I would think this is actually good for them, as more internal demand relative to supply will help further transition away from exports, and also help increases their productivity (at least if they make working hours less insane).
more internal demand but few people working is basically going to increase debt significantly, leave seniors in abject poverty, or some combination of the two. And possibly massive deflation as well since old people are on fixed incomes and don't spend too much.
I thought Chinese household debt was absurdly low, but I guess that's changed.
Still, I would prefer to "quotient out the money", and say either the demand is met or it isn't? To the extent it is met, perhaps there are imports of material goods or domestic labor (nurses?)
I don't think it makes sense to worry about "domestic debt" in the same way, given the non-liberal political economy. Of course that doesn't mean there aren't limits, but the limits maybe would take the form of e.g. rising discontent and decreased productivity if it feels like an old-people-focused service economy with nothing in it for the workers.
So, Lost Decade Japan on steroids. A massive debt hangover after an asset bubble pop, deflation for a decade, and worse employment prospects and economic conditions for young people.
It's silly to think that smaller portion of working age population -> worse employment prospects. That process is very possible but relies on higher order effects.
You can't just blindly apply the economics of traditional liberal economies to a 21st century high tech illiberal economy.
