The Global Economic Slowdown And China In The Era Of De-Globalization – Analysis

March 12, 2026 
 Anbound
By Yang Xite


China’s economic growth has transitioned from the double-digit high-speed expansion of the past to a gradual deceleration of around 5%. This shift has sparked significant attention and debate both within the country itself and internationally. The decision to modestly lower the annual GDP growth target during China’s 2026 Two Sessions, its annual plenary sessions of the National People’s Congress and of the National Committee of the Chinese People’s Political Consultative Conference, reflects a policy acknowledgment and adaptation to the new realities of the global economy under the pressures of de-globalization. ANBOUND’s founder Kung Chan suggested that observing this phenomenon requires a more comprehensive perspective. A fundamental evaluation is that the current economic downturn is not unique to China. Instead, it is a challenge shared by the entire world.

Why, then, is the global economy weakening collectively? To understand this, one must clarify the underlying logic to see the true picture. The key lies in “de-globalization”. ANBOUND has conducted research on this topic for nearly a decade, initially approaching it through the “New Space Theory” and observing a “fragmentation” of global space. While globalization seeks a unified market and relies on international agreements, multinational corporations, and organizations to integrate the world, de-globalization does the opposite. It carves the market space from a whole into regional or even national units. This can be viewed as a global-scale “balance sheet contraction”.

Against the backdrop of this global “balance sheet contraction”, the globalization dividends that once fueled high-speed growth are vanishing. In a world where markets are shrinking, vast amounts of assets and production capacity are becoming redundant or even ineffective. In such an environment, increasing production is not necessarily a virtue. Instead, it can lead to further waste and debt accumulation. Moderating production capacity is, in fact, a rational choice to absorb excess and de-leverage. Hence, it should not be labelled simply as “industrial hollowing out”. From the perspective of broader trends, this is an inevitable phase of structural adjustment. As global markets undergo a “balance sheet contraction” and asset values face a fundamental revaluation, such severe overcapacity affects more than a single country. Economic weakness is inherently contagious. At this stage, the true competitive edge lies in the judgment and ability to identify opportunities in the face of adverse environment.

Some of the tactics currently emerging in the international trade and economic arena would have been unimaginable in the past. For example, some countries are using judicial procedures to directly strip Chinese companies of their control. This precisely illustrates that in an increasingly shrinking market, competition is becoming more brutal, and extreme practices are appearing as a result.


Even under the situation where the world is experiencing economic weakness, the United States appears to be something of an exception. The Monroe Doctrine recently advocated by the Trump administration centers on shifting America’s strategic focus back to the Western Hemisphere, essentially aiming to turn the Americas into the United States’ own “backyard market”. In earlier internal reports, ANBOUND had already pointed out that the U.S. would likely pivot toward an “Americas policy”. The underlying logic is likewise rooted in de-globalization. As globalization recedes, the U.S. also needs to consolidate its core economic base. The Americas indeed hold significant potential. The U.S. itself has a market of more than 300 million people, and when combined with populous countries such as Brazil and Mexico, this creates a substantial consumer base. At the same time, the region is rich in resources, and these countries also possess the potential capacity to purchase American goods and services. For these reasons, it is not difficult to understand, from a strategic perspective, why the U.S. might shift its economic focus toward the Americas.

However, having a strategy is one thing; implementing it is another. Truly dominating the Americas market will take time. It is unlikely this goal will be fully achieved within Trump’s likely remaining term. If subsequent Republican administrations continue this policy approach, the probability of success might increase. In the short term, which ANBOUND estimates to be one to two years, however, strategic adjustments are unlikely to be implemented quickly, and the US economy will likely struggle to fully escape the drag of global weakness, and may even decline. This performance will inevitably be reflected in the political games of the upcoming election. While the U.S. stock market has repeatedly reached new highs, this has been mainly driven by a few tech giants, indicating that the situation for most listed companies is not exactly ideal. Recent market volatility, once again relying on Google’s announcement of new AI advancements, further demonstrates that the foundation of U.S. economic growth is not solid. Therefore, the U.S. cannot escape the pressure of economic weakness.


Turning to Europe, its economic condition has long been far from favorable. An article by ANBOUND’s founder Kung Chan, titled The Four Horsemen of Europe’s Decline sparked extensive international debate following its publication in European media. In reality, the European economy has never truly regained its footing since the 2008 financial crisis and the subsequent sovereign debt crisis. To this day, Greece’s economic output has not returned to pre-crisis levels, and Portugal has only just managed to claw its way out of the mire. Growth rates across Europe have remained stagnant for a protracted period. For China, Europe is a vital export market, a role that becomes even more critical amid the uncertainties of U.S.-China relations. However, Europe is not only suffering from the global weakness triggered by de-globalization. It also faces a more vexing “either-or” dilemma of how to choose between its high social welfare costs and its necessary defense expenditures.

European nations generally maintain high levels of social welfare, with public expenditures often exceeding 40% of total fiscal spending, and the burden of healthcare costs is particularly heavy. Given this fiscal structure, significantly increasing defense spending to address geopolitical shifts is an almost impossible task. This is not only Europe’s predicament. The U.S. faces a similar choice to a certain extent. If the U.S. were to reduce its security commitments to Europe, could Europe resolve this dilemma on its own? The answer is very likely no. Consequently, the European economy may not simply face a gradual decline but rather the risk of a drastic drop. Should this occur, the market space that Europe can provide to the rest of the world will contract significantly.

Understanding the European economy requires a perspective of historical realism. Historically, much of Europe’s prosperity has been built on external exploitation, from early colonial plunder to later reliance on cheap labor and markets in Eastern Europe, and then to the global expansion of capital and technology during the era of globalization. While Europe has internal innovative vitality, its technological strength has lagged far behind that of the U.S. and has not become the dominant force.


Today, the trend of de-globalization is cutting off the external channels on which Europe has long relied. This will inevitably trigger intense internal conflicts, political turbulence, and even the possibility of the European Union’s disintegration. All of these changes are inseparable from the broader era-defining framework of de-globalization. Meanwhile, the continuing tensions surrounding Iran are also impacting the stability of global energy markets and supply chains, further increasing the uncertainty surrounding the global economic recovery.

Final analysis conclusion:

The global “balance sheet contraction” of markets triggered by de-globalization is the main thread behind the current economic weakness. Countries around the world are facing pressure for structural adjustment. The United States’ shift toward an “Americas policy” is unlikely to produce quick results, while Europe’s predicament is even more severe. China’s economic slowdown is, in essence, a necessary phase of absorbing excess capacity and adapting to a contracting global environment. This is not unique to China but rather a shared global challenge. The key question is whether countries can seize opportunities for adjustment amid adversity.

Yang Xite is a Research Fellow at ANBOUND, an independent think tank.

Anbound

Anbound Consulting (Anbound) is an independent Think Tank with the headquarter based in Beijing. Established in 1993, Anbound specializes in public policy research, and enjoys a professional reputation in the areas of strategic forecasting, policy solutions and risk analysis. Anbound's research findings are widely recognized and create a deep interest within public media, academics and experts who are also providing consulting service to the State Council of China.