Are China’s big cities no longer attracting young people?

International Business News  –  A leaf knows the autumn, and you can tell the warmth of the economy from the population.

The latest statistics show that for the first time, first-tier cities are experiencing a collective population decline. Not only Beijing and Shanghai’s population will decrease by 43,000 and 135,400 respectively in 2022, but even Shenzhen has seen a decrease in population – the city’s resident population will be 17,661,800 in 2022, while at the end of 2021, the city’s resident population will be 17,681,600, which means Shenzhen The population decreased by 19,800 people.

What does this change mean? What is the impact on the economy?

The fading of the city of desires

No big city has seen its population shrink more starkly than Shenzhen, the city that epitomises China’s brutal economic growth.

To paraphrase a famous saying, this is the light of life, the fire of desire, and even the sin and soul of the economy. It can be said that Shenzhen is a perfect metaphor for China’s economy, a southern city that has always been unafraid to admit the shortage of its own cultural character, while the enviable youth superimposed on the desire to climb regardless is the main theme of the city, and money is the stimulant that keeps the city awake day and night.

What’s more, Shenzhen has been playing the welcome card to all parties, compared to Beijing and Shanghai, which have been shouting in high profile about population control in the past few years. Shenzhen has always been defined as a city of money, high housing prices did not scare off young people from all over the country, “come to be a Shenzhener” is not a vague slogan, these years Shenzhen’s settlement threshold has been the lowest in the first-tier cities, some years ago soaring housing prices also made a number of speculative nouveau riche.

In 2022, the number of permanent residents in Shenzhen declined for the first time since the city was established. A decrease of less than 20,000 people, or even just one year’s worth of data, is certainly not a big deal when viewed statically, but the signal implications are cause for reflection. From the perspective of Shenzhen’s declining population, one can get a glimpse of the ceiling constraints of China’s first-tier cities – that is, has the economic human logic that used to give enough incentives to first-tier cities come to an end?

Most Chinese people, unafraid to work hard, as long as this hard work has enough counter-value, this is human nature, no excuse, but also the result of economic rationality. When we look at the opportunity of population expansion in big cities in the past, it also lies in the fact that big cities provide enough various kinds of games and enough incentives for people in the bureau, but nowadays, this incentive is a bit chicken-hearted and even hard to swallow.

The input-output ratio of first-tier cities is declining

The first-tier cities are the perfect mapping of China’s dream, so to speak, and they are the economic engine of China. Once the economic growth slows down, it is naturally the first to send a chill through the first-tier cities.

From the past to the present, first-tier cities have been the most market-oriented areas in China, accumulating the best opportunities and attracting the best talent in China, and naturally creating the sky-high real estate prices in Chinese cities. The subtle difference is that as first-tier cities become more and more voluminous, the cost of becoming an urban middle class becomes higher and the opportunity slimmer.

In the past, high property prices meant high returns, both in terms of home ownership and careers. Generations of talented people came to first-tier cities, worked hard, fought to settle down, and tried to realize their dreams. The most common or Chinese way to describe this dream is to have a wife and children, or to have a house, a car and the next generation.

In the past thirty years, this effort has been well rewarded and has created a mindset: basically, staying in a first-tier city is a necessary choice for a successful persona, even if this choice requires paying the price of 996 labor intensity and small living space, after all, rising incomes and housing prices have comforted this lack; in contrast, returning home, even to a second-tier city, has a defeated posture. With the economic downturn and the arrival of employment difficulties, this kind of thinking preconceptions in the last three or four years has encountered great challenges, stay in the first-tier cities began to be no longer the only mainstream choice.

Today, high housing prices mean painful leverage, while corresponding opportunities are decreasing. In the first-tier cities, foreign investment is no longer a popular choice, and entering a large factory is no longer the choice of the Chosen One, the public exams and graduate studies have instead become the goal of many undergraduate students, and the “Hengshui mode” of brushing up on the problems continues from high school to university. Even a lot of indigenous residents of first-tier cities are in a trance and shaken, regretting that they do not have a hometown to lie flat, why not go to second-tier cities to try the opportunity?

In other words, the core factor of population outflow from first-tier cities is that the ratio of return on investment in first-tier cities is decreasing, and this is likely to be forming a trend. As time moves on, the criteria for evaluating success are also beginning to shift. Many middle-class people in first-tier cities start to be anxious about the phenomenon of 35 years old when they look back and realize that they have struggled for many years in large factories and foreign enterprises, and their glorious past is just a wave, and they may not be “other people’s children” in the eyes of their hometown. In the secular sense of success, it seems to belong instead to those who left the first-tier cities in the early years in the voice of regret disillusioned peers, many have successfully entered the system ashore, sitting in the first-tier cities can not dream of a large flat, the second child is basically the standard, living into the small places everyone envied “town noblewoman”.

Not to mention, what the middle class in big cities can leave to their children are only some assets that may depreciate in value, while in small and medium-sized cities, more content can be passed on, and connections and relationships are still more important capital, which is difficult for the middle class to accumulate capital in big cities through a generation.

When it comes to population decline in first-tier cities, many people attribute it to the epidemic, which is naturally true, but ignore one thing: the impact of the epidemic is always only an accelerator of the trend, not the trend itself. Urban development has its own logic, and when the economy passes the parabolic apex, its downward path is already predetermined. Therefore, the weakness of the first-tier cities, sooner or later, will be passed to the whole situation, when singing good net red city lamenting the first-tier cities, we should not forget the larger chess game.

Big Cities or the Future

The loss of population in first-tier cities is likely to be the gain of second- and third-tier cities. The difference is that in the past, more population gathered in first-tier cities and their surroundings, while today, central and western cities are becoming mainstream.

According to statistics, the city with the largest population growth in 2022 is Changsha, followed by Hangzhou, Hefei, Xi’an, Nanchang, Kunming, Wuhan, Zhengzhou, Qingdao and Jinan – seven of the top ten seats for net resident population growth belong to central and western cities. Even the populations of some large metropolitan areas did not continue their previous trend, such as Beijing-Tianjin-Hebei, which includes Beijing, Tianjin and Hebei Province, where the resident population decreased by 423,000, and the Greater Bay Area, which includes Guangzhou, Hong Kong and Macau, where the resident population decreased by 350,000.

Some of my friends and I talk about netroots cities, always exclaiming that cities like North to Chengdu, Changsha and even Dali are the new trend, and have become new communities, quite a climate and so on. In fact, the evaluation of the net red city needs a long-term vision, short-term prosperity is likely to be only a momentary move, not to mention that many of these friends who choose the second and third cities are also reluctant to choose. Many of them are driven to second and third-tier cities by housing prices, and their entry will likely also accelerate the speed of second and third-tier cities “volume”.

China’s mega-cities are likely to persist in the future, and how to develop and operate them is likely to be a major issue when growth is slowing down, and the inertia of thinking based on planning and land finance should change. In terms of network theory, the bigger the city, the more economical it is, and the larger the city provides services at a lower cost, even if for the environment, large cities are actually more friendly than we think. Some data studies show that a city with 10 million people looks the same in numbers compared to two cities with 5 million people each, but the former needs 15% less infrastructure. Looking at the 2021 data, there are 17 cities in the country with a total population of more than 10 million, which are all expected to be mega cities by international standards.

In the past, many urban middle-class people are most often concerned about their own career development, how they can work harder to achieve class crossing in a generation’s time; today, they are more anxious about where their children will go, to go abroad or stay in the country? Work to go inside or outside the system? The problem is, no matter how hard they try, their children’s lives are more affluent than their times, but there seems to be fewer ways out. All their efforts are just for their children not to fall out of the middle class.

No matter how we calculate the economic gains and losses and the grand narrative, people are always the protagonists of the story, and each individual is always the biggest part of the economy. More importantly, young people’s views are especially important. In the future, when the post-90s run five, and today’s post-00s are 35, what kind of city will they face? Or rather, what kind of city life do we want to leave to the young people of the future? This is perhaps a more important question for everyone to think about than the short-term population movement and economic fluctuations.