Fu Peng: Major Asset Reshuffling—Where Should Money Be Invested?
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Fu Peng: Major Asset Reshuffling—Where Should Money Be Invested?
Understanding demographic changes means understanding the wealth map of the next decade—the map is hidden in young people’s preferences; what young people like today will be the next wave of growth.
Navigating Web3 tides with focused insightsSource: The New Economist
What does the restructuring of wealth amid rapid economic growth mean?
Analyzing major-cycle variables is typically a once-in-several-decades event—but when it occurs, its impact lasts for decades. If current trends continue, these assets will become entirely valueless in the future.
Fu Peng explains how to adjust your investment strategy, which assets will appreciate in value, and how your career and consumption habits should adapt accordingly.
Full text below:
It’s truly an honor to be here today at Tai Xue to share insights with all of you. What I most want to discuss is a critical core variable—population. It affects virtually everything: real estate, government fiscal conditions, future infrastructure investment, and even investor preferences across asset classes.
The Critical Core Variable: Population
Back in 2018, I already shared with you a pivotal demographic turning point. For China, 2015 marked a data inflection point: the country’s birthrate plunged sharply once again. Today, our population growth rate hovers near zero. This figure has changed dramatically over the past decade—something many of you have now noticed. Yet this shift actually began ten years ago, and its effects on the economy and investment landscape are already unfolding.
I often talk about population, and many ask: “You’re an investment professional—formerly in hedge funds—so why not focus on markets? Why dwell on aging demographics, youth savings distribution, or risk preferences?” My answer is simple: I don’t tailor my message to suit popular tastes. Instead, I aim to share with you the foundational logic I’m actively thinking through.
Over the past few years, I’ve observed my daughter closely: what she likes, I invest in. In fact, both activities stem from the same root cause—the profound demographic shift reshaping our investment guidance and decisions.
For instance, Hong Kong’s market has recently embraced a prominent “new consumption” concept. Think of the Labubu dolls hanging from handbags, or the surge in trendy collectibles—anime-inspired figurines (“gu zi”), enamel pins (“ba ji”), and acrylic display stands (“li pai”)—all exploding in popularity over the past two years. Recently, I spoke with veteran figures in China’s auto industry, and they remarked how young people’s car-buying behavior has fundamentally changed. I agreed: just recently, I bought a car for my daughter—and discovered that our needs and expectations were completely misaligned. Do you think she cares about V8 or V12 engines? Mechanical performance? Suspension tuning? Brake pad specs? Or does she instead care whether the car looks “kawaii”—adorably pink, with six seamlessly connected interior screens delivering comfort and delight? From our perspective, this isn’t a car; from hers, it absolutely is.
Why does such a shift occur? Again, it stems from a fundamental demographic change. Young people are now the dominant consumer cohort, so analyzing any consumer market—whether primary or secondary—requires close attention to evolving population structures.
Silver-Haired Economy Won’t Arrive Until Post-1985 Generations Age
Many have spoken to me about the “silver-haired economy” centered on seniors. Frankly, I remain skeptical of this term, as interpretations vary widely. I do not believe China has entered a true silver-haired economy phase yet.
Put plainly: Have you lived with your parents? If so, you likely know this universal habit—no matter your family’s wealth level—your parents instinctively turn off lights and air conditioning the moment you step out, saying, “I’ll be back in half an hour.” Does your family lack money? Probably not. Consumption habits aren’t solely dictated by income—they’re shaped by mindset. Similarly, today’s youth order takeout and drink bubble tea rather than cook at home.
This reflects broader socioeconomic ideology: older generations embody thrift, frugality, and diligence.
Thus, unleashing the spending power of my parents’ generation remains extremely difficult—it largely converts into savings. Even if they aren’t cash-constrained, consider this: only when post-1985 and post-1990 cohorts age will China truly enter the silver-haired economy era.
Because their mindset is: “Life hasn’t been easy—I want my children to live well.” Later, post-2000 cohorts may think: “My life hasn’t been easy either—I want to live better myself.”
When consumption consciousness intersects with population age structure, you’ll see that population peaks, total size, and aging intensity are all non-negotiable factors. Crucially, this macro-cycle variable is not short-term—it doesn’t shift overnight. It’s a long-cycle force. From reform and opening-up until 2015, we arguably didn’t need to analyze it closely. But once 2015’s data emerged, analysis became essential—which is precisely why, for nearly a decade, I’ve consistently prioritized this issue above all else.
Population Peaks and Real Estate’s Three-Stage Evolution
What else does population affect? Real estate—undeniably. Real estate inevitably passes through three phases: housing demand, housing-plus-investment demand, and speculative demand.
Before 2004–2005, China’s real estate market was driven purely by housing demand—fueled by housing market reforms, economic growth, and population expansion, satisfying basic shelter needs. The second phase—housing plus investment demand—was equally tied to population dynamics, specifically urbanization.
Why is WWII such a pivotal node in demographic discussions? Because war reshapes population structure—and exhibits a key feature many overlook.
Take marriage and childbearing: Does financial capacity determine whether people marry early, have many children, or delay both? My answer: Not entirely. Online narratives often blame high debt leverage and intense life pressure—home-buying stress, parental expectations—as causes of low fertility. While valid for one historical stage, this view is incomplete.
In reality, postwar hardship periods—counterintuitively—often saw higher, earlier fertility. Thus, population forms distinct “peaks”: ages 0–20, 20–30, 30–40, and 40–50.
When we slice up post-WWII populations across countries, a fascinating pattern emerges: First- and second-generation postwar cohorts typically married and bore children early and abundantly. Hence, your parents’ generation usually had siblings—large extended families gathering for Spring Festival with thirty or forty members. Today, assembling even three family members for the holiday is challenging—a direct result of early marriage, early childbirth, and high fertility, compressing generational intervals so people became parents around age 20.
Now, age 20 is still “baby” territory; age 30 feels youthful; age 40 is when many begin contemplating romance and marriage—mirroring my daughter’s current mindset. This shift carries trade-offs: everything has pros and cons—I emphasize there’s no perfect scenario.
So what are the benefits of a demographic dividend? Postwar, all economic production factors—including labor—are reallocated. Many cite technology as the key factor—but that’s only partially true. Labor remains the most critical production factor. Don’t fetishize technology as a panacea. If tech solved all problems, economic cycles wouldn’t exist.
Hence, labor is the paramount production factor for any nation in its early development stages—more people meant more advantage, provided they could be sustained. Consider southern Fujian’s clan culture: “Prosperity demands abundant offspring,” because human labor historically outweighed technological capability across all economic models—making people the central variable for families, households, and nations alike.
Sufficient postwar population volume yields a demographic dividend. Indeed, all major post-WWII economies experienced this phase.
What are the downsides? First: Can rapid population growth be sustainably supported? Among essentials—food, clothing, shelter, transport—food supply must keep pace with population growth. Only then does labor function as a productive asset, not a drag.
Second: Compressed population peaks create delayed consequences—emerging 10 or 20 years later. As wealth restructures amid rapid growth, compressed peaks drive real estate through a classic three-stage evolution: housing → investment → speculation. In Stages 2 and 3, beneficiaries of investment gains and those burdened with debt end up overlapping tightly.
Reform-era “first-mover” wealth accumulation enabled early housing purchases driven by shelter needs—before the post-1980 cohort was even born. When post-1980s migrants flooded cities and started families, housing prices surged. They inherited properties from the post-1960s and post-1970s generations—eliminating intergenerational transfer effects. Wealth remained static; the “cake-cutting” process never reached them—they were cut *from* the cake.
This phenomenon isn’t unique to China—it’s universal among postwar nations grappling with compressed population peaks. Neighboring Japan and South Korea—and Southeast Asia—face identical challenges. I’ve previously discussed “intergenerational allocation”: wealth and population undergo redistribution. But if redistribution moves too fast, some gain while others miss out; too slow, and labor shortages emerge.
I’ve told many: Expect the Bank of Japan to raise rates and experience inflation. Skeptics protest: “Japan’s GDP growth barely hits 0–1%—how can it face inflation?” That’s a grave misconception.
For most workers, what determines wage levels? Market economics answers: supply and demand. Simplified: excess labor supply + weak demand = low labor value = deflationary pressure. Conversely, shrinking labor supply + stable demand—even without high growth—creates persistent scarcity, pushing prices upward.
Japan is 30 years ahead of us in this demographic cycle—making adjustment critically urgent. So is Japan’s challenge achieving high growth to generate inflation? Many err by conflating growth with income distribution. Economic growth measures aggregate output; household income growth hinges on *distribution*. I’ve never claimed Japan needs aggregate growth to boost incomes—only that it must prevent aggregate output from collapsing.
Earlier, I urged understanding Japan’s intergenerational allocation. Some netizens countered: “Mr. Fu, isn’t it simple? When you age, you pass wealth to your children.”
In other words: Once 65+ citizens reach ~200 million (current official data), won’t elders simply spend their wealth on children? Here’s the nuance: People often oversimplify. Imagine being 65: Would you hand over all savings, pensions, and retirement funds to your children? If you’re still energetic at 60, doing so might trigger a “miserable retirement”—a tongue-in-cheek warning.
Why does Japan see elderly parents leaving millions of yen untouched in drawers after passing? Viral online anecdotes—though humorous—capture truth: If I give all wealth to my children, hospital treatment might be withheld despite viability. If my child faces hardship, I’ll assist—but won’t surrender *all* wealth. Within East Asian civilization, large-scale wealth transfer typically occurs only *after* elders pass. Small-scale support—funding a car purchase, partial assistance—is common. But full, unrestricted wealth transfer? That waits until I’m gone. I’ve made this clear to my daughter: “I’ll spend first. I’ll help if needed—but the money becomes yours only after I’m gone. Until then, it’s mine.”
Declining Investment Risk Preference, Rising Savings
One more question: When society generates wealth, early accumulation concentrates within one generation. What happens when that generation ages?
This directly impacts investing: risk preference falls, savings rise. Many attribute this to “lack of confidence.” I disagree—not everyone shares identical age, risk tolerance, or circumstances. Confidence deficits assume uniform external perceptions; reality involves heterogeneous wealth distribution and life stages.
So what drives today’s risk preference shift? Back in 2018–2019, I told institutional investors: Finding 3% fixed deposits will soon become extremely difficult—interest rates will likely keep falling. I highlighted population trends, rapid wealth creation, and China’s “economic miracle” concentrating capital in one generation—locking in savings bias and risk aversion.
Elders prefer saving and low-risk assets. In investing circles, I often say: For 50–60-year-olds or retirees, I recommend fixed-income products, dividend-paying stocks (coal, oil, water, gas, electricity—monopolistic sectors), targeting ~4% dividends.
Apply this portfolio to a 20-year-old? They’d retort: “I worked hard all year to save ¥50,000—why not go all-in for 100% returns? Turn ¥50,000 into ¥100,000, then ¥200,000, then ¥400,000!” I empathize—I never call them reckless or overly speculative. Different ages, different population structures, different risk preferences.
So I tell youth: “Go all-in—bicycle to motorcycle!” But if you lose, you’re young—don’t jump off bridges. You have time and opportunity. Could I advise a 50+ pre-retiree similarly? If they lost, would recovery be possible? No—they need stability, even at ultra-low rates. Hence, society-wide risk preference naturally declines. Youth still inhabit vibrant worlds—but their “vibrancy” differs entirely.
Let’s be frank: Do you still hold other assets? Walnut beads? Stamps? Rosewood furniture? Jade, agate, antiques, calligraphy? Everyone knows these plummeted over the past decade—right?
I liquidated them long ago. Some claim they’re “bubble assets”; others insist they’re “heirloom-value.” I strongly disagree. Why? When this generation passes, those items retain no inherent value. Value is human-assigned. To understand an object’s worth, grasp its human context.
As I say: Don’t obsess over defining “value”—evaluate what *creates* value. Humans are the core value-assigners. When humans change, wealth changes, and the game changes—same principle.
So what have I invested in lately? Exclusively youth-oriented assets. I never impose my values: When my daughter queues four hours for bubble tea, do you grasp that marketing? My personal valuation says: “If I waited 10 minutes, it’s not worth it.”
But that’s irrelevant. Since youth love it, we replicate that model. Hence today’s hottest marketing emphasizes six-screen dashboards and in-car gaming—not safety, build quality, engine size, or brake specs. Why cater to consumers? Yes, issues exist—but youth cognition differs.
These Assets Will Become Worthless
This also connects to broader implications. With real estate’s speculative phase ending post-2018—and even its housing-plus-investment phase concluding—the sole remaining phase is pure shelter. And shelter serves biological needs: no people, no housing demand.
Historically, Japan, South Korea, and even the U.S. experienced real estate bubbles peaking at rampant speculation—paying premium prices for unnecessary assets. Vacation homes, tourism properties, and retirement communities mark bubble peaks.
Recently, while recovering in Chengdu, I observed: During expansion, people migrate outward; during contraction, they return inward—to the Second and Third Ring Roads. Why? Four elderly relatives live with us. Honestly, future retirement won’t happen in tourist resorts—public infrastructure gaps make them impractical. Thus, many Chengdu residents moved from inner rings to Lushan/Luhu developments—then, aged ~70, returned to inner rings for liveliness, daily conveniences, and healthcare access. Urban expansion offers opportunities—but if urbanization stalls, public resources concentrate in core areas.
Hence, Japan’s peak frenzy involved ski condos, vacation apartments, and seaside units. Superficially, Japan’s property index has rebounded to pre-1990 bubble levels—but deep divergence exists, pivoting on “shelter.” Occupied, inhabited properties rebound; vacant, uninhabited ones never recover. Projecting forward under current demographic trends, these assets will hold zero value in 10–15 years. “I’ll rent them!” someone protests—yet monthly rents of ¥100–¥150 can’t offset depreciation costs. That’s the crux.
This also implicates infrastructure. A little-known statistic: Prime working-age adults (24–45) constitute the main taxpaying cohort. Their share of total population is critical—if it falls below 25% (i.e., only 1 in 4 people pays taxes), systemic problems arise.
When this ratio hits certain historical thresholds, fixed-asset investment and urbanization both peak.
Some cite Japan’s urbanization peak data showing a final uptick—but note: At the tail end, urbanization rises not via city expansion, but rural depopulation. Japan’s Heisei mergers—abolishing towns and villages—boosted urbanization rates. In China, this may mean villages vanishing entirely, raising urbanization rates by default.
Consequently, roads and railways to abandoned villages become unsustainable—no buses for five households; no six subway lines for a city shrinking from 1 million to 600,000 residents.
Recall 2008: Abundant labor, robust growth—every investment element aligned, guaranteeing future returns. Hence the adage: “To get rich, build roads first.” True—but only if labor and growth remain stable.
Similarly, Japan and South Korea, past their peaks, saw fixed-asset investment halve—coinciding with prime workers/taxpayers falling below 25% of total population. How do public finances, subways, and infrastructure sustain themselves? Looking ahead 10 years, China has likely hit its fixed-asset investment peak.
Bluntly: If real estate reverts to pure shelter, the question is: Where are the people? People define shelter demand—and reverting to shelter creates massive disparities. Old vs. new housing diverges sharply—like aging humans. “Old, broken, small” units lack demolition feasibility; demolition itself is a product of population peaks and urbanization surges. Post-urbanization, large-scale demolition fades—meaning sky-high maintenance costs for aging stock, extreme price gaps between old and new units (even in identical neighborhoods), and diminishing relevance of other social factors. Hospitals become paramount; schools, less so.
So the choice is stark: school-district housing—or hospital-district housing? For China, hospitals represent public investment—cities won’t likely build many new ones.
Thus, finite resources concentrate in cities—driving clustered, mega-city-centric development. No debate: This mirrors today’s demographic reality.
We’ve covered population, real estate, personal investing, infrastructure, and government spending—all interconnected. Today’s core message: Prioritize analysis of macro-cycle variables. They appear once every few decades—but once they arrive, their impact endures for decades. Thank you.
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