Can Immigration Solve China’s People Problem?

Photo of Chinese men and women in a town square

China is facing a demographic crisis, but can immigration be used to counter it?

Countries like Canada and Germany have used immigration to bolster their shrinking workforces…with mixed success. China’s demographic problem is a degree of magnitude worse; the rapid industrialization, urban migration and one-child policy all led them down this path (and that birthrate is getting scary low). Immigration isn’t going to save the Chinese…unless they find a way to bring in 30 million young people annually.

So, China can expect a collapse in their workforce and societal coherence within a decade. Everyone else should get out their pen and paper and take notes on how this plays out, and start to prepare for what is to come.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from a snowy Colorado where we’re in the calm between the storms. Two feet behind us, one foot in front of us. Lots of shoveling yet to be done. Today we’re taking an entry from the Patreon forum. The question specifically is: can China use immigration to solve some of its problems?

The scale of the challenge, of course, is huge. And what China has done isn’t really technically immigration. They send their people out to attend universities and pick up technical skills that they can’t get within China, and then they try to bring them back. That has been at least moderately successful. I’d say probably a third to half of the students they send abroad come back. And considering that’s better than zero, you know, take the win where you can get it.

But moving the demographic pendulum is really hard and takes decades, even with immigration. So let me give you a quick three examples.

Canada decided about 15–17 years ago that they were facing a European-style demographic collapse. And so they opened up the doors and, over the course of the next 15 or 17 years, brought in about 4 million people, mostly under age 40. That did stabilize their tax base and their workforce, but it generated 4 million people who needed a place to live. And if you need a place to live, you’re not very price-sensitive. So it caused a housing shortage across the system in the places where there was actually work.

They’re now dealing with the political outcomes of that, which is part of the reason why the Justin Trudeau government is likely to fall in elections next year.

The second example would be Germany, where the birth rate has been dropping for 130 years, ever since industrialization began. But it really fell off the cliff after reunification in 1990.

Now, you would think that you’d have a big optimistic moment like reunification, and the birth rate would go up. The problem is that the East German territories, former East Germany, were economic basket cases, and the Germans collectively spent over €1 trillion trying to rehabilitate the industrial plant and infrastructure. And it was just a waste of money.

So if you’re in the East German system, you saw all this money coming in to try to make your system better, and it all failed. In the meantime, all your young people left, and so your birth rate almost went to zero.

In the West German system, you were paying and paying and paying and paying and paying, and you basically had a 12-year period with negligible economic growth because you were shoveling money into the furnace. So the birth rate dropped there, too.

Of course, it’s a heavily industrialized, urbanized country. When you live in condos, there’s no room for the kids, as opposed to when you live on a farm where there’s all kinds of room for them—not to mention their free labor. So the economic case went away, the emotional case went away, and the birth rate in Germany kept falling.

Probably within the next 7–8 years, we’re looking at about a one-third reduction in the size of the German workforce, and it will only shrink thereafter, with all the implications it has for consumption, tax base, and state coherence.

A few years ago, the Germans let in about a million people from Syria—refugees. And people are like, oh, sorry, demographics? No, they just did that because they were trying to do the morally correct thing. Of the million people, something like 850,000 of them were men. That really doesn’t help the demographic situation in the long run, and that’s before you consider things like language, cultural, and skills barriers.

If the Germans really wanted to solve their demographic problem with immigration, they would need to bring in about 2 million people a year under age 25, every year from now on, just to hold the line. After 20 years, it’s not Germany anymore.

If you’re going to use immigration to stave off a demographic problem, you need to do two things. One, you need to start early before you have much of a problem. And two, you have to have some assimilative capacity so you don’t generate big culture clashes. You want it to be a trickle, not a flood.

Which brings us to China.

Chinese data is getting updated bit by bit by bit. They’re trying to get a grip on their demographic problem. With a population of what they thought was 1.3 billion now looking like it’s closer to 1.1 billion, it may even be less than 1 billion. The scale of what they would need to do is immense.

Also, the trajectory of the Chinese is far worse than the Germans. The Germans industrialized over 130 years. The Chinese did it in about 45.

If you just go back to like 1960, the Chinese birth rate was so high that each woman was having 4–6 kids. Mao was concerned that the young generation was going to eat the country alive—perhaps literally.

So they instituted a two-child policy, which shortly thereafter became a one-child policy. Then the country went through the fastest industrialization process ever. So everyone moved off the farm and into condos and stopped having kids.

We’re now in a situation where officially the birth rate is about 1.2 children per woman. The reality is probably below 1. We already know by official data that in most of the major cities, places like Shanghai or Beijing, it’s already below 0.4 or 0.5.

So you’re talking about one-fourth or one-fifth replacement levels. That means we’re looking at a complete demographic collapse of the Chinese system within ten years. The Germans are practically a slow fade-out compared to what’s happening in China.

Numerically, if you wanted to use immigration, you’d probably be talking about needing to get 30 million people under age 25 every year just to sustain the numbers where they are today. I’m not sure there are that many potential migrants in the world at any given time.

We’re looking at a workforce collapse, a financial collapse, and a state coherence collapse in the not-too-distant future.

The real challenge isn’t how do you save China? It’s gone. We’re just basically marking time.

The challenge in the short term is preparing for its fall because when that industrial plant goes away, we’re going to feel it.

The second challenge, a few years from now, is how do you manage a post-China Asia, where China is in degradation and civilization is in chaos?

Then the longer-term challenge for the latter half of this century will be: what do you do when what was the world’s largest ethnic group vanishes from this world?

When you break down the industrial base—and we’re already in a country where there’s more people over age 50 than under age 50—and they age out to the point that they can’t even maintain their infrastructure, we have a sort of international crisis that we have never seen before.

The Chinese are leading the way. Hopefully, in their fall and dissolution, we can find some lessons that will help us manage other parts of the world that are experiencing extreme demographic decline because they’re not alone.

Undocumented Immigrants’ Impact on US Labor and Economy

Photo of an immigrant in a strawberry field

As of late, the topic of illegal immigration is getting as much airtime as Brittney Spears did in the early 2000s. And I hate to burst your bubble, but all those undocumented immigrants are probably doing more good than harm.

Without the influx of ~2 million undocumented immigrants in 2023, labor shortages would have likely caused higher inflation. As the baby boomers retire and the US needs to re-industrialize, labor needs are skyrocketing; this will be putting a heavy strain on industries like healthcare, construction and agriculture, areas where these undocumented workers are heavily employed. Simply put, without these workers, the US economy would be hurting.

Policymakers have obstructed and neglected meaningful immigration reform since the 80s. However, if we could modernize this system (which would take some political creativity currently lacking in DC), we could realize the full benefits of these immigrants minus the constant political bickering.

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Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Austin, Texas. And today we’re going to talk about everyone’s favorite topic this election season: illegal migration. I’ve no doubt on record saying that if the United States hadn’t had the wave of illegal migration that it had in calendar year 2023—about 2 million people—we’d probably be dealing with inflation north of 8% by now.

So I figured that’s worth a bit of an explanation. In most labor markets, you’ve got a degree of liquidity where workers can move from one subsector to another based on the economic moves and remuneration of the day. But for that to work, you can’t be headed states. You see, here in the United States, the baby boomers are in the process of retiring.

Two-thirds of them have already gone. So we have a labor shortage. In addition, the United States is in the midst of a massive re-industrialization wave as we prepare for the end of the Chinese system. Basically, if we want manufactured products, we have to build it ourselves. So demand has never been higher, and supply has been curtailed. We no longer have that pool of labor that can shift from one thing to the other or be tapped and tracked in terms of building booms.

And so anyone who is removed from the system immediately generates a pulse that goes through the entire network, driving prices higher. So yes, there are 2 million people who crossed illegally last year. Most of them are in the workforce, most here in Texas. As for the folks that are residing here illegally, which, based on whose numbers you’re using, are somewhere between 7 and 14 million.

That’s another huge chunk of the labor force that actually outnumbers the number of folks the United States has who might theoretically be looking for jobs. Unemployment in the United States is below 4%; we’re at historic lows right now. So if you were to remove some of the people who are working, we’d feel it immediately. Now, not all jobs are equal.

These illegal migrants do tend to cluster in three general categories. The first one is health care, particularly when you’re talking about something that’s on the edge of a janitorial job, you know, moving people, clearing bedpans, that sort of thing. The second is in construction, especially industrial construction, because, remember, the United States needs to double the industrial plant.

That doesn’t happen without building a lot of stuff. And third, and finally, agriculture, particularly in fresh foods, whether it’s vegetables or tree fruit. These last two are jobs that Americans just don’t want to do, won’t do, or can’t do. They’re hot. They’re heavy, outdoorsy work—certainly not the sort of stuff that today’s youth, especially Gen Z, is really interested in.

And so that just leaves us with the illegal labor pool. If you were to remove that labor pool, we wouldn’t be able to harvest any of our fruits and vegetables. So say goodbye to most of the produce in grocery stores. We certainly wouldn’t be able to build new homes or new industrial plants, so say hello to dependence on China until China is gone—and then you just don’t have stuff.

And if you don’t want to clean your own bedpan when you go into the hospital or retire, well, then, by all means, be against migration. The question, of course, is whether we can amend our legal structure so that we actually have an updated immigration system to process these people in a way that we find a.

At the moment, we haven’t had meaningful immigration reform in this country since the 1980s, and folks on both sides of the political aisle have taken steps at multiple points to prevent that from happening. So if

you were to wave a magic wand to make this all work better, you’d find a way to induce the would-be illegal migrants to actually collaborate with the system.

And that’s a very different sort of legal structure and enforcement and would require a degree of policy creativity we just have not seen in the White House or in Congress for quite some time

Immigration: Social Costs vs. Economic Benefits

Its easy to sit up in an ivory tower and say immigration is always good because of the economic benefits; however, turning a blind eye to the social implications of immigration would be irresponsible in a well-rounded discussion. Here’s what Canada and Germany have going on:

Canada jumped on the immigration train fairly early in order to counteract their demographic decline. This influx of young immigrants helped stabilize the population, boosted labor productivity, and brought in more taxes than it cost in benefits. Butttt Canada’s social fabric is rapidly changing due to this new (and growing) population of immigrants.

On the other end of the spectrum, we have Germany and they’re not exactly known for their history of immigration. Over the past few years, the Germans have brought in large numbers of refugees from places like Bosnia, Syria and Ukraine. That has created some hefty social challenges, which will only continue to grow as Germany must bring in millions of young immigrants annually to balance its demographics.

While there is a strong economic case for immigration, we must also consider the social and political costs that it comes with. No amount of money can make a round peg fit in a square hole…

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Transcript

Hey, everybody. Peter Zeihan here, coming to you from the top of the Grand Canyon of the 12. I’m in Yosemite, just below Glen Allen. This is where I’m going to be hiking for the next couple of days. Not bad!

Today, we are taking an entry from the Ask Peter Forum, and the question is: Could you go through the numbers on the pros and cons of mass immigration into countries, specifically like Canada and Germany?

People always talk about the economic upside and the tax benefits, but they rarely mention the downsides, like crime and social identity. It’s a reasonable question, especially as we see more and more countries aging. Since we have more nations basically aging out, immigration is often brought up as one of the few, if not the only, possible patches or even solutions.

Let’s start by saying Canada is a special case. Canada knew 30 years ago that they were headed for a German-style demographic implosion. Under the Harper government and later under the Trudeau government, they made the decision to open the floodgates and become an immigrant country. You’ve probably had, I mean, they didn’t count the statistics the same way we do in the United States, but roughly 3 to 4 million immigrants have come in and become Canadians during that period.

Most of these immigrants were in their 20s and 30s, as Canada specifically targeted younger people, unlike the migrants they had received in earlier years. This managed to stabilize the numbers, but only so long as they keep those inflows coming, because native Canadians, to use a church term, still have a very, very low birth rate. There’s no replacement coming from within the population, so a new social fabric is developing.

The numbers, which I don’t have top of mind, I apologize, are unequivocal: the new migrants, especially those under age 40, generate far more in tax payments than they take out over their lifetime. It’s a definite net fiscal benefit. In terms of jobs, as a rule, the people who migrate tend to be the more aggressive, skilled, and educated of their countrymen. This gives you a boost in labor productivity. Not everyone is an Elon Musk, but you get the idea.

Third is crime. Unequivocal data shows that in every country that tracks these statistics, crime committed by immigrants is significantly lower—typically at least a third lower—than crime committed by the native-born population.

Fourth, there’s something people usually don’t think about: education. In the United States, it costs over $150,000 to graduate a kid from high school. That’s just the government cost for education, not the societal cost of raising the child from birth to age 18, including healthcare. One of the benefits of migrants is that, you know, another country has already paid those costs, and now you’re benefiting from their labor. Economically, it’s a very easy case to make.

Two things to keep in mind. Number one: not all migrants are the same. Take the United Kingdom, for example. Indian migrants and family reunification—basically, the UK would bring in one person from India who meets all of these criteria we’ve discussed. But then they bring in their extended family, and all of a sudden you’ve got 60 Indian Brits, half of whom are over 60. It’s a different story if you’re bringing in new retirees; the cost to society can be very, very high.

Also, in the German case, the migrants from Syria—about a million of them—were 80–90% male. So, you’re not getting much of a demographic boost there because there weren’t enough women to have more children.

The second complicating factor is social cohesion. If immigration has been a part of your social fabric for decades or even centuries, absorbing people from different places is relatively easy. Countries like the United States, Australia, New Zealand, and Canada have done this in phases for a long time, so if someone says their parents are from a different country, most Americans won’t even blink. People in the U.S. assimilate very quickly.

But if your country doesn’t have that culture, like Germany, and you suddenly open the floodgates, things start to look very different. The first real wave of migration into Germany happened during the Bosnian wars in the 1990s. Germany did the right thing for the right reason by taking in refugees, but it changed the social character of the country. They did it again in the 2000s with Syrians, and now they’re doing it with Ukrainians. If you wait too long, until there are more people in their 40s than in their 30s, 20s, 10s, or even newborns, you’ll end up with a very different place.

This is the situation that Canada will face—not right now, but in 20 or 30 years. They waited until late in the day to start bringing in millions of people. If it happens over a long enough period, society can adapt. But in Germany’s case, this has all happened relatively quickly. To maintain their demographic standing, Germany may have to bring in 2 to 2.5 million people under age 30 every year for the next 20 years, just to stay where they are. By then, those people will form the majority of the country, which will make it a very different place.

If you look at immigration purely as a numbers game, a fiscal issue, or an economic growth issue, it’s a slam-dunk case. But we don’t live in that world. And you know what we call the gap between the ideal and reality? Politics.