China’s economy will be growing at 4.3% in 2026. This would be a major drop from the almost 5% increase that was accomplished in 2025. That expected deceleration is now going to contribute an additional 0.75 percentage points to global economic growth. This is a drop from the 0.89pp added last fiscal year. We discuss these structural challenges below that are leading to a deeper slowdown in China. Consequently, the country will be the biggest drag on a slowdown in global growth in 2026.
We project a still modest global economy-wide net growth rate of about 3 percent in 2026. China’s economy is going to be the biggest factor pushing that slowdown. Yet the country has deep structural problems that continue to thwart its potential. Unfriendly demographics, shrinking productivity, and too much debt in its monetary systems work against it as well. These challenges only further highlight the divergence between China’s growth trajectory and that of the United States.
Nevertheless, China continues to be a dominating force in the international arena. Its positive impact on global economic growth has been enormous. The current geopolitical climate makes it more difficult for the Netherlands to take advantage of those opportunities. U.S.-imposed tariffs and strained trade relations will prevent China from fully benefiting from resilient consumer demand in the United States throughout 2026. This added external pressure places new blocks on China’s economic potential.
Meanwhile, analysts are starting to sound the alarm that the EM-DM divide may be permanently gapped. They have pointed to the continuation of deep-rooted structural problems in China’s economy as the cause. The EM-DM growth gap is an important indicator of global economic health. With China’s growth slowing, the impact on every market—with the potential to disrupt them all—could be substantial.
As China enters 2026, its economy is undergoing intense domestic and external pressures. Substantial structural challenges will prevent it from making significant contributions to global economic growth. To understand the true impact, we need to look back against prior years. China’s growth prospects are going in the opposite direction from those of the United States. These societal and technological disruptions highlight our new global economic reality.