By 2040, China’s economy may see its growth rate slow to approximately 2% per year, and the country’s population will shrink by nearly 60 million people. This is the conclusion reached by experts from the Economic Policy Foundation and the Gaidar Institute in a study published RBC. The authors attribute this to the exhaustion of the previous growth model and the accumulation of structural problems in the economy.
China’s economy has shown a steady slowdown in recent years, which is becoming increasingly noticeable against the backdrop of growing internal and external constraints. While the country’s GDP growth averaged around 10% in the 2000s and 6–7% in the 2010s, it fell to approximately 4.8% in 2020–2024. According to the study’s authors, average annual growth could drop to around 2% between 2026 and 2040.
Experts note that the previous development model, based on the demographic dividend, large-scale investments, cheap labor, and integration into global production chains, has gradually run its course. Structural constraints that are hindering further growth are coming to the fore.
Key challenges facing the Chinese economy include the crisis in the real estate sector, rising debt burdens, deflationary pressures, and slowing productivity growth. Population decline and an aging society are exerting additional pressure.
Weak domestic demand is another factor. The share of household consumption in China’s GDP remains significantly lower than in the world’s largest economies. This is due to the population’s high propensity to save, the underdevelopment of the social safety net, and the consequences of demographic policies from past decades.
Researchers also point to imbalances in the fiscal system: a significant portion of revenue is concentrated at the central level, while expenditures largely fall on the regions. This leads to the accumulation of debt and encourages short-term infrastructure projects rather than long-term reforms.
Other challenges include a large public sector, limited competition in the domestic market, price wars, and overproduction, which exacerbate deflationary pressures. Limited integration of the financial system into the global market and external technological constraints also hinder development.
“In the technology sector, China faces barriers related to both human capital and external restrictions on access to technology. At the same time, the authorities are focusing on developing ‘mature’ technology segments and strengthening their position in mass production,” notes Alexander Knobel, Senior Researcher at the Gaidar Institute’s International Trade Department.
Despite this, the country’s leadership is attempting to adapt the economic model. In recent years, support for private business has been increasing, and measures are being taken to stimulate competition and domestic demand, including subsidies for consumer goods and tax reforms.
Economists note that the transition to a new growth model will be a complex and lengthy process due to the scale of the economy and the depth of accumulated imbalances.