Great powers rarely fail because they are unaware of their problems. More often, they fall apart because they misidentify or only partially identify the root of those problems. The ability to accurately diagnose weaknesses, to distinguish between temporary constraints and structural limits, and to generate the political will to fix deep-seated problems separates states that adapt and thrive from those that stagnate or crumble.

China today faces an imposing list of challenges that it needs to assess and address. Economic growth is slowing, the population is aging, the financial system is under stress, and other countries have been tightening trade controls and scaling up their own industrial policies to compete. For many years, China’s economic expansion could mask the country’s underlying vulnerabilities. That era is now over. And in party documents and major speeches alike, leaders in Beijing admit these pressures and acknowledge the country’s weaknesses.

But recognition is not diagnosis, nor does it automatically translate into meaningful action. Beijing describes China’s challenges as technical, developmental, or externally imposed rather than products of systemic problems. This distinction is strategic. It downplays political and institutional vulnerabilities that are causing the issues or making them worse, including the concentration of authority in the hands of Chinese leader Xi Jinping, tensions between central directives and local implementation, misaligned incentives between leaders and rank-and-file cadres, and a demand for ideological rigidity that leaves limited room for feedback or policy correction.

How China views its own weaknesses is as consequential as the weaknesses themselves. When Beijing casts structural problems as technical hurdles or pressures from abroad, it limits the reforms it is willing to pursue while offloading responsibility by blaming factors outside the Chinese political-economic system itself. For policymakers in the United States and Europe, understanding how China interprets its own problems is essential to managing long-term competition, calibrating deterrence, and identifying areas, however few, where real engagement remains possible.

SPEAKING TRUTH

Rhetorically, Chinese leaders have not shied away from identifying the challenges that the country faces. In 2017, Xi signaled that he was aware of growing problems of decades of economic growth by declaring that the country’s principal contradiction—the tension that defines each era and drives development, according to Mao Zedong’s framework—had changed. China’s biggest contradiction was no longer between growth and scarcity, which had been the driving force of the reform era, but rather between “unbalanced and inadequate development and the people’s ever-growing needs for a better life.” In other words, while endorsing more and better development overall, Xi was acknowledging that rapid economic growth had created quality-of-life concerns such as income inequality, environmental degradation, and demand for more than just the fulfillment of basic subsistence needs.

Xi has been equally blunt about China’s technological vulnerabilities. Since 2016, when China’s 13th Five-Year Plan and other policy documents signaled the leadership’s renewed emphasis on the long-standing objective of promoting domestic innovation, Xi has repeatedly warned that China’s “key and core technologies are controlled by others.” He has identified advanced semiconductors, industrial software, and precision manufacturing equipment (such as lithography machines) as strategic chokepoints. External assessments by Chinese universities and think tanks similarly identify dependence on critical inputs and upstream technologies as a constraint on China’s technological advancement. Beijing has been moving aggressively to mitigate its vulnerabilities through measures including state subsidies and targeted industrial policy support for strategic sectors, and it has expanded incentives for universities and firms to invest in research and development. China also established state-backed funds to finance its technological aspirations and, where feasible, sought to diversify supply chains and reduce reliance on imports.

China’s leadership is aware of the country’s vulnerabilities.

Recent party communiqués show a growing willingness to name vulnerabilities that leaders previously ignored or downplayed. The 15th Five-Year Plan, which sets the country’s policy plans through 2030, reaffirms the need to address three key risks: the protracted real estate downturn, excessive local government debt, and fragile financial institutions. Key party sources, including its leading journals, have started to discuss the country’s rapidly aging population as a strategic challenge that requires proactive state intervention.

Beijing has adopted modest measures to contain these internal strains without abandoning its core development model. To stabilize the housing market, Beijing has lowered downpayment requirements, increased financing to complete stalled developments, and promoted urban renewal and affordable housing. In the financial sector, regulators have tightened oversight of smaller banks exposed to property and local government debt risk and encouraged them to consolidate and recapitalize to prevent localized stress from becoming a systemic crisis. And on demographic issues, Beijing has offered modest pronatalist incentives such as higher childcare subsidies, expanded parental leave, and a gradual increase of the retirement age.

These policies suggest that China’s leadership is aware of the country’s vulnerabilities and attentive to the social and political pressures they generate. Although Beijing’s outward confidence has grown since its successful use of export controls to put pressure on Washington to lower its tariffs against China during the trade war in 2025, official rhetoric about China’s outlook remains measured. Party documents emphasize resilience, preparedness, and control rather than triumphalism.

BLAMING BAD APPLES

Yet the party’s diagnoses are also revealing for what they omit. In official speeches, policy documents, and state media articles, China’s weaknesses are almost always framed as technical shortcomings linked to the country’s development stage or the result of policies imposed by other countries. They are framed as problems of capacity, not of structure.

Leaders in Beijing attribute economic imbalances to China’s stage of development rather than to a system in which state dominance and political priorities distort markets. In the same 2017 speech in which he described China’s new principal contradiction, for instance, Xi claimed that China was still in the “the primary stage of socialism”—suggesting that the existing system would provide solutions to the country’s challenges along its current trajectory. Unsurprisingly, party documents also avoid framing the increasing concentration of political power or the expanding presence of the party in private firms as potential liabilities. Political leaders are quick to acknowledge governance shortcomings, but they deflect responsibility downward onto incompetent cadres, weak discipline, or corruption. Their attitude is that the underlying political and economic system remains sound, and its stability is treated as a prerequisite for resolving other problems.

This divergence between framing and reality shapes the leadership’s analysis, its policy choices, and the limits it faces. Beijing recognizes that excessive internal competition and lackluster consumption are holding back China’s economy. In 2025, it launched a campaign to reduce destructive competition among Chinese firms and local governments by instituting price controls, production restrictions, and tools to manage predatory pricing in sectors suffering from overcapacity, and to more tightly regulate mergers, investment, and new entrants in those markets. And in 2024, Beijing introduced a program to encourage consumers to trade in household goods to boost purchases of new products. But none of the policy initiatives fundamentally questions the structures behind the policies; instead, they treat the problems superficially. It is easier to blame episodes of individual misconduct on poor behavior or bad actors than to address the institutional arrangements that generate them.

As a result, Beijing continues to favor corrective, short‑term fixes over meaningful structural reforms. Household consumption illustrates this clearly. The 15th Five-Year Plan highlights household consumption as an economic priority but includes no commitment to raise consumption’s share of GDP, and the fiscal transfers announced to strengthen the welfare state remain far too limited to put enough money into people’s pockets to encourage them to consume more. The consumer goods trade-in program, for instance, boosted consumption slightly in 2025, but its effects slowed in 2026 as its budget declined and people ran out of appliances to replace. China’s long-term strategy to improve consumption has turned out to not be a new strategy at all; instead, it is the same strategy China has always relied on—one that focuses on increasing production with an expectation that household incomes will eventually rise as production improves in the long term. It manages symptoms while refusing to let go of the old economic and political structures, leaving the underlying problems untouched.

LET A HUNDRED PROBLEMS FESTER

China is not the first great power to struggle to make needed structural changes. In the late nineteenth century, British elites worried that their empire would be overtaken by faster-growing competitors such as Germany and the United States, which were making huge advances in chemicals, electrical engineering, and steel production. In response, Britain pushed to expand technical education and upgrade its industrial structure from mature sectors such as textiles and coal to more technologically sophisticated industries. But these solutions underestimated deeper problems of an overstretched empire and extreme domestic inequality. The Soviet Union is a similar case. By the time that Leonid Brezhnev took charge, in 1964, Soviet leaders openly discussed stagnation and corruption. Yet reform efforts framed problems as failures of policy implementation rather than of system design.

Great powers tend to recognize mounting constraints long before they are willing to confront the institutional sources of those constraints. This gradually weakens them. How slowly they weaken depends on whether their leaders can generate the political will to pursue more fundamental reform. Although history is full of examples of smaller and regional powers adapting enough to delay decline or successfully embark on a new path—in the late nineteenth century, for instance, Japan’s Meiji reforms modernized its military, industrialized its economy, and adopted constitutional governance in response to the rising threat of Western imperialism—such turnarounds are rare among great powers and often come only in the wake of unique political shocks. For both the British Empire and the Soviet Union, when more change finally came, it was already too late.

Western leaders are unlikely to be able to force Beijing to confront its own blind spots. External pressure will not compel China to face structural challenges that it already recognizes but is reluctant to address in any meaningful way. Instead, as policymakers in the United States and Europe develop new strategies to deal with China and mitigate the negative consequences of many of its economic policies, they need to accurately identify China’s domestic weaknesses; assess its strengths and how they will evolve; and analyze its vulnerabilities, including the gap between the country’s objective challenges and how the leadership in Beijing perceives them.

Beijing continues to favor short‑term fixes over meaningful structural reforms.

Understanding this gap will allow U.S. and European policymakers to avoid costly policy failures and more reliably envision where China is headed. Assessments of China’s relationship with Russia, for instance, which focused too much on China’s historical reluctance to support wars beyond its borders and its commitment to global economic stability rather than what Beijing and Moscow saw as their shared interests, led Western leaders to miscalculate China’s willingness to support Russia’s war in Ukraine. Looking forward, Western policymakers need to pay attention to how China’s perception of its position has changed after successfully using export controls to push back on U.S. tariffs in 2025. Efforts to deter China from economic coercion or respond to trade tensions depend on how China views its strengths and weaknesses. A new area of tension is already emerging: China’s technological success has been widely hailed around the world, but policy documents from Beijing reveal a persistent sense of vulnerability.

China is unlikely to either collapse or transform overnight. Instead, the most plausible scenario is a prolonged process of adaptation to slower growth, tighter political control, and more cases in which security trumps efficiency. Such a process is familiar in history and is likely to drag out over a long period. In both the British Empire and the Soviet Union, decline driven by the failure to address structural weaknesses unfolded over decades, not years. And China today, similar to each of these examples, faces a dynamic and powerful challenger in the United States, even as both contemporary superpowers have their own internal set of constraints and pressures.

Although Beijing is unlikely to accept any measures that would meaningfully address the country’s structural challenges because of the risks it would pose to its authority, Beijing’s self-assessments are always evolving. For leaders in the United States and Europe, understanding these shifting perceptions is as critical as analyzing the underlying data itself. They will shape China’s policy trajectory and determine whether any Western response to China will ultimately work.