Ken Cao's: 

Why China’s Crash Will Be Worse — Point by Point

1. The Bubble is Bigger

At its peak, China has devoted far more of its economy to real estate than Japan ever did as Chinese households are also far more exposed:

~70% of household wealth tied to property

Japan in 1990: ~50%

A 5% drop in home prices in China wipes out trillions with many cities prices already down 30% or more.

Consumers don’t “wait it out” after that.  They stop spending — entirely.

2. Overbuilding on an Unprecedented Scale

China has an estimated 65–70 million empty apartments — enough to house the population of France.

And unlike Japan, millions of Chinese families are stuck paying mortgages on homes that don’t exist yet.

That destroys something priceless: Trust

The belief that property always goes up is the cornerstone of China’s growth model and it’s gone; once that belief dies, it doesn’t come back.

3. China Is Getting Old Before It Gets Rich

Japan aged after it became wealthy.

China is aging while still middle-income.

China’s population peaked around 2021 and is already shrinking.

Japan didn’t peak until 2010 — nearly 20 years after its bubble burst.

China’s fertility rate has collapsed to around 1.1 — even lower than Japan’s.  There is no second wave of young homebuyers coming.

The number of people in their 20s — the lifeblood of growth — is about to plunge.  That makes every economic problem harder to fix.

4. Debt + Deflation + Weak Currency = A Trap

Japan faced deflation — but the yen strengthened, preserving purchasing power. 

China faces something worse:  Deflation and a weakening yuan; that’s toxic if they stimulate too much then capital flees and if they hold back, deflation deepens.   Meanwhile, debt is everywhere.

China’s total debt is nearing 300% of GDP.

Household debt alone is about 70% of GDP — double Japan’s level in 1990.

People drowning in debt don’t spend.  They deleverage — and drag growth down with them.

5. Social Stability Is Far More Fragile

Japan bought social peace by spending over 20% of GDP on social security China manages to spend under 8%.

Youth unemployment officially topped 20% — before Beijing stopped publishing the data.  Unofficial estimates run far higher.

A popular saying inside of China is vibrant old people, lifeless young people, with exhausted middle-aged people.

The unspoken deal of the CCP era was simple: growth in exchange for obedience.  What happens when growth disappears?

6. China Faces a Hostile World

Japan in the 1990s had allies, open markets, and global goodwill.

China faces:

Trade wars; Sanctions; Capital flight; Strategic distrust.

When Japan stumbled, capital stayed.

When China stumbles, capital runs.

The Bottom Line

Japan’s lost decades was a controlled burn.

China’s reckoning looks more like a wildfire with a bigger bubble, poorer population and worse demographics.  More debt and far weaker safety nets creating a far more dangerous political backdrop.

This isn’t about cheering for collapse.

It’s about being honest.

For years, optimists said China would “learn from Japan.”  Instead, Beijing doubled down on the same playbook —more debt, more construction, more control.

If Japan’s stagnation was a slow bleed, then China’s will be a hemorrhage.  Fasten your seatbelts China’s reckoning won’t just reshape its own future — it will rewrite the global economic map for the next decade.  We’re only at the beginning.