We’ve previously covered that China’s demographics are in severe decline and that China’s GDP may be overstated by 60%. Now a researcher says that China’s population could be overstated by 37-50%.
(Before we dig in, two caveats: First, the channel is Lei’s Real Talk, from someone who came over from communist China and was a student in the U.S. during the Tiananmen Square crackdown, but she doesn’t use her full name, which she says is to protect her family back in China. Second, she’s using AI to answer some of her questions. Still, the math-based questions don’t seem conducive to the “AI hallucinations” we see elsewhere, but some caveat lictor seems in order.)
“We know China is facing a series of economic challenges. Weak consumer, confidence falling real estate prices, high debt, industrial overcapacity, sluggish exports, and so on and so forth. But the underlying issue of the faltering economy, in my opinion, is a severe population crisis.”
“China’s actual population is far below than the official figure of 1.4 billion.”
“I want to compare China and India’s population between the 30-year period from 1990 to 2020. Let’s also compare their average fertility rate between the two countries and their medium age.” If you run those very basic numbers, things don’t add up.
“In 1990, China’s population is over India is by about 270 million [1.14 billion vs. 870 million], and 30 years later China’s population is still over India by 30 million [1.41 billion vs. 1.38 billion].”
“However, if you look at the fertility rate, India’s average fertility rate [2.97%] during the 30 years years is so much higher than China’s [1.70].” All these are the official published rates.
“With that kind of fertility rate in India consistently over 30 years, India’s population should be larger than China’s. Mathematically it’s impossible that China’s population is still greater than India’s.”
I’m skipping over a detailed breakdown of the two country’s respective fertility rates by decades.
“I asked GPT to apply the fertility rates for each country and give me the total population in 2020 for India and China respectively, and this is the results it generate. In 2020 population, India’s population was 1.38 billion, China’s was only 890 million.” India’s number is off the official figure by 4%. China’s number is off by 37%, or 520 million people. And this is at a time when life expectancy for China has been increasing.
Analysis of various other population factor considerations snipped.
“I asked AI to recalculate everything by replacing the official fertility of 1.7 and 1.5 from the year to 2000 to 2010 replaced them with Dr. Yi Fuxian [University of Wisconsin Madison demographic researcher whose work we previously mentioned here] fertility assessment of 1.1. It came up with a shocking total population of 695 million, and that’s less than half of the announced population of 1.4 billion.”
We didn’t see a huge drop in economic output because China’s economy is investment driven.
“Population loss took place over 30 years, and particularly started since 2000, and this reduction in population didn’t show up as reduction in consumer spending until this generation reached the age of 18, or even older, when they started to spend money. So now we start to see the impact on consumer spending because there’s a time lag.”
Plus Flu Manchu deaths.
“China suddenly saw a wave of kindergarten closures, so in some cases private kindergartens have been shrunk by 20% in some regions.”
“So for all these factors combined, I think China’s real population may be between 600 million and to 800 million.”
Given the GDP overstatement estimates, this enormous overstatement of China’s population seems plausible. It also makes all those wild claims of “China will soon overtake the US economically” look even more ridiculous.
China’s “one child per couple” policy will be seen by future generations as one of the greatest self-inflicted catastrophes in history.
There more you start poking around online, the more you turn up reasons why China is screwed.
The first installment in this series was popular. Well, there’s a lot more reasons why China is screwed.
It’s screwed all the way down.
First up: Demographics:
Takeaways:
Remember all that talk of an “Asian Century?” Yeah, not so much.
“China will soon run out of people.”
China’s population pyramid is about to shift from a huge bulge of people in their prime earning years to one where that bulge is disproportionately elderly.
“Everything that made China what it is today has relied on a large, young, and productive workforce. Now, that workforce is about to succumb to biology just as every other generation has in every other country, ever.” Their demographic dividend is running out.
“China’s working-age cohort grew from 58% of the country in 1978 to 74% in 2010. But in less than twenty years, the UN predicts that number will be roughly back where it was in ‘78. By then, China will have twice as many seniors as children under 15.”
“Per capita wealth remains low, on the level of Mexico, the Maldives, and Kazakhstan. That means this mass of retirees won’t just contribute less to the economy, but will also require immense financial support — the kind China’s fractured pension and healthcare system isn’t remotely prepared for.”
“Unfortunately for China, the One-Child Policy has set the cultural expectation firmly at one.”
Replacement fertility: 2.1 children per woman. China’s official fertility rate: 1.6. “Yi Fuxian, a scientist at the University of Wisconsin-Madison [estimates] the true number at 1.18.”
“China’s preference for male babies means that between 2020 and 2060, there will be roughly 3 single men for every 2 single women.”
“China’s 2020 Census, [tallied] 14.65 million births the previous year — the lowest level since 1961.”
Japan, which is also aging, provides a best case scenario. “With a median age of 48.6, Japan is the 2nd oldest place on earth. Today, its share of the world’s manufacturing exports has fallen from 12.5% to just 5.2. Japan did not fade into global irrelevance. It’s still a great power. But it never fulfilled what once seemed certain: its rise to rival the U.S. as a superpower. And it never will.”
That’s part 1. Part 2 focuses on China’s out of control property market:
It starts off talking about the ghost cities, especially Ordos.
“Ordos does have an interesting story to tell. Just, not the one you might expect. The missing context, at the time, was far stranger than what the unimaginative pessimists concocted: Nearly all of these half-finished homes have owners — the vast majority of which have no intention of ever moving in.”
“All over China are millions of empty, some unfinished, but almost universally sold homes — not just in far-flung corners but also in Beijing, Shanghai, and Shenzhen. Over one-fifth of all urban homes — 65 million in all — sit vacant.”
China relied on “a surplus of cheap labor, which means, by definition, wages are low. You can only compete with the entire rest of the world for so long — and neither do you want to. Low-value manufacturing has long since moved South, to places like Vietnam, Laos, and Bangladesh.”
All the long-hanging fruits of infrastructure spending have already been built.
“Individually, Chinese consumers really don’t spend very much — just 32% of GDP — less than half that of the US, and far below countries like Japan and Germany. Worse, this number has actually been decreasing over time.”
“Chinese consumers are spending, but only on one thing, something not considered ‘consumption’: houses!”
China’s home ownership rate “is among the highest in the world — 90% — to much of the developed world’s mid-60s. It gets much weirder, still. If you can believe it, the majority of recent purchases have been 2nd and 3rd homes. In 2018, for instance, 87% of new home buyers already owned at least one.”
“Because the government tightly controls how much cash is allowed to leave the country, Chinese people simply don’t have a lot of options, and of them, housing is seen as the only sure thing.”
Also, given the sex imbalance mentioned above, for men, home ownership = marriage.
“For all of these reasons, prices have risen to extreme levels. In Shenzhen, Beijing, and Shanghai, it takes 40 years of the average income to afford a home.”
Most are bought before construction even begins.
And here’s where the demographics above provide a double whammy. “The majority of homebuyers, meanwhile, are aged between 20-50 — precisely the segment China will soon lose.”
One huge reason for the bubble: Local governments using their control of land to balance their budgets:
They created what are basically state-owned shell companies called “Local Government Financing Vehicles”. They gave these LGFVs free valuable land, which they then used to take out loans that local governments themselves couldn’t. The trick is that because their debt is hidden, local governments appear far healthier than they really are, while at the same time, meeting the quotas set by Beijing. Following the 2008 crisis, LGFVs transformed from a little quirk of its financial system to the backbone of local economies. If these ‘financing vehicles’ default on their loans, or if housing prices fall too steeply, local governments now have just as much to lose as homeowners. If a local government stops taking out loans, it instantly loses over a third of its revenue, causing a different kind of doomsday. So while the central government may direct local officials to control their debt, the best they can really do is feign cooperation.
Flu Manchu only temporarily halted home price rises, and they’re still soaring.
“Solutions are far too costly to assume their implementation.”
There are a lot more videos of China suckage, but I’ll have to split this up and get to those another time.