China’s long-held dominance as the top performer among emerging markets is fading, according to a new analysis by Capital Economics. The brokerage firm reports that China is “no longer an EM outperformer,” marking the end of decades of economic leadership that once set the pace for developing nations.
Since 2000, China’s economy has consistently outgrown its peers, with the firm’s China Activity Proxy showing faster expansion than most emerging markets—except during the pandemic. However, Capital Economics now expects China’s growth to fall below the EM average in the coming years, even if official data suggest otherwise.
A key factor driving this slowdown is the decline in China’s construction and infrastructure sectors. The brokerage warns that growing government debt and diminishing returns will lead to an inevitable pullback in infrastructure investment. This shift not only dampens China’s outlook but also threatens emerging economies reliant on Chinese demand, especially commodity exporters like South Africa and Brazil.
Capital Economics projects China’s GDP growth will slow to around 2% by 2030—a dramatic drop that could reshape global economic dynamics. The slowdown is also expected to weigh on oil prices, affecting Gulf economies dependent on energy exports.
Meanwhile, the global growth story is moving elsewhere. Capital Economics highlights India, Southeast Asia, and North Africa as the next wave of emerging-market leaders. These “Other EM Manufacturers,” including nations like India, Vietnam, Malaysia, and Egypt, are projected to grow nearly 5% annually thanks to strong labor markets, competitive costs, and manufacturing opportunities.
As China’s growth engine cools, economic momentum is shifting toward these dynamic new players. The era of China-led emerging market dominance is ending—ushering in a broader, more diversified map of global growth.