Recently, I've been thinking about how long this round of economic contraction in China will last. Gradually, I've formed some ideas that I'd like to share with everyone.
Why were China, Japan, and South Korea able to develop rapidly after the war? Many people vaguely attribute it to Confucian culture; this explanation is ambiguous, leaving everyone half-understanding. Here, I will further explain this reason: the so-called Confucian cultural sphere is one where the entire social culture is centered around the family. Everyone's values are built around the family, and each person places extreme importance on the family, willing to pay a heavy price for it. This is precisely why the three East Asian countries captured the essence of this group and placed the costs and overextension within the family. The highest housing price bubble in the world, the most intense competition in children's education – it is precisely because of these enormous self-drives and great overextension that the economies of the East Asian countries soared for decades, accomplishing in decades what took others centuries. The price, however, is the complete collapse of family culture in East Asia, leading to the lowest fertility rates in the world, worsening aging, and severe gender conflict. This is the cost of overdevelopment. (Excessive prosperity inevitably accompanies excessive overextension and debt; once the speed of economic growth slows down and debt growth cannot be maintained, the entire economy will face immense contraction pressure, which is the so-called cost of prosperity, and the reason for recession must be excessive prosperity. Excessive prosperity is also an inevitable product of human shortsightedness; who cares about future floods? Other countries do not wish to overly prosper, but lack a family as the core of exploitation, making it impossible to drive people.)
Now let's talk about why there is at least 20 years of contraction time domestically. The peak fertility rate in the country (after the two-child policy was relaxed) was around 2016-2017. These children will graduate from university around 2040, which means that before 2040, the number of university graduates will not decrease, and the labor supply will remain stable at over 15 million. However, our fertility rate has plummeted sharply since 2017, halving in just seven years, breaking records in China, Japan, and South Korea; we are far ahead of the other two countries, who took several times longer to halve their fertility rates. On one hand, labor supply remains stable, and on the other, marriage and fertility rates have plunged. The decline in fertility rates leads to a continuous decline in overall social demand. With demand decreasing and supply remaining unchanged, combined with the ongoing efforts of AI to replace human labor, the 20-year brutal period of university student employment becomes very clear. Of course, if the fertility rate continues to decline and cannot stabilize, combined with the continuous aggravation of aging, even if the number of university students decreases in 40 years, employment is likely to be difficult to improve.
Currently, we have experienced the first five years: three years of the pandemic and two years of failed economic rebound expectations. The reason why 2025 is so difficult is also due to this; everyone is slowly beginning to accept that the economy has entered a contraction phase, prices are in a downward trend, and employment is in a prolonged difficult period. Of course, many people would not expect this cycle to start in 20 years, which is too long and too cruel for many to accept. The second stage is to completely accept the future of a contracting society, followed by further economic downturn. The third stage is a long wait at the bottom, enduring (Japan has recently achieved near-full employment for university students, which is a glimmer of hope for this model).
When Japan entered a deflationary society, in order to address the continuously decreasing employment problem, it began to advocate for full-time housewives, and feminism quickly disappeared, achieving a certain level of uniform employment. However, in our country, due to extremely low labor income and a very low labor-to-dependency ratio, we cannot promote the model of full-time housewives. The recent proposal of 'mother jobs' is to provide these mothers with some part-time job opportunities to supplement family income. Therefore, our feminist culture cannot achieve a soft landing like Japan; must we go mad like South Korea? This can only be left to the future to observe.
Additionally, let's separately discuss the issue of excessive housing price prosperity. Our housing prices reached a bottleneck around 2014, and the bubble began to clear. However, in pursuit of short-term prosperity, we implemented monetary policies for shantytown renovations, which lasted for six years, resulting in a secondary bubble. When the bubble had not yet cleared, we built upon it again. It is precisely because of this extreme overextension during these six years that our residents' debts soared, leading to a rapid deterioration of gender relations, and a dramatic decline in marriage and fertility rates. All of these are the costs of excessive prosperity, the costs of overextension. Of course, those who enjoy prosperity are one group of people, while those who pay the price are another. Currently, housing prices nationwide are slowly clearing the bubble. Housing prices have basically returned to around 2017 levels. The secondary bubble is gradually clearing, returning to 2015 prices. Only when the shantytown renovation bubble is completely cleared can we start to consider whether the housing price-to-income ratio and the housing price-to-rent return rate are reasonable. We are unwilling to have a hard landing; we are implementing a prolonged soft landing model, which requires slow endurance.
The advice I can give is: abandon fantasies, reduce debt, prioritize safety, and live in the moment.
