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.
