewelry to risk-hedging assets.

Sources: Chinese social media videos; Shanghai Gold Exchange data; multiple Chinese media reports on Shenzhen platform collapse. Confidence: HIGH for gold consumption shift; MEDIUM for counterfeiting incidents; LOW for 60-ton rumor.

Military Purge: Zhang Youxia Detention Claims

Unverified claims continue to circulate in overseas Chinese media ecosystems that CMC Vice Chairman Zhang Youxia may be near death in detention. These claims cannot be independently confirmed and originate from single-source diaspora outlets.

The broader purge pattern carries more analytical weight: multiple sources report the military has expanded investigations to officers with even limited professional contact with Zhang and former CMC member Liu Zhenli. Separate unverified claims describe retired generals organizing joint letters and active-duty units discussing “marching to Beijing.”

Claims that Liu Yuan has taken control of the 82nd Group Army were effectively rebutted by commentary noting the unit falls under the Central Theater Command (whose commander was recently promoted by Xi) and that PLA regulations require the CMC chairman’s signature for any company-level unit movement. The transfer of a new commander to the Beijing Garrison Command appears designed to reinforce Xi’s control of the capital.

Sources: Claims aggregated from Chinese-language diaspora media; analytical commentary from multiple China watchers. Confidence: LOW for specific claims; MEDIUM for broader purge pattern

Officials with Family Abroad: Expanded Crackdown

The South China Morning Post reported on February 18, citing three sources, that CCP agencies have conducted multiple screening rounds since early 2025 to map overseas ties of senior officials and SOE executives. The scope now includes cases where only children reside abroad — previously limited to spouses. By late 2025, at least 20 officials had been removed from key posts.

Historical context: in 2014, Beijing’s People’s Procuratorate disclosed approximately 4,000 corrupt officials had fled abroad over 30 years, each taking an average of about 100 million yuan (~$13.7 million). The expanded screening signals that Xi’s anti-corruption apparatus has shifted from punishing flight to preventing it — a qualitative escalation in control.

Sources: SCMP (3 named-position sources); Beijing People’s Procuratorate (2014). Confidence: MEDIUM-HIGH

Youth Despair: The “No Afterlife” Generation

The most viral phrase on Chinese social media this Lunar New Year was not a greeting but a dark inversion: “Wish me an early death and no afterlife.” In traditional Buddhist and folk belief, reincarnation represents hope. When young people explicitly reject even future lives as worthwhile, they express a conviction that the structural conditions producing their despair are permanent.

The material basis is confirmed by official data. Youth unemployment has repeatedly hit record highs. Posts aggregated from Chinese platforms describe 5,000 yuan (~$690) in Lunar New Year savings as “wealthy” while many report inability to withdraw 2,000 yuan (~$275) in cash. Accounts from viral posts describe PhD graduates sending 100+ resumes with no responses, 20,000 applicants for 200 positions, and women increasingly entering food delivery work previously dominated by men.

Lunar New Year: Economics of Performed Prosperity

Reports aggregated from diaspora outlets and Chinese social media show migrant worker confessionals flooding platforms about the financial toll of homecoming. The phrase “365 days of scrimping, seven days of performing fake wealth” went viral. Workers earning 6,000 yuan/month (~$830) who save less than 20,000 yuan/year (~$2,760) report spending 10,000 yuan (~$1,380) on New Year gifts and red envelopes. The phenomenon of “two-tank cars” — vehicles driven only during New Year — has become a recognized social category.

A village chief reportedly broadcast over loudspeaker: “Don’t talk about cross-border e-commerce. Don’t say you’re a CEO. If you have money, spend your own.” The cultural commentary reveals the gap between official economic narratives and household reality.

Sources: Weibo, Douyin, Xiaohongshu posts (widely aggregated); Radio Free Asia interviews; multiple vlogger confessionals

Product Safety: Counterfeit Construction Materials and Consumer Goods

A pattern of counterfeit materials has surfaced across construction and consumer goods sectors: steel rebar at Nanjing Metro Line 9 that snaps on light impact, copper-labeled electrical wire with aluminum cores, cables filled with cement, fire extinguishers that explode on activation, and red bricks that crumble between fingers. A fake infant formula operation in Henan Province generated 6.5 million yuan (~$895,000) in six months producing formula that cost 2–4 yuan per can but sold for 30–88 yuan, impersonating 14 imported brands.

While individual incidents are documented through social media videos, the systemic claims cannot be independently verified through Tier 1 sources. However, China’s history of food and product safety scandals (melamine formula, gutter oil) is well-documented, and the pattern described is consistent with established regulatory gaps in enforcement at the local level.

Sources: Chinese social media videos; vlogger investigations. Confidence: HIGH for individual incidents (video evidence); MEDIUM for systemic characterization.

Demographics: Births Fall Below 8 Million

China’s National Bureau of Statistics confirmed 7.92 million births in 2025, down 17% from 9.54 million in 2024 — the lowest since records began in 1949. The population fell by 3.39 million to 1.405 billion, the fourth consecutive year of contraction and the largest annual drop on record. The birth rate fell to 5.63 per 1,000 people. Those aged 60+ now number 323 million (23% of the population).

As Japan Times analysis notes, births have fallen to levels comparable to 1738, when China’s population was approximately 150 million. The number of women aged 20–34 — responsible for 85% of births — is projected to drop from 105 million in 2025 to 58 million by 2050, making any lasting fertility rebound structurally unlikely.

The Cyberspace Administration has launched a campaign prohibiting online content promoting non-marriage or non-childbearing lifestyles. China also removed contraceptives from a VAT exemption list in 2025, imposing a 13% tax on condoms effective January 1, 2026. These coercive pronatalist measures have drawn sharp criticism on Chinese social media.

Sources: NBS official data (confirmed by PBS, CNN, SCMP, Caixin, Reuters); Japan Times demographic analysis; PBS/AP reporting on policy measures

U.S. Tariff Escalation: Impact Data

The tariff regime affecting China trade has reached levels that constitute a structural barrier rather than a negotiating tactic. Key verified figures: baseline 10% on all Chinese imports; peak rates of 145% on certain categories; re-export penalties of 40% on suspected transshipment countries; India’s effective tariff rising to ~50%; 25% tariffs on steel and aluminum from China. Walmart has reportedly been pressured by China’s Ministry of Commerce after requesting Chinese suppliers cut prices by 10% to offset tariff costs.

Sources: U.S. Commerce Department; Fortune; TRADLINX; ainvest.com analysis

Every issue closes with a transparent accounting of what we could and could not verify against Tier 1 institutional sources.

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