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How China Loses Economic Steam and Global Appeal

China faces economic challenges with a shrinking share of global GDP and waning domestic demand

By: EBR - Posted: Tuesday, January 28, 2025

China remains an investment-led economy. It is the world’s largest source of investment (around 28%) and gross manufacturing output (35%), but it represents only around 13% of global consumption.
China remains an investment-led economy. It is the world’s largest source of investment (around 28%) and gross manufacturing output (35%), but it represents only around 13% of global consumption.

1. For the first time in more than four decades, China’s share of the world economy is shrinking. It peaked at just above 18% of global GDP in 2021 and stands at around 16%.

2. China’s growth has slowed significantly since the property sector collapsed in 2021 and COVID-related restrictions impeded all types of economic activity in 2022.

3. Domestic demand and household consumption in China made only a limited rebound after those restrictions were lifted at the end of 2022.

4. China remains an investment-led economy. It is the world’s largest source of investment (around 28%) and gross manufacturing output (35%), but it represents only around 13% of global consumption.

5. Local government investment in infrastructure, constrained by high debt levels, has slowed considerably in recent years as well.

6. China itself relies far more on foreign markets to sell its manufactured goods than it did in the past.

7. China’s expansion to new markets, particularly in Southeast Asia, ostensibly makes China less vulnerable to tariffs or trade restrictions imposed by any single country — including the United States.

8. However, to a considerable extent, China’s diversification is superficial. Its goods are simply shipped through third countries before reaching the same U.S. and European consumers as before.

9. In addition, 28.6% of the country’s exports are produced by foreign-invested firms within China.

10. Worse, in response to the weakness of China’s domestic demand and in anticipation of rising problems with exporting from a base in China, these firms increasingly plan to shift production overseas.

*first published in: Theglobalist.com

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