1 Why the MSS is treating ‘lying flat’ as a national security issue
MSS calls out ‘lying flat’ discourse
On April 27, the PRC Ministry of State Security published on its official WeChat account an article titled, “Those Who Incite ‘Lying Flat’ Are Themselves So Busy They Hardly Have Time to Take a Seat” (煽動“躺平”的他們，正忙得腳不沾地).
The article attributes the growing prevalence of “lying flat” discourse online to “foreign infiltration.” For instance, the article claims that “overseas anti-China hostile forces” have, in recent years, leveraged online platforms to deliberately amplify social anxiety, distort interpretations of development challenges, and continuously promote pessimistic narratives such as “effort is futile” and “hard work leads to disadvantage.” The article added that these efforts aim to manufacture negative sentiment, escalate individual hardships into broader social antagonism, and mislead or co-opt young people, thereby eroding their motivation to strive and potentially undermining the foundational values of society.
The article further alleges that “certain overseas organizations fund various anti-China media outlets and think tanks to fabricate narratives such as ‘hard work equals exploitation’ and ‘social stratification makes effort meaningless.’” It also claims that “these organizations heavily sponsor ‘lying flat influencers,’ mass-producing short videos promoting ideas like ‘lying flat is justice’ and ‘anti-involution equals anti-exploitation,’ thereby conducting systematic ‘lying flat indoctrination.’”
The article does not disclose the names of the organizations involved in fueling “lying flat” discourse, nor does it identify the alleged influencers receiving such support.
Subsequently, multiple state-affiliated media outlets republished and adapted the MSS’s article on “lying flat” discourse with revised headlines. For example, China National Radio and the CCTV News app used the headline: “Certain Overseas Organizations Fund ‘Lying Flat Influencers’ in Attempted Infiltration, Ministry of State Security Reveals,” while Guancha.cn published: “Ministry of State Security: Anti-China Forces Fabricate Narrative That ‘Social Stratification Makes Effort Useless.’”
Backdrop
Under MSS head Chen Yixin (a close associate of Xi Jinping), the state security apparatus has been increasingly commenting and intervening directly in economic and financial affairs following the 20th Party Congress in 2022.
Our take
The MSS article criticizing “lying flat” discourse and blaming “foreigners” for essentially carrying out ideological infiltration reflects heightened efforts by the CCP to control social sentiment amid worsening domestic economic conditions.
1. The CCP’s primacy concern with “lying flat” is that it is a form of “passive resistance” that fundamentally undermines its traditional mobilization model. The Party originated from labor movements and strikes, and is acutely aware of the disruptive power of work stoppages and non-cooperation. Historical episodes such as the Anyuan coal miners’ strike of 1922 demonstrated how halting production (cutting power supplies and suspending transport) could force concessions from authorities. The current CCP leadership likely views “lying flat” (reflected in disengagement from factories, markets, and the workplace) as a modern incarnation of the sort of collective strikes it once organized, and therefore a serious threat to its rule given its historical experience.
China’s economic growth has long depended on the country’s vast workforce and extended working hours (e.g., the “996” system). The “lying flat” ethos — which advocates a minimalist lifestyle and eschews conventional “musts” like career, home ownership, marriage, and children — directly disrupts both labor supply and domestic demand. This poses a structural challenge to a system reliant on continuous capital accumulation, potentially weakening the foundations from which the regime elites derive sustained economic returns.
2. The MSS article serves to externalize domestic social tensions in the PRC. By reframing the “lying flat” issue as conflicts between Chinese society and “foreign adversaries,” the CCP is seeking to deflect attention from actual systemic distributional imbalances that are to a great extent the cause of societal problems in China today.
Publicly available figures underscore the huge wealth gap in China. Data from China Merchants Bank for 2024–2025 show a pronounced concentration of wealth in the upper echelons of society. By the end of 2024, approximately 2.49 percent of high-net-worth clients (Jinkuihua-tier and above) controlled 81.90 percent of the bank’s total assets, with average assets reaching 2.333 million yuan per client. In contrast, the remaining 97.5 percent of customers held an average of only 13,200 yuan each.
When the official narrative of “prosperity through hard work” confronts the reality that roughly 2.5 percent of individuals control 80 percent of the wealth (extrapolating from China Merchants Bank data), the regime faces a significant legitimacy challenge. This incentivizes Beijing to blame “lying flat” on “foreign funding” and outsiders more broadly to redirect youth discontent away from critiques of domestic inequality while ginning up nationalistic sentiments in the call to resist “cultural infiltration.”
3. Labor market conditions in 2026 further explain Beijing’s heightened sensitivity to “lying flat” and its efforts to preemptively suppress potential sources of social instability. In March 2026, the youth unemployment rate (ages 16–24) rose to 16.9 percent, reaching a five-month high. At the same time, the growing adoption of generative AI technologies in China appears to be displacing white-collar roles, eroding returns on education for those with higher degrees.
Concurrently, the implementation of delayed retirement policies in 2026 has further constrained career advancement opportunities for younger cohorts and disrupted intergenerational support structures (such as grandparents providing childcare). The CCP is likely concerned that the combined pressures of diminished employment prospects and weakened family support could see the “passive withdrawal” of Chinese youth from society evolve into more active forms of resistance against the regime. This is a key risk factor that the regime’s national security forces appear intent on containing in advance.
4. The Xi Jinping leadership has long relied on the narrative of “national rejuvenation” to drive social mobilization. To that end, state media has attempted to manufacture a vast number of “little pinks” (nationalistic youths) imbued with a “struggle spirit” to propagate campaigns such as the “Chinese Dream.” The “lying flat” ethos, however, directly counters Beijing’s efforts at mobilizing Chinese society towards the CCP’s goal by fostering attitudes of “fatigue” and “low desire,” particularly among the youth.
Although the “lying flat” phenomenon is currently decentralized, the state security authorities are concerned that online influencers associated with it could evolve into new focal points of social organization. By labeling such actors as “foreign-funded,” the state security authorities create a basis for regulatory action, including the removal of related groups, accounts, and commercial activities. Beijing would be hoping that such action would prevent passive discontent from evolving into organized movements with explicit political objectives.
5. The CCP’s elevation of “lying flat” to an issue of regime security does not appear to be driven by verified evidence of large-scale foreign funding. Rather, the authorities are going after “lying flat” because it exposes structural realities and problems in China such as extreme wealth concentration and entrenched social stratification. When 2.5 percent of the population controls the vast majority of resources, the concept of “struggle” loses all economic rationality for the remaining 97.5 percent.
The MSS’s intervention on “lying flat” can therefore be interpreted as an attempt to compensate for declining economic incentives through political deterrence. However, as long as the disparity in per capita assets between lower-income youth and elite groups remains on the order of nearly 200-fold (13,200 yuan versus 2.333 million yuan), and pressures from unemployment and AI-driven labor substitution persist, such securitization efforts are unlikely to restore social dynamism. Instead, regime intervention could steer social sentiment toward more subdued and latent forms of societal resistance.
2 UAE’s exit from OPEC likely to squeeze Beijing
UAE, Asian countries look to the US for swap lines
April 19
The Wall Street Journal reported that U.A.E. central bank governor Khaled Mohamed Balama had proposed the idea of a currency-swap line with U.S. Treasury Secretary Scott Bessent and Treasury and Federal Reserve officials in meetings in Washington in the week of April 6, citing U.S. officials familiar with the matter. The officials added that the Emiratis stressed that they had thus far avoided the worst economic effects of the U.S.-Iran war but might still need a financial lifeline.
April 22
Secretary Bessent told a U.S. Senate Appropriations subcommittee budget hearing that a number of U.S. allies in the Gulf region and in Asia have requested currency swap lines to help them manage energy shocks and other fallout from the conflict in the Middle East.
Bessent said that the Treasury intends to utilize the Exchange Stabilization Fund (ESF) to execute these operations. He explained that, compared with traditional standing swap lines led by the Federal Reserve — which require approval by its Board — deployment of the ESF would grant the executive branch greater strategic flexibility.
At the hearing, Bessent framed the issue in terms of “national financial security.” He emphasized that the UAE holds more than $1 trillion in U.S. assets, including substantial holdings of Treasuries and equities. Due to the closure of the Strait of Hormuz amid the U.S.-Israel-Iran conflict, the UAE is facing a severe shortage of U.S. dollar liquidity. Without access to swap lines, it could be forced into “disorderly liquidation” of U.S. Treasuries to obtain cash, potentially causing significant disruption to U.S. financial markets.
Bessent said, “And swap lines, whether it’s from the Federal Reserve or the Treasury, are to maintain order in the dollar funding markets and to prevent the sale of the U.S. assets in a disorderly way. So, the swap line would benefit both the UAE and the U.S., and as I said, numerous other countries, including some of our Asian allies, have also requested them.”
UAE withdraws from OPEC
On April 28, the UAE announced that it will withdraw from the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+ effective May 1.
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Primarily composed of oil-producing nations in the Gulf region, OPEC has for decades influenced crude oil prices through coordinated production adjustments and quota allocations among member states. The organization played a pivotal role during the oil crises of the 1970s, which reshaped global energy policy.
Although production leadership within OPEC is dominated by Saudi Arabia, the UAE possesses the second-largest spare production capacity within the group. In effect, it serves as a secondary “swing producer,” capable of increasing output to stabilize market prices.
OPEC had constrained the UAE’s daily production to a range of 3.0–3.5 million barrels. As a member, the UAE bore a disproportionate share of forgone oil revenue due to these limits.
Since 2020, the UAE has pursued an expansion of its production capacity from under 4 million barrels per day to 5 million barrels per day by 2027, a target later advanced to the end of 2026. Prior to the U.S.-Iran conflict, however, approximately 30 percent of its capacity remained idle (with actual capacity reaching 4.85 million barrels per day). The UAE’s oil exports have currently declined by 44 percent year-on-year (to about 1.9 million barrels per day) due to the impact of war in the Middle East.
Big picture
The U.S.–Israel–Iran conflict that erupted near the end of February 2026 has imposed the most severe shock on Middle Eastern economies since the energy crises of the 1970s. Already, the conflict has extended beyond a military confrontation and evolved into a highly destructive economic and financial war.
- The war has fundamentally altered the long-standing norm of the “inviolability of infrastructure,” with national energy systems becoming primary targets.
- By mid-March 2026, attacks and sanctions (including closure and blockade of the Strait of Hormuz) by all sides led to the combined daily oil production in Saudi Arabia, UAE, Kuwait, and Iraq dropping sharply by about 10 million barrels. This has triggered severe panic in global energy markets.
- Iran’s partial blockage of the Strait of Hormuz has disrupted around 20 percent of global oil supply and 25 percent of natural gas flows. This has severely impaired both energy exports and essential imports for Gulf economies.
- Heightened wartime uncertainty has also triggered the largest capital flight in the Gulf region’s history. Investors are withdrawing funds from the Gulf states and sending them instead to the U.S. and Asia, forcing those governments to impose stringent capital controls. Capital flight from the region is further undermining the ambitions of the Gulf countries to function as global financial centers.
Our take
UAE’s withdrawal from OPEC amid the backdrop of the U.S.-Iran conflict represents a strategic recalibration aimed at maximizing its national interests. The move and war-related energy supply disruptions are likely to have cascading implications for the PRC’s economic structure, energy security, and geopolitical positioning.
1. Abu Dhabi’s decision to exit from OPEC reflects a deliberate shift from collective production discipline toward unilateral, sovereignty-driven profit maximization. Meanwhile on the financial front, the move signals a transition away from a technocratic reliance on the global dollar system toward a politically anchored currency swap framework (often described as the “Bessent Doctrine”). This dual decoupling is both a strategic maneuver ahead of a projected peak in global oil demand by 2030 and a direct response to perceived dysfunctions in the current international governance system.
i) The UAE’s withdrawal constitutes the most severe institutional disruption to OPEC since its founding in 1960. As the organization’s second-largest holder of spare production capacity, the UAE has long expressed dissatisfaction with its assigned quotas under the OPEC+ framework, which significantly constrained output relative to its actual capacity.
The decision to exit in May 2026 was made in the context of the closure of the Strait of Hormuz following the Iran conflict. With traditional maritime export routes disrupted and the Abu Dhabi Crude Oil Pipeline (Habshan–Fujairah, ADCOP) offering limited throughput capacity (around 1.5 million to 1.8 million barrels per day), the marginal benefit of adhering to OPEC’s coordinated pricing strategy no longer offsets the opportunity cost of idle capacity.
This implies that, should regional tensions ease, the UAE could attempt to re-enter global markets with unconstrained production as it seeks to monetize its energy reserves before the structural decline of the oil era as the globe transitions toward new energy.
ii) At the financial level, the UAE’s pursuit of currency swap arrangements reflects a departure from the traditional Federal Reserve–led framework toward mechanisms managed by the U.S. Treasury’s Exchange Stabilization Fund. Under the leadership of Scott Bessent, the ESF is being positioned as a geopolitical instrument, extending dollar liquidity support to strategically aligned partners.
Unlike conventional Federal Reserve swap lines, which are typically limited to core institutions such as the Bank of England or the European Central Bank, Bessent’s approach embeds currency liquidity within a broader framework of political alignment.
The UAE’s motivation is subtle. Despite holding over $2 trillion in sovereign assets and about $298 billion in foreign exchange reserves, it faces acute pressure due to the collapse in oil export revenues following the Iran conflict. Maintaining the dirham’s dollar peg requires sufficient dollar liquidity; absent external support, this could necessitate disorderly sales of U.S. Treasury holdings. The ESF swap line thus functions as a form of “confidence insurance,” signaling to global markets that the UAE is treated as a top-tier financial ally on par with major developed economies.
From the U.S. perspective, the arrangement is asymmetrical. The dirham has limited utility for the U.S. as a reserve currency issuer. However, the strategic objective lies elsewhere — by embedding dollar liquidity into the UAE’s financial system, Washington effectively inserts a structural barrier against alternative settlement systems, including those linked to China’s renminbi. In this sense, the swap line acts as a geopolitical anchor, reinforcing the UAE’s integration within the dollar-centric financial order.
2. The UAE’s dual decoupling presents a multidimensional and internally contradictory external shock for China. This development not only exposes structural vulnerabilities in the PRC’s energy security, but paradoxically also accelerates the real-world stress testing of RMB-based payment infrastructure.
1) China is the world’s largest crude oil importer, with daily imports reaching 11.6 million barrels by 2025. In theory, expectations of a breakdown in coordinated production cuts following the UAE’s withdrawal from OPEC should exert downward pressure on oil prices over the longer term. However, this effect has been entirely offset in the first half of 2026 by the partial closure of the Strait of Hormuz due to the ongoing U.S.-Iran conflict. Under normal conditions, the Strait facilitates 20 to 25 percent of global oil shipments and serves as a transit route for more than half of China’s crude imports. Its partial closure in March 2026 has created the most severe physical supply disruption for China since the 1970s energy crisis.
Although the UAE possesses the Abu Dhabi Crude Oil Pipeline (ADCOP), its export terminal in Fujairah lacks sufficient capacity to support the UAE’s targeted output of 5 million barrels per day following its exit from OPEC. Consequently, the UAE’s “production freedom” remains largely theoretical until maritime routes are restored, while China must absorb the cost of elevated supply premiums amid constrained availability.
ii) China’s manufacturing sector is experiencing significant margin compression with oil prices trading over $100 per barrel. First-quarter 2026 data reveals a growing macroeconomic imbalance: the producer price index (PPI) has turned positive due to rising input costs, while the consumer price index (CPI) remains subdued amid weak domestic demand.
Key indicators as of March 2026 include:
- Driven primarily by imported inflation, China’s PPI increased by 0.5 percent year-on-year, ending a 41-month decline.
- Prices in oil and gas extraction rose by 3.9 percent, while chemical raw materials increased by 2.9 percent.
- Profit margins in the automotive sector fell to a historic low of 3.2 percent (down from 4.1 percent in 2025).
- Consumer goods prices declined by 1.3 percent, particularly in durable goods, reflecting weak end-market demand.
This divergence indicates that Chinese firms are unable to pass rising energy costs onto consumers. Should oil prices remain within the $100–120 range for an extended period, each additional 12 months could reduce China’s GDP growth by approximately 0.1–0.2 percentage points. More critically, petrochemical sector utilization rates have fallen to around 82 percent, with losses expanding. This places the Chinese economy on the threshold of energy-induced stagflation.
iii) While the UAE is seeking U.S. financial backing through politically anchored dollar swap arrangements, practical constraints in oil trade settlement (stemming from war-related sanctions risks and potential disruptions to the SWIFT system) have driven a significant shift in currency usage.
The RMB accounted for a record 41 percent of China–Middle East oil trade settlements by March 2026, surpassing the euro to become the region’s second-largest settlement currency. This shift is less a reflection of preference than of risk mitigation under extreme conditions. Notably, First Abu Dhabi Bank became an official RMB clearing bank in 2025, establishing a parallel financial channel. At the same time, the UAE has actively participated in the mBridge initiative, including the execution of its first government-level digital dirham transaction in November 2025.
These developments indicate the UAE is constructing a contingency “post-dollar” settlement framework even as it seeks dollar liquidity support from the United States. In the context of a blocked Strait of Hormuz and constrained traditional dollar clearing mechanisms, this blockchain- and digital currency-based infrastructure provides China with a critical fallback mechanism to sustain minimal levels of energy imports.
3. The U.S. has played an assertive and interventionist role in the UAE’s decoupling from OPEC. Through the destabilizing effects of the Iran conflict in the Middle East, the deployment of Treasury-led currency swap arrangements, and the expansion of high-technology export controls, Washington appears to be drawing Abu Dhabi back into the dollar orbit while simultaneously advancing technological decoupling from China in areas such as artificial intelligence.
If the above is indeed Washington’s strategy rather than a series of reactive moves, it does come with a structural trade-off. The U.S. has introduced systemic strains into the foundations of dollar hegemony in striving to reinforce its alliance network. This could potentially accelerate the emergence of a more adversarial geopolitical and financial bloc centered around China.
By utilizing the ESF to provide politically conditioned swap lines, the U.S. Treasury is effectively signaling that access to dollar liquidity is contingent, discretionary, and subject to executive authority rather than the institutional neutrality traditionally associated with central banking. This shift carries several far-reaching implications:
- The global dollar liquidity architecture is bifurcating into two tiers: a Federal Reserve–anchored “technical stability zone” centered on G7 economies, and a Treasury-controlled “political concession zone” for strategic partners. As the world’s second-largest economy, China is structurally excluded from both layers.
- The UAE’s need for swap lines to avoid disorderly liquidation of U.S. Treasuries underscores a deterioration in the perception of U.S. government bonds as a passive “safe haven,” increasingly reliant on policy intervention to sustain demand.
- The U.S. appears willing to compromise the neutrality and credibility of the dollar as a global public good in order to contain the expansion of RMB-denominated settlement in Middle Eastern energy trade.
This dynamic effectively compels Beijing to construct a parallel financial architecture insulated from the dollar system. While such a transition raises short-term costs, it may, over the longer term, contribute to the gradual erosion of the existing dollar-centric financial order.
4. Regardless of whether it was the intent, the UAE’s withdrawal from OPEC and its strategic alignment with the U.S. is likely to significantly complicate the PRC’s broader Middle East policy framework.
(1) The CCP’s regional strategy has been premised on fostering a stable and relatively unified Middle East, including efforts to reduce tensions through initiatives such as Saudi–Iran rapprochement. The UAE’s strategic pivot undermines this framework.
The UAE’s unwillingness to operate within a Saudi-led structure and pursuit of an independent trajectory marks the end of the PRC’s “portfolio-style” regional diplomacy. Beijing must now manage a more complex balancing act between Saudi Arabia’s continental-oriented strategy and the UAE’s maritime- and technology-focused approach. This balancing act is likely to considerably increase diplomatic and economic costs for the CCP.
The UAE’s repositioning also reflects a deeper integration with U.S. and Israeli economic and security frameworks associated with the Abraham Accords. By leveraging infrastructure such as the Fujairah port and potential overland pipeline links to Mediterranean terminals via Israel, the UAE aims to bypass chokepoints like the Strait of Hormuz and secure direct export channels to Western markets. This “strategic realignment” introduces asymmetric risks for China’s investments and long-term positioning in the region.
ii) The UAE’s aggressive plan to expand production capacity to 5 million barrels per day embeds a significant speculative risk, particularly given emerging structural shifts in global energy demand.
Key indicators suggest that oil demand growth is approaching an inflection point:
- China’s electric vehicle fleet is projected to displace more than 540,000 barrels per day of gasoline demand by 2026.
- Incremental growth in China’s crude consumption is expected to slow to approximately 200,000 barrels per day — well below the historical average of the past decade.
- Should the Strait of Hormuz reopen in 2027, a simultaneous surge in supply from the UAE, Saudi Arabia, Russia, and producers in the Americas (including Brazil and Canada) could trigger an unprecedented supply glut and price collapse.
The inflection point creates a temporal asymmetry for China. While lower oil prices in the medium term may reduce import costs, the near-term environment in 2026 is characterized by heightened uncertainty and disrupted investment signals. This mismatch between future capacity expansion and current demand fragility complicates planning and capital allocation within China’s petrochemical sector, increasing operational and financial risks during the transition period.
5. The recent turmoil in the Middle East is accelerating the obsolescence of the OPEC+ framework and the Federal Reserve–anchored global liquidity regime. This transition is pushing the global economic system toward a “hard landing” where all parties lose.
i) The U.S. war against Iran has compelled its allies to seek currency swap arrangements, signaling a structural shift in the foundations of the global financial system. This trend toward “financial bloc formation” imposes a significant credibility cost on all participants:
- The U.S., as the architect of sanctions and liquidity control;
- The PRC, as a system participant seeking avenues of circumvention; and
- The UAE, as a state attempting to secure external financial protection.
The increasing politicization of liquidity provision, particularly via instruments such as the ESF, undermines the neutrality of the dollar system and introduces conditionality into what was previously perceived as a global public good.
ii) The PRC is now bearing the cumulative cost of its long-standing reliance on imported energy. Although China’s strategic reserves are substantial (estimated at 1.2 billion barrels in 2025), the persistence of oil prices over $100 per barrel, combined with fragmentation among Middle Eastern partners, is exerting sustained pressure on industrial profitability.
In response, Beijing is accelerating efforts to expand RMB-denominated oil trade (“petroyuan”) and deploy digital settlement mechanisms. While these measures serve as risk mitigation tools, they also represent a structural challenge to the dollar-centric financial order.
In aggregate, these developments mark the early start of a systemic hard landing for the global economy. Also, the UAE’s exit from OPEC in May 2026 can be interpreted as a symbolic step toward the unraveling of traditional oil geopolitics.
Several trends are likely to materialize over the next three to five years:
- Increased volatility in global energy prices;
- Gradual erosion of the petrodollar system;
- Intensifying pressure on China’s manufacturing sector, caught between rising energy costs and technological constraints.
The current geopolitical dynamic is not a contest in which there is likely to be a clear winner. Rather, it is turning into a race to see who loses more slowly.
