FX.co ★ China’s economy shows mounting signs of decline

Despite official optimism in Beijing, China’s economy is facing a growing set of structural problems that could lead to long‑term decline. The Telegraph’s analysis says the continuing downturn in the real estate sector—which previously accounted for about 25% of GDP—has created budget shortfalls for local governments. The situation is worsened by high youth unemployment amid the need to absorb more than 12 million graduates into the labor market each year and by a shortage of skilled workers for retraining as technological automation advances.

Additional pressure comes from price wars among local manufacturers, which are compressing business margins, cutting R&D budgets, and reducing tax revenues. Instead of natural market consolidation, authorities are propping up unproductive firms with credit. Demographic stress and a shrinking working‑age population are restraining aggregate demand, while domestic consumption remains weak because of underdeveloped pension and health insurance systems and a reluctance by authorities to expand social transfers.

President Xi Jinping’s attempts to reorient growth toward exports and new quality productive forces—artificial intelligence, quantum technologies, biotechnology, and advanced materials—have so far delivered limited results. Those high‑tech sectors accounted for just over 6% of GDP in 2025. The export strategy is also facing rising protectionist barriers from importing countries, and China’s GDP growth has already slowed to 4.7% in the first half of 2026 from 5% a year earlier.