How Bad Will China's Population Crisis Be in 20 Years?

TL;DR

China's total fertility rate has fallen to about 1.3 nationwide, below the UN's low-fertility-trap threshold of 1.5, and newborns dropped roughly 40% in four years, from around 17 million in 2017 to 10 million last year. Within 20 years this shrinking workforce will make nannies, cheap delivery, and takeaway unaffordable and push most cities' housing and asset prices down.

Transcript

I had a haircut. When my previous show was broadcasted two days ago, some people say my hair looks like Hu Xijin’s (frisbee Hu) hair. I was so shocked and I hurriedly rushed to a barbershop. So what is going to be discussed today? Today I want to illustrate a point. Twenty years later, the demographic statistics will be horrendous. What is th... Read More

Key Insights

• Total fertility rate is how many children a woman of childbearing age has in her lifetime, and a rate of 1.1, as seen in Wuhu city, means China's population would roughly halve each generation without intervention.
• China's national fertility rate is about 1.3 per the most recent census, already below the UN's dangerous threshold of 1.5 that signals a low-fertility trap, and many scholars suspect the true figure is even lower.
• China's newborn count fell roughly 40% in just four years, from around 17 million in 2017 to 10 million last year, described as possibly the steepest peacetime population decline curve in history.
• Ten regional areas in China already show negative population growth, and the consequences of falling birth numbers only become visible after 20 years, so today's decline is a delayed danger.
• People are not just consumers but labor forces and social resources, so a country whose population shrinks dramatically cannot sustain positive, upward economic growth.
• China's reform-era boom was driven by a massive labor force born during the 1960s population boom, combined with labor-intensive industries relocating from Japan and Taiwan to exploit cheap Chinese labor.
• Service industries staffed by low-paid rural workers, such as delivery, catering, nannies, and couriers, will be hit first as labor costs rise, making nannies unaffordable for ordinary urban Chinese within 15 years.
• Real estate makes up 60-70% of Chinese urban households' wealth, so as population declines and demand falls, asset and house prices will drop sharply in most cities except a few large ones.

Questions & Answers

Q: What does a total fertility rate of 1.1 mean for China's population?

Total fertility rate measures how many children a woman of childbearing age has in her lifetime. A rate of 1.1, recorded in Wuhu city, means that without any intervention the entire population of China would roughly halve with every generation. Nationally the figure is about 1.3, but scholars are skeptical and believe the real number may be lower, closer to Wuhu's 1.1, signaling a severe long-term decline.

Q: How fast is China's birth rate declining?

China's birth rate has fallen dramatically in a short time. Newborns numbered around 17 million in 2017 but dropped to about 10 million by last year, a decline of roughly 40% in only four years. The speaker describes this as possibly the steepest population decline curve in history during peacetime, and notes the fertility rate is still falling every year rather than stabilizing at 1.3.

Q: How does China's fertility rate compare to Japan and South Korea?

Japan's current fertility rate is relatively low at 1.3, and South Korea is even lower at around 0.8. China's official data also shows 1.3, but many scholars are highly skeptical and believe it is actually lower now. For example, Wuhu city measures only 1.1, and that figure includes not just registered residents but also workers who moved there from other places.

Q: Why does a shrinking population hurt economic growth?

From the perspective of modern economics, people are not only consumers who drive the production of others but also labor forces that form an important component of overall productivity. When a country's population decreases dramatically, both its labor supply and consumption shrink. As a result, its economic growth and development cannot remain positive or stay on an upward curve, so China's continued population decline threatens its economy.

Q: How did the demographic dividend fuel China's economic boom?

China's reform and opening-up made great progress largely because of its demographic structure and massive labor force. A population boom in the 1960s produced a huge generation that entered the workforce just as China opened to the world. Labor-intensive industries from Japan and Taiwan relocated to China to use its cheap labor, and combined with reform measures, China experienced an explosive development period and became the factory of the world.

Q: Why will nannies, delivery, and takeaway become unaffordable in China?

These service industries rely on abundant, low-paid workers, mainly rural farmers who moved to cities and whose insurance the city does not cover. Couriers and delivery workers earn only about $1-2 USD per order because labor is plentiful. As the workforce shrinks drastically over the next 15 to 20 years, labor costs will rise sharply, workers will move to better-paying industries, and ordinary urban Chinese will no longer afford nannies, cheap delivery, or takeaway, mirroring Japan today.

Q: What will happen to house prices and assets in China?

In the past 40 years almost all asset prices in China rose, especially real estate, which makes up 60-70% of urban residents' household wealth. Because asset prices depend on economic growth and population demand, a shrinking population will cause house prices to fall sharply. The speaker predicts that assets will gradually depreciate in most cities, with only a few large cities being exceptions, ending the era of high housing prices.

Q: What do the cities of Yubari and Yumen show about population decline?

Yubari in Hokkaido, Japan, was a coal-based city that declined as its mines were depleted and is now on the brink of bankruptcy, with closed shops and empty buildings. Yumen in Gansu, China, was an oil-field city whose population plummeted after workers left, dropping one apartment's price from about $4000 USD to as low as $800 USD, leaving neighborhoods as empty haunted houses. Both illustrate the gloomy scenes that widespread depopulation creates.

Summary & Key Takeaways

• Wuhu city, Anhui, published then quickly deleted an article showing its total fertility rate had dropped to 1.1, meaning the population would roughly halve each generation. Nationally the rate is about 1.3, below the UN's 1.5 low-fertility-trap threshold, and it keeps falling every year.

• China's newborns fell from around 17 million in 2017 to 10 million last year, a 40% drop in four years. Comparisons show Japan at 1.3 and South Korea near 0.8. Examples like Japan's Yubari and China's Yumen show resource-exhausted cities emptying out with collapsed house prices.

• A shrinking workforce will end cheap labor-based industries: nannies, couriers, and takeaway delivery will become expensive and scarce as in Japan. Manufacturing will keep moving to India and Vietnam, and real estate, which is 60-70% of urban household wealth, will lose value in most cities.