Yet equally persuasive are signs of structural weaknesses : rising debt, an aging population, a collapsed real estate market, and rising youth unemployment. China’s economy, some say, has peaked . “ Involution ,” or wasted production, is not only the word of the year in China but for some is another sign of an inescapable downward growth spiral. If this trajectory continues, China will find it impossible to escape the middle-income trap . If China’s economy slows down or stagnates, nearly 1 billion people could be stuck in low-income livelihoods.

Yet equally persuasive are signs of structural weaknesses: rising debt, an aging population, a collapsed real estate market, and rising youth unemployment. China’s economy, some say, has peaked. “Involution,” or wasted production, is not only the word of the year in China but for some is another sign of an inescapable downward growth spiral. If this trajectory continues, China will find it impossible to escape the middle-income trap. If China’s economy slows down or stagnates, nearly 1 billion people could be stuck in low-income livelihoods.

Observers often favor one or the other of these diametrically opposed images. Some argue that China’s innovation prowess is overstated, while others say the debt and demographic challenges are more manageable than some people assume.

Our own view, based on extensive fieldwork in urban and rural China that yielded large amounts of qualitative and quantitative data, is that there is truth in both and that the key challenge is to integrate them into a single, unified vision of the country’s economy. The split screen of techno-wizardry on one side and empty apartment complexes and struggling villages on the other conveys valuable yet only partially accurate pictures of a complex country.

One of us previously described China as a “fat tech dragon,” generating tech breakthroughs but wasting vast quantities of resources that were never properly metabolized in the Chinese economy. Almost a decade later, China now looks more like a “slow tech dragon,” one weighed down by its own heavy tail defined by a misallocation of resources, low income growth, and neglect.

In many cases, both the upward signs and the worrying ones may seem unconnected but are really two sides of the same coin. A seemingly bifurcated picture is still one country, and the roots of both the optimism and the pessimism are the same.

Women in a factory, wearing blue uniforms, arranging rows of electronics parts on metal tables.

By every measure, China’s technology capabilities have improved dramatically in recent decades. From 2010 to 2025, China’s rank in the Global Innovation Index, the gold standard for tech development, rose from 43rd to 10th. China now sits first among 36 upper-middle-income economies and 3rd in the Asia-Pacific, trailing only Singapore and South Korea. China’s spending on research and development jumped 475 percent between 2007 and 2023, placing it just behind the United States.

In 2017, China’s scientists for the first time published more papers than their U.S. counterparts. By 2022, their papers also were being cited more often by other scholars. China has long led the world in the number of filed patents but since 2019 has led with the most filings of globally recognized “PCT” patents, an objective sign of quality.

In 2015, China launched the infamous “Made in China 2025” plan to accelerate its indigenous capabilities and market share in a wide range of high-tech sectors. Analyses by Bloomberg, the Information Technology & Innovation Foundation, the U.S. Chamber of Commerce and Rhodium Group, the Wire China, and others show that the risky initiative largely paid off, with substantial advances in domestic technical capabilities, value added, and market share in most of the targeted industries.

The focus on innovation has contributed to growth b