A Nation on the Brink
Imagine a country where the weight of its debts crushes its economy, and its population vanishes faster than anyone dares to admit. This isn’t a dystopian novel—it’s China in 2025. Two colossal crises, debt and demographics, are tearing apart the world’s second-largest economy. The numbers are staggering, the implications are terrifying, and the silence from official channels is deafening. How did a nation once poised to dominate the global stage end up here? Let’s unpack the twin ticking time bombs that have already started to detonate.
The Debt Mountain: A Financial System on Life Support
China’s financial system is drowning in debt. As of May 2025, the country’s on-balance-sheet loans total 270 trillion yuan, covering government, corporate, and personal borrowing, according to the People’s Bank of China. Add to that 185 trillion yuan in direct bond market debt—government bonds, local government bonds, and corporate bonds—and you get a jaw-dropping 455 trillion yuan in total societal debt. That’s roughly $63 trillion USD, a figure that excludes shadowy underground lending and opaque shadow banking systems.
To put this in perspective, let’s do some quick math. At a modest 3% interest rate, China must fork over 13.5 trillion yuan annually just to cover interest payments—not touching the principal. In 2024, China’s official GDP was 135 trillion yuan. That means 10% of its economy is swallowed by interest alone. But here’s the kicker: many experts argue China’s GDP is wildly inflated, possibly by 50% or more. If we halve that GDP to a more realistic 67.5 trillion yuan, a staggering 20% of the economy goes to servicing debt. One-fifth of China’s wealth vanishes into the black hole of interest payments every year.
What’s backing this mountain of debt? Not much. Asset prices, particularly in real estate and local government financing vehicles, are plummeting. These assets, once considered solid collateral, are now either illiquid or worthless. Meanwhile, China’s debt continues to grow at an alarming 7% annually, adding another 30 trillion yuan by the end of 2025. Compare that to the official GDP growth rate of 5%—which many doubt exists at all—and you see the problem: debt is outpacing economic growth by a wide margin.
Who’s borrowing? Mostly the government and state-owned enterprises, the least efficient parts of the economy. Private sector activity and household consumption have flatlined, leaving the state to prop up a sinking ship. Corruption, too, plays a role. Some experts suggest that soaring debt reflects persistent “corruption costs,” where funds are siphoned off through inefficiency and graft. The financial sector itself is a ticking time bomb, with liabilities reaching 500 trillion yuan—higher than the total societal debt. This translates to 390% of China’s official GDP, or a mind-boggling 780% if you use a more realistic GDP figure. For comparison, the U.S. financial sector’s liabilities are about 35–45% of its total debt and 170% of its GDP. China’s financial system is not just overleveraged—it’s a house of cards waiting for a gust of wind.
The Population Collapse: A Demographic Disaster
If debt is the first crisis, demographics is the second—and it’s just as devastating. A shrinking population means fewer workers, fewer consumers, and less economic activity to service that crushing debt. China’s official population stands at 1.4 billion, but this figure is increasingly suspect. Some estimates suggest the real number is closer to 400–500 million, a discrepancy of nearly a billion people. How could such a massive overstatement happen? And what does it mean for China’s future?
The evidence is in the numbers. Between 2000 and 2023, China’s official population grew by 140 million, an 11% increase. Yet, during the same period, the country lost 74% of its primary schools—410,000 institutions closed, leaving just 143,000 by 2023. How does a growing population lose three-quarters of its elementary schools? It doesn’t. The collapse in schools, especially in rural areas, points to a long-term population decline that began around 2000.
This isn’t just a rural issue. In Tuenjo, Fujian province, a metropolitan area with a population similar to New York City, 20 primary schools closed in the first half of 2023 alone, with 50 more at risk. Imagine 70 schools shuttering in New York City in a single year—it would be a national scandal. In China’s northeast, the situation is even worse. Heilongjiang province lost 60% of its primary schools between 2013 and 2022, Jilin lost 50%, and Liaoning saw 2,200 closures. Even Shanghai, China’s gleaming financial hub, closed four primary schools and 12 kindergartens in early 2025.
Kindergarten data tells an even grimmer story. Between 2022 and 2024, China lost 41,500 kindergartens, a 14% drop. Projections for 2025 estimate another 26,000 closures, bringing the total decline to 23% in just four years. The remaining kindergartens are shrinking, too, with average enrollment falling from 180 children in 2017 to 141 in 2024—a 22% drop. Combining these figures, the preschool population has plummeted by an estimated 40% since 2022, with some suggesting it could be as high as 50%.
What explains this collapse? It’s not lifestyle changes—90% of Chinese children attend daycare, so this isn’t about parents suddenly opting out. Nor is it just low birth rates. During the COVID lockdowns of 2020 and 2021, enrollment remained steady, and some argue birth rates should have risen with couples spending more time at home. A 40–50% drop in preschoolers suggests something far more catastrophic: a massive loss of people of childbearing age. If China’s pre-COVID population was closer to 800 million, as some estimate, a 40–50% loss during the pandemic would leave the country with roughly 400 million people today. That’s a billion fewer than the official figure.
Historical Context: How Did We Get Here?
China’s economic and demographic crises didn’t emerge overnight. The roots of the debt problem trace back to the 2008 global financial crisis, when China unleashed massive stimulus packages to shield its economy. These measures, while effective in the short term, fueled a borrowing spree that never stopped. Local governments and state-owned enterprises piled on debt to fund infrastructure and real estate projects, many of which were unprofitable or outright wasteful. The real estate sector, once a cornerstone of China’s growth, became a bubble, with ghost cities and empty apartment complexes dotting the landscape. When the bubble began to deflate in the early 2020s, it exposed the fragility of China’s debt-driven growth model.
The demographic crisis has deeper roots. The One-Child Policy, implemented from 1979 to 2015, slashed birth rates and created a demographic time bomb. By the time the policy was relaxed, cultural and economic shifts—high living costs, intense work pressures, and a preference for smaller families—had cemented low fertility rates. Add to this the devastating impact of COVID, which some argue caused hundreds of millions of deaths, and you have a population collapse unlike anything in modern history.
Geopolitical Implications: A Weaker China on the World Stage
China’s twin crises have profound implications for the global order. A financially crippled and demographically shrinking China is less able to project power, whether through its Belt and Road Initiative or military ambitions in the South China Sea. A weaker economy could lead to internal instability, as public frustration grows over stagnant wages, unemployment, and a collapsing social safety net. Could this spark unrest, or even regime change? It’s not unthinkable.
Globally, a faltering China disrupts supply chains, trade, and investment. Countries reliant on Chinese manufacturing or investment—particularly in Asia and Africa—may face economic fallout. Meanwhile, rivals like the United States and India could seize the opportunity to fill the void, reshaping global alliances and economic power dynamics. But a collapsing China isn’t necessarily good news for the West. A sudden economic implosion could trigger global market shocks, given China’s role as a major consumer and producer.
Reflections: A Sobering Reality
As I dug into these numbers, I couldn’t help but feel a sense of unease. China’s story is a cautionary tale about the dangers of unchecked borrowing and ignoring demographic realities. It’s easy to point fingers at mismanagement or corruption, but the deeper issue is systemic: a growth model built on debt and an aging population with no replacement generation. What happens when a nation runs out of people to carry its burdens? Can an economy survive when it’s suffocating under its own weight?
For ordinary Chinese citizens, the consequences are already real. Empty schools, shuttered kindergartens, and a property market in freefall signal a future of uncertainty. For the rest of the world, China’s unraveling is a wake-up call. No economy, no matter how powerful it seems, is immune to the laws of math and time.
Conclusion: The Road Ahead
China’s debt and demographic crises are not abstract problems—they’re a slow-motion disaster unfolding before our eyes. With 455 trillion yuan in debt and a population potentially half its reported size, the country faces a reckoning. The government may try to paper over the cracks with more borrowing or rosy statistics, but the numbers don’t lie. Schools are closing, kindergartens are emptying, and the financial system is buckling under its own weight.
The question isn’t whether China can avoid collapse—it’s whether it can manage the fallout. For now, the world watches, and the stakes couldn’t be higher.
