The strange paradox of Chinese economic decline
Opinion by Ambrose Evans-Pritchard
London Telegraph, November 5, 2025
China’s share of the global economy is shrinking for the fourth year in a row. Few are aware of this astonishing development, and even fewer predicted it.
Chinese GDP has contracted from over three quarters of the US economy to just two thirds since 2021 when measured at market exchange rates, which is the relevant metric for the projection of world power across the full strategic spectrum.
“The era in which China’s share of global output was surging has ended,” says Mark Williams, head of Asia at Capital Economics. The yuan may rise again, but woe betide Chinese deflation if it does.
Productivity growth has collapsed and has even been negative by some measures, using plausible GDP data estimated by outside analysts.
Productivity has underperformed the US and other advanced economies since Xi Jinping took power in 2012 and turned away from China’s Great Reopening. “Economic growth is being powered almost entirely by investment, despite diminishing returns and escalating debt,” says Williams.
The malaise has spread even to Chinese manufacturing, long thought immune. “There is mounting evidence that industrial policy is itself partly to blame,” he says.
Capital Economics says the trend rate of output growth is likely to drop to 2pc this decade. By then the demographic crisis will be deepening. China’s workforce will be 8pc smaller in 2040.
The strange paradox of Chinese economic decline |
