Fu Peng: Why Demographics Explain Everything
The outspoken economist on the generational clash over wealth, and where to find future investment returns in China
For today’s episode, I want to introduce Fu Peng’s analysis. Fu’s career spans both international and domestic financial markets, including roles at Lehman Brothers and Solomon International Investment Group. He served as the Chief Economist of Northeast Securities from 2020 to 2025 and became an independent economist recently. He’s an influential figure on the Chinese internet known for his outspoken commentary. SCMP describes him as a “conscientious economist.”
He puts demographics at the very core of his framework. Fu Peng argues that 2015 was a critical demographic turning point for China, and that the “miracle wealth” accumulated over the past four decades is now entering a cycle of redistribution and revaluation.
In his recent speech, Fu contrasts the frugality of the 50s/60s generation with the “live for oneself” philosophy of the post-85s and the “self-oriented” mindset of the post-00s. He argues that “silver-haired economy” won’t be a reality in the short term, while true investment potential lies in what captivates the youth.
I really like the angle of the mismatch of wealth among different generations, which is also a worldwide problem right now. He argues that China’s wealth is largely concentrated in the hands of the 60s/70s generation nearing retirement, who have a low risk appetite and prefer savings. This drives a systemic decline in society’s overall risk tolerance and pushes long-term interest rates lower. “The pie was divided too quickly,” leaving the post-80s and subsequent generations at a distinct disadvantage in the wealth distribution game.
The full Chinese ver was first published on the WeChat account of the New Economist X Taixue. Thanks to their kind authorization, I can make an English transcript.
https://mp.weixin.qq.com/s/eDfszxV86h9IUlAD94YqTA?scene=1&click_id=33
Fu Peng: The Great Asset Reshuffle — Where the Money Flows?
It’s a real honor to be here with you all at Tsinghua today. What I really want to discuss is a single, pivotal variable that impacts virtually everything: demographics.
It influences real estate, government finances, future infrastructure investment, and even shapes preferences in your investment portfolios.
The Core Variable: Demographics
I first highlighted a major demographic turning point back in 2018. Why? Because for China, a critical data point emerged in 2015: the nation’s birth rate fell off a cliff. Fast forward to today, and our population growth is essentially at zero. This shift has accelerated dramatically over the past decade. While it’s now widely recognized, the trend was already in motion ten years ago, and its impact on the economy and investments is already being felt.
You might wonder why I focus so much on demographics. Some say, “You’re an investor, a former hedge fund manager. Why not just talk about the markets? Why all this focus on aging populations, the savings habits of young people, and their risk appetite?”
My answer is this: I’m not here to pander to your expectations. I’m here to share with you the fundamental logic that truly guides my thinking.
Let me give you an example from my own life. Over the past few years, I’ve learned to pay close attention to what my daughter is interested in. Whatever she likes, I look into as a potential investment. These two things – observing her and managing investments – are fundamentally the same. They are both about understanding how our decisions are being guided and reshaped by major demographic shifts.
Take the famous “new consumption” trends, especially visible in Hong Kong markets. Think about the Labubu dolls hanging from everyone’s bags, or the explosion in popularity of collectible art toys, ACG (Anime, Comics, Games) culture, and related merchandise like gashapon badges and acrylic stands.
Here’s another example. I was recently talking with some seasoned veterans from the auto industry. We discussed how young people today buy cars completely differently. And I said, “You’re absolutely right.”
I bought a car for my daughter not long ago, and I realized our needs and her desires are worlds apart. Do you think she cares about a V8 or a V12 engine? Is she interested in mechanical performance? Will she analyze the suspension or the brake pads?
No. Her reaction is more like, “This car is so kawaii (cute)! It’s a lovely pink color, and the dashboard has six seamless screens—it feels so cool.” From our perspective, we might think, “That’s not a real car.” But from their perspective, that is what a car is.
Why is this happening? The driving force, once again, is a profound demographic shift. The core consumer group in today’s market is young people. So, whether you’re analyzing the primary or secondary market, you cannot ignore the seismic changes in our population structure.
Silver-Haired Economy Won’t be Reality in the Short Term
Many have spoken to me about the “silver-haired economy,” but I must admit I have certain reservations about this concept. Our interpretations of what constitutes a silver-haired economy can differ significantly, and I don’t believe we’re currently in the first phase of a genuine silver-haired economy.
Let me explain this in plain terms: How many of you live with your parents? If you do, you’ve probably noticed something. Regardless of whether your family is well-off or not, the older generation always maintains certain habits - when you say, “Mom, I’ll be back in half an hour,” the moment you step out, they’ll immediately turn off the lights and switch off the AC. Is it really about the money? Probably not. Spending habits aren’t solely determined by wealth; they’re deeply connected to mindset.
Consider today’s young people. Many comment that they constantly order takeout, drink bubble tea, but rarely buy groceries to cook at home. This actually reflects the economic and social mindset of different generations. The older generation tends to be frugal, economical, and hardworking.
That’s why, at this stage, stimulating consumption from our parents’ generation is actually quite challenging. Their money is more likely to become savings rather than consumption. Even if they’re not short on money, if you think about it, the real silver-haired economy will only emerge when the post-85s and post-90s grow old.
Because their mindset will likely be: “My life hasn’t been easy - I want the next generation to live well.” And for the post-00s who follow, it might be: “My life hasn’t been easy - I want to live better myself.”
When you combine this consumption consciousness with shifts in population age structure, you begin to understand why demographic factors - population peaks, total numbers, aging trends - cannot be ignored. Particularly because this major cyclical variable isn’t a fast-changing one; it doesn’t change day by day. It’s a long-cycle variable.
From the reform and opening-up period all the way until 2015, we might not have needed to analyze this issue closely. But when the 2015 data emerged, we had no choice but to confront it. That’s why, for nearly a decade now, I’ve always placed this factor at the very core of my analysis.
Population Peaks and the Three-Phase Evolution of Real Estate
What else does demographics affect? It profoundly influences real estate. The property market inevitably undergoes three distinct phases: demand for housing, demand for housing coupled with investment, and finally, speculative demand.
Before 2004-2005, China’s real estate market was primarily about housing demand. Driven by housing marketization reforms, economic growth, and population increase, we were focused on meeting basic housing needs. The second phase, housing and investment demand, was also closely tied to demographics—specifically, urbanization.
Why do we consider the post-WWII period a critical demographic juncture? Because wars lead to a restructuring of population dynamics, and they come with another characteristic that many overlook.
For instance, is the decision to marry and have children—and how many—solely about money? My view is that it’s not entirely correlated. You often hear online that people today are reluctant to marry, date, or have children mainly due to overwhelming pressure—whether from buying a home or societal expectations. The declining birth rate is often attributed to high debt leverage and life stresses. While this reflects a certain stage, it’s not the complete picture.
Historically, after wars, even in poverty and hardship, the common pattern isn’t fewer births. In fact, you often find that more challenging environments correlate with earlier marriages and higher birth rates. This creates distinct population peaks. We can segment these peaks: those under 20, 20-30, 30-40, and 40-50.
When we analyze post-WWII demographic data across countries, a fascinating pattern emerges: the first and second generations after a war typically marry early and have more children. That’s why your parents’ generation mostly has siblings—extended families gathering 30-40 people for Chinese New Year were common. Now, just getting three people together for the holiday is an achievement. These large families were the result of early marriage and high fertility, with each generation’s population peak closely spaced, meaning people often became parents around age 20.
Nowadays, a 20-year-old is still considered a kid, 30 is “still young,” and 40 is when one might “consider dating and marriage”—that’s roughly my own child’s mindset. There are pros and cons to everything; I must emphasize that every situation has its trade-offs—nothing is perfect.
So, what’s the advantage of the demographic dividend? After a war, all factors of economic production are redistributed, and while many cite technology as the most crucial, it’s not the whole story. Human capital is the most critical factor. Let’s not迷信 (overly mystify) technology as the solution to all problems. If technology alone could fix everything, we wouldn’t have economic cycles.
In the early stages of any nation’s development, people are the most vital productive force. During that phase, if you could support them, more people were better. Think about why families in Minnan traditionally valued large families—because in most pre-modern economic structures, technology was secondary to human labor. Thus, people became the most crucial variable for families, communities, and nations.
If there were sufficient people in the post-war early stages, you had a demographic dividend. Virtually all post-WWII economies developed through this phase.
What are the drawbacks? First, after rapid population growth, can you actually support everyone? The crucial question becomes whether basic necessities—especially food—can keep pace with population growth. This determines whether the population remains a productive asset or becomes a burden.
Second, what’s another downside? The population peaks are too closely spaced. The impact of this becomes apparent 10 or 20 years later. After wealth is reconcentrated during rapid economic growth, closely spaced population peaks mean the real estate market transitions from housing, to investment, to speculation, forming a standard three-phase peak cycle.
During the second and third phases, the beneficiaries of property investment and those burdened by the resulting debt become very close generationally. Those who gained their first capital during the Reform and Opening-up era, and initially bought homes for housing needs, were largely from the pre-80s generations. When the post-80s generation began migrating to cities, starting families and careers, housing prices inevitably rose. They had to purchase properties from the post-60s and post-70s generations. This process prevents the formation of a generational buffer. It’s more like a spaced-generation effect.
Your Slice of the Pie Has Been Taken
The same principle applies to wealth: the act of dividing the pie hasn’t been passed down to you, yet your portion has already been allocated. This phenomenon isn’t unique to China—every nation faces similar issues because all post-war populations experience these tightly clustered demographic peaks.
Look at Japan, South Korea, even Southeast Asia—they all face the same challenges. That’s why I’ve previously discussed what I call intergenerational allocation. There’s actually a redistribution process between wealth and demographics, but if this process happens too quickly, some groups benefit while others get left behind. If it’s too slow, labor shortages emerge.
I’ve told many people they would witness the Bank of Japan raising interest rates and see inflation emerge in Japan. Many couldn’t understand this—they thought Japan would be lucky to achieve even 0-1% economic growth, so how could inflation possibly occur? This represents a fundamental misunderstanding.
What ultimately determines workers’ wages and labor income? Market economics tells us it’s determined by supply and demand. Simply put, when labor supply increases while market demand decreases, the value of human labor declines—this is the root cause of deflation. Conversely, if labor supply shrinks while demand remains stable (it doesn’t even need to grow rapidly), the resulting supply shortage will push prices upward.
Japan entered this demographic cycle a full 30 years before we did. This population adjustment is absolutely crucial. So, does Japan now require rapid economic growth to achieve inflation? Many make a conceptual error here—economic growth measures total output, but for household income growth, there’s a critical intermediate factor: distribution. I’ve never claimed Japan needs high aggregate growth to boost household income; rather, it needs to maintain current output levels without decline.
That’s why I’ve suggested people try to understand Japan’s intergenerational allocation model. Some online commentators respond, “But by that logic, wouldn’t it simply mean that when you get old, your money just gets spent by your children?”
In other words, if we have a large aging population—currently about 200 million people aged 65 and above according to the latest data—does that automatically mean older people will transfer all their wealth to their children? I think this perspective is too simplistic.
Consider this: if you’re 65 years old, how would you actually treat your children? Would you hand over all your savings, retirement funds, and pensions to them? If you’re 60 years old and still full of energy, and you do this, let me joke—your miserable retirement life is about to begin.
Why does Japan present such a contrasting picture? You often hear stories about elderly people who have children, yet after they pass away, their families discover tens of millions of yen hidden in dresser drawers. While internet memes about this are humorous, they reveal something profound: “If I give all my money to my children, then when I’m hospitalized—even when I’m still treatable—someone might pull the plug on me.”
I can support my children if they face difficulties—help them buy a car or provide some financial assistance—but I won’t transfer all my wealth to them. Across East Asian societies, we see a common pattern: significant wealth transfer typically occurs only after the older generation has passed away. Small inter vivos gifts are possible, but a complete, unrestricted transfer of control? That won’t happen while I’m still here.
I’ve been very clear with my own children: while I’m alive, I’ll spend my money as I see fit. I may provide some support if appropriate, but fundamentally, the money remains mine until I’m gone. That’s when it truly becomes yours.
Aging Inevitably Drives Down Risk Appetite and Increases Savings
Let me ask you another question: when a society creates wealth, and that early wealth creation and accumulation is concentrated in one generation, what happens when that generation grows old?
This is precisely where it connects to our investments: risk appetite declines, and savings rise. Many attribute this phenomenon to a “lack of confidence,” but I don’t quite agree with that. The phrase “lack of confidence” assumes we are all the same—identical in age and risk tolerance—and that the preference for saving stems from concerns about the external environment, economic conditions, or the investment landscape. But from my perspective, people are different, and wealth distribution is uneven.
So what truly is a key factor influencing risk appetite today? Back in 2018 and 2019, I shared with many institutional professionals that for China, finding a 3% fixed deposit in the future would become very difficult, and interest rates would likely continue to decline. Even then, I explained the demographic issue: when rapid wealth creation and an economic miracle are concentrated and solidified within a single generation, it leads to a preference for saving over risk-taking.
Do you know what older people prefer? They prefer saving money and have a low risk tolerance. For instance, in investment circles, when someone in their 50s, 60s, or already retired asks me for investment advice, I almost always recommend fixed income, dividend-yielding stocks, or monopolistic sectors like coal, oil, water, gas, and electricity. A 4% dividend yield is considered quite good for them.
Now, if I applied the same strategy to a 20-year-old, their reaction would be: “I worked hard all year to save 50,000 RMB, and you’re talking about compound interest? Isn’t there something where I can go all-in, turn 50,000 into 100,000, then 200,000, then 400,000?” I understand this completely. I would never call them reckless or overly speculative. This simply illustrates that different people, from different demographic age groups, have entirely different risk appetites.
So I often tell young people: “Take a bet,(搏一搏，单车变摩托) but if you lose, you’re still young—just don’t jump off a bridge. You have time and opportunities ahead.” Could I say the same to someone in their 50s nearing retirement? If they took that risk and lost, would they still have a chance? For them, what they need is stability—even with low interest rates, they seek certainty. This naturally leads to an overall decline in society’s risk appetite for wealth investment.
Of course, even within this broader decline, young people still have their own vibrant world—it’s just that their definition of “vibrant” is completely different.
Now, let’s be honest, these past few years—do you still hold onto those other kinds of assets? Do you still have your hand-harvested walnuts? Your stamp collections? That redwood furniture? Any jade, agate, antiques, or calligraphy? And of course, everyone knows that the items I just mentioned have all plummeted in value over the past decade, right?
I can tell you I sold off all mine long ago. Some say these were all bubbles, while others claim, “Mine are family heirlooms with intrinsic value.” I strongly disagree. Why? Once this generation passes, those items will hold little value. Value is assigned by people. Whether something has value or not, you need to learn to understand this.
In my own words: you don’t need to rigidly define or judge what is valuable, because people are the core source that assigns value. When the people change, when wealth changes, the game changes with them. It’s that simple.
So what have I been investing in lately? I invest entirely in what young people like. I never use my own values to judge. For example, my daughter and her friends will wait in line for hours for bubble tea. Do you understand that kind of marketing? Waiting four hours for one drink? By my values, if I had to wait even 10 minutes, it wouldn’t be worth it.
But that’s not the point. Since young people love it, we adapt to that marketing style. That’s why the hottest marketing strategies in recent years are all like this. Don’t advertise how safe a car is, its quality, engine size, or brake performance. Instead, promote that it has six screens and you can play games inside. Market that. Why cater to consumers this way? Certainly, there are some issues with this approach, but young people perceive value differently.
These Assets Will Have No Value in the Future
What else does this involve? Since the real estate boom has already ended—speculative phase concluded after 2018, and I believe the phase combining housing and investment has also ended—its next stage has only one purpose: housing. Once we enter this pure housing phase, we’re talking about basic human needs: eating, drinking, and shelter. But without people, where is the demand for housing?
Look at historical examples: Japan, South Korea, even the U.S. real estate bubbles. Do you know what characterized their peaks? Speculation—frantic speculation where people paid premium prices for non-essential properties. Vacation homes, tourist properties, retirement properties—these all represented the peak of the bubble.
Recently, while recuperating, I returned to Chengdu. Do you know what’s happening there now? During expansion phases, people move outward. During contraction phases, they return to the Second and Third Ring Roads. Why? All four of our elderly parents live there. To be frank, when it comes to future retirement, people won’t actually retire to tourist spots or vacation destinations—they need public facilities and services. So you’ll find many who moved from central Chengdu to outskirts like Lushan or Luhu are now returning to the Second and Third Ring Roads as they approach their 70s. They seek the liveliness, daily amenities, and medical resources there.
If urbanization continued expanding, there might still be opportunities. But once urbanization stagnates, it means existing public resources will remain concentrated in core areas. Look at Japan at its most frenzied: ski apartments, vacation apartments, seaside apartments. Superficially, Japanese housing indices have recovered to pre-1990 bubble levels, but the divergence is enormous—everything revolves around this word: “housing.” Properties where people actually live have recovered; those without residents never will.
Let’s project into the future: given our current demographic trends, these assets will definitely hold no value in the next 10-15 years. Some say, “I can rent them out for cash flow—maybe 100-150 RMB monthly.” But that won’t even cover the depreciation and maintenance costs. That’s the fundamental problem.
This connects to another issue: infrastructure. There’s a figure many might not know: the core working-age population (24-45 years old), who are also society’s primary taxpayers. Their proportion of the total population is crucial—it cannot fall below 25%. Once fewer than one in four people are primary taxpayers, serious problems emerge.
When this ratio hits certain historical thresholds, we reach the peak of fixed asset investment and urbanization. Some might cite Japanese data showing urbanization rates surged slightly at the end, but note: that final push didn’t come from cities expanding, but from villages disappearing. Japan’s Heisei mergers, where towns and villages were consolidated or eliminated, artificially boosted urbanization rates. In China’s context, many villages will simply empty out.
The ultimate consequence: public expenditures like roads and railways to rural areas become unsustainable. We can’t maintain bus services for five households in a village, nor build six subway lines in a city whose population shrinks from 1 million to 600,000.
Rewind to 2008: abundant labor, strong economic growth—all elements aligned where investments guaranteed future returns. Hence the classic saying: “If you want to get rich, build roads.” This was correct, but its premise depended on constant factors: stable population and economic growth.
Like our neighbors Japan and South Korea, after passing the peak, fixed asset investment typically drops to about half previous levels. What’s the corresponding population threshold? That moment when core workers and taxpayers fall below 25% of the population. How do we maintain public finances, subways, and infrastructure then? Looking ahead ten years, we’ve likely already reached peak fixed asset investment.
To be blunt, if real estate returns to pure “housing,” the question becomes: where are the people? Only where people exist will there be housing demand. And once we return to this phase, what emerges? Extreme differentiation. The gap between old and new properties will widen dramatically, much like aging humans themselves. Those dilapidated old homes can’t be redeveloped—demolition and reconstruction were products of the population peak and urbanization surge. Once that process completes, large-scale redevelopment becomes unfeasible in many areas.
What does this mean? Maintenance costs for old properties will become prohibitively high. We’ll see an enormous price gap between old and new properties, even within the same district. Other social factors gradually become less important—hospitals will be crucial, while schools become less so.
So the question becomes simple: are you buying a school district property or a hospital district property? That’s what you need to consider. For China, hospitals represent public investments, and cities probably won’t build many new ones.
You’ll discover that limited resources remain concentrated in urban cores. Thus, future development will inevitably cluster around major cities—this is the undeniable reality we’re already witnessing from demographic shifts.
Today we’ve discussed demographics, their impact on real estate, personal investment considerations, and even how population trends affect infrastructure investment and government spending. What I really want to emphasize is this: we must learn to analyze these long-cycle variables. They might appear only once every few decades, but when they arrive, their impact lasts for decades too. Thank you all.