After a two-week visit to China, British author James Crabtree expressed his surprise at the rapid technological development in Shenzhen, which surpassed his expectations. However, he also remarked that the overall economic situation in China is far worse than he had imagined. Crabtree identified a growing “K-shaped economy” in China, where the technology sector experiences rapid growth, while the real estate market, investment, and employment sectors continue to languish in decline.
Crabtree is an esteemed visiting fellow at the European Council on Foreign Relations (ECFR). On November 1, he shared insights from his trip in an article published on his personal website.
Regarding his experiences in Shenzhen, Crabtree stated, “As I departed from Shenzhen, I was shocked by the power of the local technology ecosystem, which far exceeded my prior understanding.” He continued, however, by noting, “Beneath the surface, problems persist: the economic situation is quite bleak and may be even worse than I initially realized.”
According to data from the National Bureau of Statistics of China, the GDP grew by 4.5% year-on-year in the third quarter of 2026. Crabtree pointed out that, although the official growth figures remain impressive, there are significant declines in investment, weak domestic demand, a stagnating real estate market, and a lack of willingness from private enterprises to invest. Economic growth increasingly relies on exports, while Chinese goods face tariff barriers abroad.
Employment issues also garnered Crabtree’s attention. The official urban unemployment rate disclosed for September was 5.2%, but he raised doubts that this figure adequately reflects the employment crisis. Citing estimates from Chinese economist David Daokui Li, he suggested that the actual unemployment rate could be as high as 10.2%. Economist Michael Pettis, whom Crabtree met in Beijing, indicated that the situation might be even more dire.
Crabtree further referenced data from the Financial Times, indicating that approximately 53 million people in China are involved in food delivery and ride-sharing services. Additionally, he mentioned that there could be around 200 million workers in the broader gig economy. He believes that as the economy slows, the gig economy is becoming an essential avenue for absorbing the unemployed workforce.
The competition within China’s technology sector is equally fierce. Crabtree noted that there are more than 100 electric vehicle brands in China, leading enterprises to compete on prices, which in turn squeezes profit margins. During his visit, he frequently heard entrepreneurs liken competition in the Chinese market to a “civil war.” This intense domestic rivalry is prompting an increasing number of Chinese companies to seek profits overseas.
While in Beijing, Crabtree also visited Pettis, and they discussed the prospects for the Chinese economy in a traditional courtyard residence near the Drum Tower, surrounded by students.
According to Crabtree’s recounting, Pettis believes that China’s economy may be on the brink of a prolonged downturn, reminiscent of Japan’s situation following the collapse of its asset bubble. It may take China ten years or even longer to gradually resolve its massive debt issues, a relatively optimistic estimate.