Discerning the illusion of "peak China": The real story

‪Editor's note: Ge Lin is a journalist and an economic commentator with CGTN. The article reflects the author's opinions and not necessarily the views of CGTN.‬

A recent "peak China" narrative – framed around a property downturn, government investment failures, private-sector confidence setbacks, the end of demographic advantage, and receding globalization – reads like a confident diagnosis. Its confidence, however, comes from an old map. The governing premise is that China is still trying to stretch a past growth formula: Low-cost labor, urbanization-led demand, heavy investment, and export absorption into a US-centric order. From that premise, every datapoint looks like decline.

But the premise is wrong. China began a deliberate pivot years ago from speed to quality, from factor accumulation to productivity, from specificity to standardization, from leverage to equity-style risk sharing, and from imitation to invention. Much of what is labeled "peak" is, in fact, the cost of switching engines while in flight – a cost anticipated, budgeted for, and absorbed.

This is not a victory lap; it is an invitation to update the analytic frame. The question is not whether yesterday's model has run out of road. It has – and by design. The real question is whether the new model is coherently assembled, institutionally supported, and increasingly productive. On that question, the evidence points to a steady answer: Yes.

I. Property, soft landing, and why China is not Japan

Comparisons with Japan's bubble era are a staple of "peak China" commentary. The metaphor is tidy; the substance is weak. Japan's predicament has stemmed from structural rigidities that delayed adjustment.

China's trajectory is different on two decisive dimensions:

Proactive deleveraging. Unlike Japan in the 1990s – where property bubbles were left unchecked until systemic stress forced a collapse – Chinese policy has, for years, deliberately tightened financing channels for highly leveraged developers, constrained speculation, and shifted the growth narrative away from "land finance." Property cooling is not the unraveling of growth; it is the intended, controlled outcome of removing distortions early, preserving stability while guiding the economy toward sustainable urban value and quality.

Engine switching while in motion. Even as real estate cools, growth around the 5 percent range has been sustained by manufacturing upgrades, new-energy deployment, and digital services. If property had been the only engine, such resilience would be impossible. The fact that it is happening – amid the heaviest property adjustment in decades – speaks to the breadth of new drivers.

A word about the US comparison is also instructive. In 2008, a property-centered financial crisis cascaded into systemic dysfunction. China's correction has been painful but contained, precisely because the financial architecture, regulatory sequencing, and policy intent were geared to shrink the property share of GDP while protecting delivery and avoiding a generalized credit freeze. There is no virtue in pain for its own sake; the virtue lies in absorption without systemic rupture.

The upshot is simple: China is not becoming Japan because China chose, early, not to extend a late-stage property boom – and because new sectors are demonstrably carrying weight while the old ones are disciplined.

II. From megaprojects to guided capital: The state's shift in approach

Critics often recite that the "high-investment model has failed." Again, the frame is out of time. The question is not whether more cement can deliver the next decade of growth. It cannot. The question is how the public authority should structure risk so that innovation can scale.

The shift underway is straightforward:

From direct building to catalytic investing. While the state and local governments still support select key projects, the era of direct control over construction or platform initiative is waning. Public money increasingly acts as anchor equity in guidance funds, often matched by private capital, and managed by professional teams that evaluate deal flow, set milestones, and enforce governance. It is not hands-off; it is disciplined, guided crowding-in.

From one-off projects to portfolios. Projects used to be pass/fail, binary bets made by administrative fiat. Portfolios accept that many early-stage bets will fail, a few will survive, and a handful will compound returns dramatically. That logic – long familiar to venture investors – is now embedded in public-private capital structures that back semiconductors, advanced materials, biomanufacturing, industrial software, and next-generation energy.

From land as collateral to knowledge as collateral. When lending tied to property slows, good ideas should not starve. Equity-style financing – combined with milestone-based disbursement, convertible instruments, and co-investment platforms – keeps the pipeline open to firms that have technology, teams, and traction but not fixed assets. The role of government is not to pick winners by decree; it is to create structured risk pathways where competence, not connections, determines endurance.

One practical result is visible on the ground: Cities compete to attract high-quality start-ups with packages that combine office space, tax holidays, lab access, and – most importantly – capital that is conditional on performance. This competition is a market-shaping environment where rules aim to protect the broad ecology of firms rather than a handful of incumbents.

III. Private sector confidence, discipline, and emerging entrepreneurs

Another claim asserts that private-sector confidence has been "crushed by politics." This is mistaken. There was a temporary dip in sentiment – mainly among firms whose growth relied on regulatory gray zones or excessive leverage – but interpreting targeted discipline as broad hostility toward private enterprises is a fundamental misreading.

Discipline is aimed at the structure of competition. The goal is to curb disorderly expansion, close loopholes, and prevent a winner-take-all dynamic that would suffocate the pipeline of new entrants. Enforcement is uncomfortable for some by design. But the alternative is an economy dominated by a few platforms using financial muscle to suppress rivals and buy future moats. In such an order, medium-sized entrepreneurs have almost no opportunities.

A cleaner ecology benefits the next cohort. Once rules are clearer and incumbents compete on product and service rather than privileged access, the "entrepreneurial middle”has room to run – especially in deep-tech and advanced manufacturing where capabilities, not clicks, determine survival.

The direction is clear: The private sector is not being squeezed out; a healthier private sector is being designed for. The recent surge of specialized start-ups across emerging technology sectors – ranging from globally recognized AI ventures like DeepSeek to robotics innovators such as Unitree – is not an accident; it reflects newly opened lanes.

IV. From population dividend to talent-and-automation dividend

Demography matters, but models matter more. The "population dividend" thesis assumes that growth scales with the quantity of labor. That was true in an era of rapid urban migration and labor-intensive assembly. In a capital-deepening, technology-rich economy, the production function changes. What matters is skills per worker, tools per worker, and software per process.

Three shifts anchor the new dividend:

Firstly, the education base. China's higher-education system has expanded its capacity and broadened its pipeline of engineers, technicians, and applied researchers. The typical manufacturing firms in the country now rely on process engineers, data analysts, and equipment integrators, with far fewer ordinary workers. The relevant comparison is not with the China of 20 or 30 years ago; it is with peer economies competing at the frontier of industrial quality and yield.

Secondly, the factory itself has changed. "Lights-out"production lines, machine vision, robotic arms, automated guided vehicles, and predictive maintenance are no longer exhibits from a trade show; they are the standards for competitiveness in batteries, EV supply chains, precision components, and electronics. Replacing tedious tasks with machines does not eliminate humans – it upgrades what humans do: Design, control, optimization, and service. The claim that growth still hinges on "cheap labor" misreads both the shop floor and the balance sheet.

Thirdly, the learning curve accelerates. With digital twins, industrial software, and AI-assisted quality control, improvements compound. Each cycle reduces scrap rates, energy usage, and downtime. In such environments, an older population can remain highly productive because the marginal gains come from process intelligence rather than brute-hours.

Yes, an aging society raises fiscal questions and alters consumption patterns. But the direction of causality flows both ways: Richer, more productive economies age; they also innovate to support aging. Framing aging as destiny and ignoring the productivity response is an analytic choice – not a fact.

V. Deglobalization: Portrayed as China's loss, but Western fear exposed

Another pillar of the "peak" argument is that globalization is in retreat and that Chinese technology firms face a "technology island" problem – strong at home, walled off abroad. This, too, flips signal and noise.

The first misreading is the attribution of causality. In reality, the way Western powers are recalibrating global networks directly reflects China's growing strength. Trade barriers, export controls, entity lists, and investment screening are defensive measures applied not to inconsequential rivals, but to competitors who have become strategically significant. Western anxiety, not Chinese weakness, is what drives these barriers.

Next is the matter of agency. Contrary to the notion that China is now passively constrained, the country is actively shaping new pathways for global integration. Investment and commercial engagements across the Global South are forward-looking strategies that signal the emergence of a new, multipolar globalization. China is setting the terms of a broader, more inclusive global architecture.

Equally important is the domestic dimension. China's home market provides a critical buffer, allowing firms to absorb and respond to external pressures. Faced with foreign chokepoints and competitive constraints, Chinese companies are compelled to innovate and advance their technologies, developing the capacity to surpass global competitors. The domestic market offers the space to iterate and scale these capabilities, preparing Chinese enterprises to assert leadership on the global stage.

Ultimately, the West's apprehension is itself a mirror of China's ascendancy. Every restriction, every narrative of "isolation," signals recognition of a competitor whose influence cannot be ignored. These fears highlight the shift in the balance of capability – China is no longer merely reacting to the world; it is increasingly prompting the world to respond.

Conclusion: What the numbers mean – and what they don't

It is tempting to compress all of this into a single figure – say, 5 percent real growth – and declare victory or defeat. Resist that temptation. In transition, aggregates conceal as much as they reveal. What matters is the composition of growth, the direction of investment, and the system's resilience to shocks.

On those measures: A larger share of output and exports now comes from higher-value segments. Services are becoming more knowledge-intensive. The economy is less tied to land cycles and more powered by innovation and advanced industries. That is a good trade-off.

Anyone is free to critique execution, question the efficiency of government investment, worry about regional disparities, highlight youth employment challenges, or call for stronger household consumption. Those are productive debates. But to claim that China is failing simply because an old growth model is fading is to keep asking yesterday's question and congratulating oneself for yesterday's answer.

"Peak China" is compelling only if one assumes the country is still trying to complete the 2010 task within the constraints of 2025. It is not. The transition to high-quality development is not a slogan – it is the reality. That is why so many easy narratives feel stale: They mistake deliberate adjustment for involuntary decay.

Will there be setbacks? Of course. Will some funds misallocate, some firms fail, some regions struggle to reinvent, and some policies require mid-course correction? Inevitably. But friction is not evidence of failure; it is evidence of movement. The only economies that look perfectly smooth are the ones that are not changing.

So let us move beyond deceptive headlines and ask better questions – not "has China peaked?" but "how far along is the new model?" With an updated frame, what once looked like an ending now appears more like a beginning.