For decades, China’s economy moved with relentless momentum. That momentum is now fading. The property sector has stalled. Local governments are drowning in debt. Youth unemployment is stubbornly high and consumer sentiment fragile. Even with promising breakthroughs in electric vehicles, AI, and green tech, China’s export sector is facing mounting headwinds from rising geopolitical friction.
China’s economy is nowhere near a breaking point – but it is unmistakably slowing down.
This moment of slowdown has prompted an uncomfortable question: Is China entering its “Japan moment”? The comparison is tempting. Japan, too, saw an end to its high-growth era after a debt-fueled asset bubble burst in the early 1990s. Growth stagnated, property prices collapsed, and public debt ballooned. The phrase “lost decades” went on to loom over Japan’s economic image. For some, the implication for China is ominous – an era of high-speed expansion drawing to a close, perhaps for good.
But the analogy risks being oversimplified. Whether China’s slowdown marks a historical dead end or a necessary transition depends less on growth rates and more on how the country adapts. In that light, the true question may not be whether China is becoming Japan, but whether it can draw the right lessons from Japan’s experience. In particular, can China use this slowdown as an opportunity to transition from a high-speed, investment-led growth model to a more stable, balanced, and resilient economy?
Looking at Japan in the decades following its crash, the outcome was not as dire as some suggest. Growth did slow, yet the state hardly collapsed. The unemployment rate remained desirable. Basic services functioned well. Many Japanese cities remained orderly, safe, and globally competitive.
This relative stability didn’t happen by accident. It was supported by a comprehensive public safety net – universal healthcare, a multi-tiered pension system, and sustained investment in urban infrastructure. Equally important, Japan benefited from decades of institutional continuity: regulations were enforced, public services were delivered with consistency, and policymaking followed a cautious, consensus-oriented approach.
China, facing its own demographic and structural headwinds, must now ask whether it can do the same. On some fronts, the answer is encouraging. Pension coverage for urban employees has expanded significantly, and major cities boast world-class infrastructure.
But the gaps remain wide. Informal workers – such as delivery drivers and migrant workers – often lack retirement plans or medical coverage. Many in small towns and rural counties struggle to access quality education or affordable healthcare. In many second- and third-tier cities, the local fiscal base is already overstretched, limiting room to improve services or invest in quality-of-life upgrades.
Without a stronger social safety net, a slower economy risks breeding anxiety – especially among younger generations already shouldering the burdens of job insecurity, caregiving, and rising costs of living.
This is where policy must move faster than GDP. China doesn’t need a Western-style welfare state, but it does need more robust systems of basic protection – ones that make economic transitions less frightening and give people the confidence to plan long-term. Expanding access to affordable childcare, raising rural healthcare standards, and ensuring portable pensions for the growing cohort of flexible workers would all be tangible steps in that direction.
One of the enduring myths surrounding Japan’s “lost decades” is that it was a period of passivity. In reality, Japan made steady – if incremental – adjustments: modernizing industry, promoting regional integration, upgrading its service economy. These reforms didn’t produce headline-grabbing results, but they helped sustain economic vitality.
China today has the opportunity to take a similarly long view, especially when it comes to upgrading its industrial policy from a scale-oriented to a quality-oriented model. That means encouraging competitive niches in advanced manufacturing, supporting small and medium-sized enterprises with real innovation capacity, and allowing local economies to evolve based on comparative advantage – not short-term construction cycles.
This shift is particularly critical given China’s changing external environment. As geopolitical tensions with the United States and its allies continue to escalate, the old playbook of catching up by running faster may no longer apply. Today’s competition is not just about speed, but about resilience – about who can build institutions that absorb shocks, adapt over time, and sustain social cohesion amid uncertainty.
The path forward does not require a dramatic reinvention of China’s model. But it does require a clear shift in mindset. For the past four decades, growth has been the ultimate political and economic imperative. That imperative is now evolving. Stability and confidence must play a larger role in the next chapter. And while that chapter may be slower in pace, it can still be productive – if it is anchored by clear goals, credible policies, and honest communication with the public.
What would success look like? It would mean not just protecting headline growth, but reducing inequality in access to core public services; making mid-sized cities more livable and attractive to talent; ensuring that young people see a future in both high-tech and traditional sectors.
China is not Japan. But it is approaching a similar inflection point: a moment where the logic of the past no longer guarantees success in the future. If Chinese policymakers can use this moment to build a more resilient system – one that delivers not just growth, but stability and trust – then this slowdown will not mark the end of an era, but the beginning of something more durable.
The views expressed in this article are the author’s own and do not represent those of Trivium China.