'China's economy is doing really quite badly': British author stunned by tech boom, economic slump

British author James Crabtree has described a striking contrast in China's economy after spending two weeks in the country.

While he was impressed by its advances in artificial intelligence, electric vehicles and drones, he found an economy struggling with weak demand, falling investment, unemployment and a prolonged property crisis.

In a post titled 'China: through the K-Hole', Crabtree described China as a "K-shaped economy", where rapid technological progress exists alongside deep economic problems.

"I left Shenzhen blown away by the power of its tech ecosystem, which was far in excess of what I’d previously understood. Yet underneath the rot remains: an economy that is doing really quite badly, and perhaps even worse than I’d realised," he wrote.

'The economic K is widening'

Crabtree, a distinguished visiting fellow at the European Council on Foreign Relations, said the gap between China's technology sector and the broader economy was growing.

"Headline GDP supposedly grew at 4.5% in the most recent quarter. But investment is falling, demand is weak, property is in free fall, and private business has stopped spending," he wrote.

The geopolitical analyst also pointed to falling tax revenues, pressure on China's stock market and restrictions on access to advanced computing technology.

According to Crabtree, China's remaining growth is increasingly dependent on exports, which are facing retaliatory tariffs from trading partners.

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Could China face Japan-like stagnation?

During his visit to Beijing, Crabtree met economist Michael Pettis, who discussed the possibility of China experiencing a prolonged period of weak growth similar to Japan after its asset bubble burst.

The analyst described Pettis's assessment of China's economic outlook as "a decade or more of flat growth, stagnation and slow repair while it works through the biggest debt overhang in history."

"And that is the optimistic scenario," he added.

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Jobs crisis beneath the official numbers

Crabtree also questioned whether China's official unemployment figures fully reflected labour market conditions.

"To take one obvious example, unemployment officially sits at a little over 5%. Nobody believes this, of course. Chinese economist David Daokui Li recently put the actual figure at 10.2%. Pettis thinks it is higher still," he stated.

He cited a Financial Times report stating that 53 million Chinese workers are employed in food delivery and ride-hailing, while roughly 200 million work in the broader gig economy.

"China is clearly using the informal economy as a form of new unemployment insurance, as its economy slows," the author said.

The employment estimates and alternative unemployment figures were cited in his commentary and were not independently verified in the post.

Fierce competition pushes Chinese companies abroad

Crabtree said Chinese businesses were facing intense competition at home, particularly in electric vehicles.

"On several occasions during my trip I heard entrepreneurs describe competing in China as a civil war," he wrote.

He pointed to more than 100 EV brands competing through aggressive price cuts, leaving most companies with thin margins.

According to Crabtree, this domestic competition is also pushing Chinese companies to expand overseas in search of profits.

China prepares new technology export controls

Crabtree also highlighted China's growing use of technology export restrictions as competition with the United States intensifies.

"China’s powerful 'open weight' AI models will be controlled for the first time too, along with everything from drones to tunnel-boring machines," he wrote.

He argued that Beijing was developing mechanisms similar to those used by Washington to restrict access to strategic technologies.

A powerful but economically troubled China

Crabtree concluded that China remains technologically competitive and increasingly confident internationally, even as its domestic economy faces structural challenges.

"Xi's China is feeling confident on the world stage. It faced down Washington in 2025. Its lead in many technologies is accelerating," he wrote. "But China feels economically weak too, and rightly so, which also explains why Beijing has been keen to keep ties with the US stable."