How debt and demographics are tearing China apart

So to me, China's economy or China's economic mess boils down to two massive crisis. Debt and population or demographics. The financial system is buried in debt and can fund a real recovery. And with a massive population decline, the gap between expectations and reality is growing fast. When you lose this many people, even a manageable debt becomes crushing. So today I want to break down China's twin ticking time bombs debt and population. Actually I think both have detonated. So let me start with the numbers. So China's onbalance sheet loan total stand at 270 trillion yuan and that includes government corporate and personal loans. And this number comes straight from the central bank's credit balance sheet as of May 2025. and it covers government, corporate and personal loans. And then add to that is uh 185 trillion yen in direct bond market debt. That includes government bonds, local government bonds, and corporate bonds. And this number came from the the central bank's April report. So if you add them up, it shows that China has a total social debt or society debt at 455 trillion yen and um this number excludes the underground lending and shadow banking. So 400 at 455 trillion. Um so now let's do the math. Even assuming a low interest rate of of just 3%, China would need to pay about 13 and a half trillion yen in interest payment every year. Just interest, no principle. And China's official GDP for 2024 was 135 trillion yen. Meaning 10% of the economy goes just to interest payments. But here's the problem. That GDP number is inflated. I've covered this before in my programs. China's actual GDP could be 50% or even 67% lower than reported. So if we use a more realistic baseline, right? So let's say if we normalize China's GDP by cutting it in half, then 20% of China's real GDP goes to purely paying interest. Think about it. 1/5if of the actual wealth China produces every year is eaten up by interest payments alone. And it's not like the collateral backing backing this debt is strong. Asset prices in China are falling and many forms of collateral like local government financing assets or real estate are not liquid or worthless. So, China's total wealth is shrinking, but its debt is still growing and growing very fast. An estimated annual 7%. So, China's debt is growing at 7%. So, if you apply the 7% to the 455 trillion, that's another 30 trillion y in new debt that will be added by the end of this year. It far outpacing the official GDP growth of 5%. And most of the new debt is government borrowing, right? Because Chinese government's fis fiscal deficit is expected to hit 10% of GDP in 2025 and will it will exceed 12 trillion. So you wonder why why the the debt is growing so fast, why the debt is growing faster than the GDP growth. I mean, first of all, I don't believe there's any GDP growth, but the debt is growing for real. And some experts believe this soaring debt growth rate reflects persistently high corruption costs. That's the cost of Chinese corruption. And who's borrowing? Who's still borrowing? The government and stateowned enterprises, which are the most inefficient parts of the economy. Um meanwhile, household consumption and private sector activity have flatlined. Um now there's another layer of risk that is the financial sector itself. Total liabilities of China's financial institutions have now hit 500 trillion UN and that includes commercial banks, trusts, insurance companies, security firms, asset managers. Um of course it also includes um a huge amount of interbank debt. Um, but think about it. The 500 trillion you run in financial sector liabilities, it's higher than the 455 trillion in total societal debt, it's a sign of just how bloated and overleveraged China's financial system has become. Um, and it's 390% of China's official GDP. Now, for context, I want to I want you to compare that to the US. So for context, US total debt is about hundred trillion US dollars. US financial sector liabilities is between 35 to 45 trillion. So you see it's about uh 35 to 45% of US total societal debt and it's only about 170% of US GDP. Whereas in China the total financial sector liability it exceeds total societal debt and it's 390% of GDP. Now we know China's GDP is inflated. So if we have China's inflated GDP, its financial sector debt explodes to about 780% of real GDP and that's unthinkable. So in short, China's financial system is highly leveraged and dangerously fragile. It's under massive strain and simply cannot fund any real economic growth anymore. And if you think this is already a disaster, it gets worse. And here's why. China's population is collapsing. Because you need people to pay back debt. I mean, the debts will not pay back by itself. You need people to get the real economy going before you can pay back the debt. So a shrinking population means a shrinking economy. Fewer workers, fewer consumers. I mean, there's no way that they could carry this mountain of debt. The debt burden will keep growing. But the base that's supposed to support it, that's China's people, is rapidly disappearing. So eventually this debt won't just pressure the economy, it will crush the shrinking population left behind. So that bring us to the next topic. What is China's real population? Now for those of you who have followed my channel for a while, you know that I've said it many times. China's real population is not anywhere close to 1.4 billion. It's overstated by nearly a billion people. um it's somewhere between 300 and 500 million. And I based that estimate on two key assumptions. One, China never actually reached 1.4 billion people before the pandemic. The real number was closer to 800 million. And then two, CO caused catastrophic losses likely in the hundreds of millions. And just today I came across a government slide and some media reports that indirectly confirmed my estimates. I mean I was shocked. So the first evidence came from China's Ministry of Education. This chart shows the number of primary schools in China from 2000 to 2023. What do we see? A steady collapse. Officially China's population grew from 1.26 26 billion in 2000 to 1.4 billion in 2023. A gain of 140 million people in 23 years. And that's 11% increase. So why during the same period did China lose 74% or 410,000 primary schools? Right? If you look at the chart, if you look at the numbers, I don't know if you can read the numbers, they're a little small. Um, so in 2000, China had 553,600 primary schools. By 2023, only 143,000 remained. And that's a staggering 74% decrease in 23 years. Yes, most closures according to to the ministry happened in rural areas. But still, what kind of country loses threearters of its elementary schools while its population grows 11%. It makes no sense unless the population didn't grow at all. In fact, it declined. Um, that chart likely mirrors a real gradual population decline starting around 2000. Which is why I still stand by my claim that China's real population in 2013 in 2019 was closer to 800 million before COVID hit. Let me give you an example to illustrate the drastic population decline on the ground. So in just the first half of 2023, 20 primary schools in Tuenjo Fujian province announced closure and another 50 in the city may soon follow. Now, Trendo's population, I checked, is 8.83 million in the metropolitan area. Now, that's about the same as New York City. Now, imagine 72 elementary schools closing in New York City in a single year. It would be front page news. The same goes to London, right? The same goes for London, which has similar population as Tranjo or the closure of 72 elementary schools in one year. That's unthinkable. unless the city has suffered a massive demogra demographic collapse. And it's not just Fujian. The worst the above numbers are all from all came from official Chinese media which most likely quoted um official statistics. Um and so it's not just Fujian. The worst school closures are in northeastern China. Halong Jang province lost nearly 60% of its primary schools between 2013 and 2022. Jiling lost nearly 50% totaling 2600 closures. Leonging shut down more than 2,200 primary schools, a decline of almost 50%. So in 10 years, China's northeast closed half of its elementary schools. And this was even before COVID hit. This this was from 2013 to 2022. So if it's not a population decline, what is it? And even in major city like Shanghai, it's happening. Since the start of 2025, Chinese media has said that six districts have closed four primary schools and 12 kindergartens. So these numbers are from official Chinese sources and they're hard to dispute. Now, while primary school collapse reveals the long-term population decline that started way before COVID, the kindergarten data give us clues about CO casualties. Now, let's talk about the kindergarten statistics. So, according to the fin Chinese financial magazine, Taiing, experts estimate that 26,000 kindergartens may shut down in 2025. China's Ministry of Education reported that 21,100 kindergartens already closed in 2024. And between 2022 and 2024, the number of Chinese kindergartens dropped by 41,500, which was a 14% decrease. That's the official Chinese statistics. So the 14% is only from 2022 to 2020 2024. So what I did is I factor in the um estimated um closure of 2025. So I calculated how much um what is the percentage of decrease in between the four year in four years from 2022 to 2025 in China. Right? by using all of these numbers and it's a 23% drop. So, China's total kindergartens uh will drop by 23% by the end of this year since 2022. The kindergartens that remain open are shrinking too. The average size fell from 180 children in 2017 to 141 in 2024, a 22% drop. Now, let's be conservative. Assume there was no growth from 2017 to 2022, right? Because the number I just gave you, it was a seven-year number. It was from 2017 to 2024. What I really need is the drop from 2022 to 2025. So they're not appletoapple comparison, but but let's make some very conservative assumptions. So let's assume that there was no growth from 2017 to 2022 and the trend holds steady from 2024 to 2025. That still give us a 22% drop in average size over those four years. So then I asked AI, I mean this is a mathematical question. If the number of kindergartens shrink by 23% and their average size drop by 22% over four years, what is the total drop in preschool population during that period? The answer is it's a 40% decline in preschoolers between 2022 and 2025. And keep in mind, those are conservative assumptions. Now, here's a real world example. Chinese media interviewed a Miss Chung Ling who used to run three kindergartens. She closed one in 23 and another one in 24 both due to a lack of students and the last one is struggling. So she said uh in 2020 and 2021 enrollment was effortless. Parents came to her. She didn't need to do anything. 60 kids graduated, 60 new kids enrolled and sometimes even more. Um, and some of her classes were over capacity. But after 2023, she said things changed. Only 20 students enrolled to replace the 60 that graduated. So this is real and this is measurable and it suggests that our earlier 40% estimate is still very conservative. I think the real drop in terms of the number of preschoolers in China right now could be as high as 50%. So here's the big question. Why? It can be explained as lifestyle choices because 90% of Chinese kids go to daycare. Um people didn't suddenly stop having kids. I mean this kind of drop because it happened suddenly in 2023, right? She said 2020 and 2021 was no problem at all. In fact, during lockdowns, couples had more time together at home. If anything, birth rates should have gone up. So, a 40 to 50% collapse in the preschool population means something more severe. It means it could possibly mean that 40 to 50% of people of childbearing age are simply gone. It confirms what I've long argued that China lost hundreds of millions of people during COVID. If China's real population was 800 million before COVID, uh, and it lost half of the population or 40 to 50% of the population during the pandemic, the country's true population today is around 400 million. And that means the official population of 1.4 4 billion is off by 1 billion