Great insights with deep understanding of China's social structure. Just add few colors on education and productivity outlook.
One statistic makes David’s argument especially intuitive. China’s working-age population still averages only about 11.3 years of schooling, while new entrants to the labor force already average roughly 14.3 years. That three-year gap is, in large part, demographic history embedded in a national average. China does not need to “re-educate” the average existing worker from 11.3 to 14.3 years. As older cohorts educated in a much poorer China retire and younger cohorts raised under mass secondary and higher education replace them, the average will rise mechanically. In this sense, today’s aggregate education statistics partly measure China’s past rather than the human-capital level being produced by China today.
The same point also matters for productivity. China’s shrinking workforce is widely discussed; the upgrading of that workforce receives much less attention. Workers leaving the labor force are, on average, much less educated than those entering it. So even as the number of workers declines, the average human capital of the workforce can continue to rise. Higher educational attainment should support technology adoption, automation, movement into higher-productivity sectors, and the ability to operate increasingly complex industrial and digital systems. China’s demographics are therefore simultaneously a quantity headwind and a quality tailwind.
That is why I think David’s demographic-replacement argument has implications beyond education, pensions, wealth and consumption. Part of China’s future productivity growth may already be embedded in its cohort structure. National averages still contain a large statistical weight from generations formed under a much poorer China. As those cohorts are gradually replaced by generations raised entirely in the post-reform economy, China will have fewer workers—but, on average, much better-educated and potentially much more productive ones.
Replacement did what redistribution could not. If the cohort effect is that strong, the case for compensating past misfortune gets weaker.
Money paid against a loss that can no longer be reversed buys nothing. Money paid to reopen an opportunity buys something measurable. Retraining that pays a wage while it runs is a transfer I would defend.
The generation now entering the workforce cannot buy property and faces a flatter mobility curve than the one before it. No one proposes compensating them for it. If contribution earns entitlement, the rule has to run in both directions.
The whole structure also rests on a promise. Today's workers pay in on the understanding that the next cohort will do the same. Nobody can enforce that.
One limit. Where the capacity to take an opportunity is gone, a floor is the answer, not compensation.
Who says young people in China who have begun their careers aren't able to afford property? Housing is becoming cheaper relative to wages, not more expensive. And young people relative to their older generations are much better educated and are positioned much better to accumulate assets and resources they can use to support themselves in their old age, that's the entire point of this article
Affordability isn't my core point, but you raised it.
First-tier price-to-income ratios in 2024: Shenzhen 34.8x, Beijing 26.4x, Shanghai 26.1x (E-house). Healthy range internationally is 3–6x. Housing hasn't become cheaper relative to wages. It's been structurally out of reach for the generation now entering the workforce.
The core argument stands regardless. If contribution earns entitlement, the rule has to run both ways. Today's workers pay in on the promise that the next cohort will do the same. Nobody enforces that promise. The article doesn't address it. Neither does your reply.
"That's the entire point of this article" uses the article's conclusion to defend it. That's not an answer.
The vast majority of Chinese people don't live in first tier cities, and wages are outpacing housing price growth everywhere in the country regardless. The biggest impact of the housing crash in China is in places where the vast majority of the population lives, which is 3-4th tier cities. For them, the housing price dropping is a good thing for non-home owners. Here is some data on this which shows hoise price to income ratios falling in most cities
"There is a silver lining to the correction in the property market: housing has become more affordable. Looking across 91 cities, the median home-price-to-household income ratio fell from 8.6 in 2021 to 5.3 in 2025 (Figure 7). While there still are 7 Chinese cities in which the price-to-household income-ratio exceeds 10, that’s down from 24 cities in 2021."
People treat “generations ” as if it were a ‘clearly obvious” category or line that separates groups of people into discrete groups or classes of common behaviour patterns. But human behaviour is not so clearly defined and the term generation is arbitrary and in post WWII more a product of the personal perspective of popular social commentators and in some cases social scientists who use it to support a personal theory. But changes in social behaviour are more a continuous flow of behaviour among people and “generations” are an arbitrary category which are not really discrete classes .
Of course the boundaries of a generation is arbitrary, but a cohort of people born in roughly the same period will most likely share the same set of lived experiences and have interacted with the world when it was experiencing a common set of social or economic circumstances. An old person who grew up during the cultural revolution when the tertiary education rate was in the single digits will be influenced by a different set of lived experiences than a 30 year old who has only lived in the post reform era. If you read the article you would understand that
Great insights with deep understanding of China's social structure. Just add few colors on education and productivity outlook.
One statistic makes David’s argument especially intuitive. China’s working-age population still averages only about 11.3 years of schooling, while new entrants to the labor force already average roughly 14.3 years. That three-year gap is, in large part, demographic history embedded in a national average. China does not need to “re-educate” the average existing worker from 11.3 to 14.3 years. As older cohorts educated in a much poorer China retire and younger cohorts raised under mass secondary and higher education replace them, the average will rise mechanically. In this sense, today’s aggregate education statistics partly measure China’s past rather than the human-capital level being produced by China today.
The same point also matters for productivity. China’s shrinking workforce is widely discussed; the upgrading of that workforce receives much less attention. Workers leaving the labor force are, on average, much less educated than those entering it. So even as the number of workers declines, the average human capital of the workforce can continue to rise. Higher educational attainment should support technology adoption, automation, movement into higher-productivity sectors, and the ability to operate increasingly complex industrial and digital systems. China’s demographics are therefore simultaneously a quantity headwind and a quality tailwind.
That is why I think David’s demographic-replacement argument has implications beyond education, pensions, wealth and consumption. Part of China’s future productivity growth may already be embedded in its cohort structure. National averages still contain a large statistical weight from generations formed under a much poorer China. As those cohorts are gradually replaced by generations raised entirely in the post-reform economy, China will have fewer workers—but, on average, much better-educated and potentially much more productive ones.
It’s always extremely enlightening reading your essays! You pack so much info and analysis together; it amazes me!
Once again, a truly great essay. It's always helpful when someone gives you another way to look at what is happening. Thank you.
Thank you for an accurate and beautifully written account.
Replacement did what redistribution could not. If the cohort effect is that strong, the case for compensating past misfortune gets weaker.
Money paid against a loss that can no longer be reversed buys nothing. Money paid to reopen an opportunity buys something measurable. Retraining that pays a wage while it runs is a transfer I would defend.
The generation now entering the workforce cannot buy property and faces a flatter mobility curve than the one before it. No one proposes compensating them for it. If contribution earns entitlement, the rule has to run in both directions.
The whole structure also rests on a promise. Today's workers pay in on the understanding that the next cohort will do the same. Nobody can enforce that.
One limit. Where the capacity to take an opportunity is gone, a floor is the answer, not compensation.
Who says young people in China who have begun their careers aren't able to afford property? Housing is becoming cheaper relative to wages, not more expensive. And young people relative to their older generations are much better educated and are positioned much better to accumulate assets and resources they can use to support themselves in their old age, that's the entire point of this article
Affordability isn't my core point, but you raised it.
First-tier price-to-income ratios in 2024: Shenzhen 34.8x, Beijing 26.4x, Shanghai 26.1x (E-house). Healthy range internationally is 3–6x. Housing hasn't become cheaper relative to wages. It's been structurally out of reach for the generation now entering the workforce.
The core argument stands regardless. If contribution earns entitlement, the rule has to run both ways. Today's workers pay in on the promise that the next cohort will do the same. Nobody enforces that promise. The article doesn't address it. Neither does your reply.
"That's the entire point of this article" uses the article's conclusion to defend it. That's not an answer.
The vast majority of Chinese people don't live in first tier cities, and wages are outpacing housing price growth everywhere in the country regardless. The biggest impact of the housing crash in China is in places where the vast majority of the population lives, which is 3-4th tier cities. For them, the housing price dropping is a good thing for non-home owners. Here is some data on this which shows hoise price to income ratios falling in most cities
"There is a silver lining to the correction in the property market: housing has become more affordable. Looking across 91 cities, the median home-price-to-household income ratio fell from 8.6 in 2021 to 5.3 in 2025 (Figure 7). While there still are 7 Chinese cities in which the price-to-household income-ratio exceeds 10, that’s down from 24 cities in 2021."
https://www.yicaiglobal.com/opinion/mark.kruger/the-year-ahead-for-the-chinese-economy
People treat “generations ” as if it were a ‘clearly obvious” category or line that separates groups of people into discrete groups or classes of common behaviour patterns. But human behaviour is not so clearly defined and the term generation is arbitrary and in post WWII more a product of the personal perspective of popular social commentators and in some cases social scientists who use it to support a personal theory. But changes in social behaviour are more a continuous flow of behaviour among people and “generations” are an arbitrary category which are not really discrete classes .
Of course the boundaries of a generation is arbitrary, but a cohort of people born in roughly the same period will most likely share the same set of lived experiences and have interacted with the world when it was experiencing a common set of social or economic circumstances. An old person who grew up during the cultural revolution when the tertiary education rate was in the single digits will be influenced by a different set of lived experiences than a 30 year old who has only lived in the post reform era. If you read the article you would understand that