For most of the 2010s, China was framed as the inevitable successor to the United States — a rising superpower whose economic momentum looked unstoppable. Western businesses treated it as the future. Governments treated it as the dominant strategic challenge. Analysts assumed its GDP would pass America’s within a decade.
That narrative has cooled. Not because China suddenly became weak, and not because the West lost interest, but because the underlying assumptions changed. The country is still powerful, still capable, and still central to global supply chains — yet the expectation of a straight-line rise has evaporated.
China hasn’t collapsed.
But it has plateaued.
And the world has quietly adjusted.
1. COVID Didn’t Break China — It Revealed the Existing Fault Lines
China’s strict Zero-COVID approach didn’t just slow the economy; it exposed structural fragilities that were already forming.
- Consumer confidence never recovered. Repeated lockdowns wiped out small businesses and suppressed household spending.
- Youth unemployment soared. A generation entered the workforce with limited prospects.
- Global supply chains diversified. “China + 1” became standard as companies moved operations to Vietnam, India, and Mexico.
- The property bubble burst. Housing had underpinned 25–30% of GDP. The Evergrande and Country Garden crises were symptoms of a system stretched to its limits.
COVID didn’t cause China’s slowdown — it accelerated it.
2. Demographics: The Fastest Aging Curve in Modern History
China is aging at a speed usually associated with much wealthier countries. It now faces:
- A shrinking workforce
- A soaring dependency ratio
- Fertility levels lower than Japan or South Korea
It is becoming old before it becomes rich. Long-term growth potential falls sharply when the labour pool contracts and the cost of supporting retirees rises.
This is not a cyclical problem; it is structural and irreversible.
3. The Wage Advantage Has Gone — and So Has Low-Cost Manufacturing
A decade ago, China was unrivalled as the world’s low-cost factory. That advantage has eroded.
- Wages have risen each year.
- Environmental and compliance costs have increased.
- Competitors such as Vietnam, Bangladesh and India now absorb much of the low-margin production.
China still dominates global manufacturing, but the mix has shifted to higher-tech, capital-intensive sectors: EVs, batteries, solar panels, robotics, and industrial automation. The transition is technologically impressive but economically uneven.
4. Politics Has Become Centralised — and Predictability Has Fallen
Under Xi Jinping, China moved from pragmatic economic governance to ideology-first central control.
This has reshaped the business environment:
- High-profile tech crackdowns discouraged private investment.
- The education sector was abruptly forced to become non-profit.
- Entrepreneurs became more cautious, and capital outflows increased.
Certainty — once China’s selling point — has been replaced by political opacity and regulatory unpredictability.
5. The West Is Now Actively Containing China
2024–2025 marked a decisive shift from integration to strategic restriction.
- Advanced semiconductors are tightly controlled.
- AI hardware exports are blocked.
- Huawei remains excluded from Western telecom networks.
- Critical mineral supply chains are being reconstructed outside China.
China still holds enormous leverage in batteries, solar, and rare-earth processing, but the era of frictionless global access is over. Containment isn’t theoretical — it’s policy.
6. The Result: A Powerful Country Entering a Slower Phase
The story is neither “China will rule the world” nor “China is collapsing”. The truth sits between those extremes.
Over the next decade, expect:
- Growth around 2–3%, not 6–8%.
- A focus on hard-tech self-sufficiency: EVs, solar, batteries, drones, automation.
- A weaker domestic consumer economy shaped by high savings and low confidence.
- A more inward-looking political system that prioritises national security over globalisation.
- A long-term rivalry with the US, but not a scenario where China overtakes it.
China remains influential, but the “overtaking” narrative has dissolved. The upper limits of its growth model are now visible.
7. Why We Hear Fewer Warnings Today
The optics shifted for three reasons:
- Analysts no longer assume exponential growth. The plateau is evident.
- China’s vulnerabilities are better understood. Debt, demographics, governance.
- Western economies have diversified away from China. The strategic dependence has eased.
China now looks less like an unstoppable force and more like a high-capability state navigating structural constraints.
8. The Real Risks Now Are Not About China Rising — But China Stagnating
A rising power competes.
A stagnating authoritarian power can act in ways that are harder to predict.
Two issues stand out: Taiwan and debt.
Taiwan — Politically Crucial, Economically Devastating to Disrupt
Taiwan is central to China’s national narrative and to the global economy.
Why it matters politically:
- The Communist Party frames reunification as a core pillar of national destiny.
- Xi Jinping has tied his leadership legacy to achieving it.
- Backing down is politically dangerous; escalation is economically dangerous.
Why it matters economically:
Taiwan is the world’s semiconductor choke point. TSMC alone produces over 90% of the planet’s most advanced chips — the components that power AI, smartphones, data centres, military systems, and autonomous vehicles.
A disruption to Taiwan’s stability would:
- Paralyse global tech production within weeks.
- Trigger the largest supply shock in modern history.
- Hit the US, Europe, and China itself, which heavily relies on Taiwanese chips.
China’s political incentives pull it toward Taiwan; its economic incentives pull it back. The friction between those forces defines the geopolitical risk.
Debt — Especially at the Local Government Level
China’s debt crisis is not a single failure but a system-wide structural issue.
Where the debt sits:
Mostly not with Beijing, but with Local Government Financing Vehicles (LGFVs) — quasi-official entities used to borrow for infrastructure and property projects.
For more than a decade, these vehicles fuelled:
- new cities
- airports
- rail lines
- industrial parks
- vast housing developments
The model depended on ever-rising land sales. When the property market stalled, the revenue base collapsed.
Why this is a serious problem:
- Local debt now exceeds central government debt.
- Some estimates place total obligations at 60–90% of GDP.
- Cities are cutting services, delaying payments, and reducing investment.
- Beijing cannot rely on another infrastructure boom — the leverage is already spent.
Debt doesn’t mean imminent collapse, but it constrains China’s ability to stimulate growth. The tools that powered the last 20 years — construction, land finance, local borrowing — no longer work the way they once did.
Conclusion: China Hasn’t Fallen — It’s Levelled Off
The world talked about China differently ten years ago because analysts assumed the rise would continue unchecked. That assumption has gone. What remains is a more accurate picture: a technologically capable, globally significant nation that has reached the natural limits of its development model.
China still matters.
China still shapes global supply chains.
But its era of explosive growth is over.
The defining question for the next decade is not how high China rises — but how it manages its plateau.