I think you need to go back a bit further in time. And I'm just going to limit this post to 1911. Because it will be crazy long if I don't.

Qing China modernized its army and navy with the Self-strengthening Reforms starting in the 1850s and 1860s. They bought guns, cannons, and ships, built factories and armories, and started to improve their infrastructure (railroads and telegraphs) as well. But they did not modernize/Westernize their education enough. To be a high ranking official in Qing China, you had to pass the civil service exam (based on Confucianism). Very few people became high officials without going through the civil service exam. 中体西用 or "Chinese learning for substance, Western learning for function" was their slogan.

So this was the limits of Self-Strengthening Movement. Qing China really needed to adopt modern education (emphasis on science and math, reason and logic, and nationalism instead of Confucian classics and rote memorization) to master what they were buying from the West. Defeat against Japan in the First Sino-Japanese War of 1894-1895 proved that just buying weapons was not enough. So after 1895 they tried to do this.

The 100 Days of Reform in 1898 was one such attempt to radically change the government and education. But this Reform was crushed by Empress Dowager Cixi and the conservatives. After the failure of the Boxers to defeat Western forces (Boxer Rebellion of 1900), the Empress Dowager herself recognized the need for reform and started the last attempts at reforms in 1901. In 1905 the dynasty abolished the Confucian civil service exams and in 1908 the emperor promulgated a written constitution, and in 1911 the dynasty created a Western style cabinet.

But there was a reason why conservatives resisted this reform to de-emphasize Confucianism. Fundamentally the Qing dynasty was a Manchu aristocracy (1% of population) ruling over the Han Chinese people (90% of population), the other 9% were Mongols, Tibetans, Uyghurs, etc. The main thing keeping the Manchus and the Han Chinese together was Confucianism and the promise that 50% of government posts would go to Han Chinese who passed the Confucian civil service exams. The government posts essentially bought off the ambitious and wealthy Han Chinese. But once you get rid of Confucianism and the civil service exams, nothing keeps these two groups together. There was no nationalism that brought these two groups together back then.

So it is not an accident that the dynasty collapsed in October of 1911. In 1905 Confucianism and civil service exams no longer kept the two groups together. In May 1911 the Qing government announced a Western style Cabinet, in this cabinet 8 out of the 10 ministers were Manchus, only 2 ministers were Han Chinese (the minister of foreign affairs and the minister of education). And out of those 8 Manchus, 5 were members of the imperial family. With this cabinet, the ability of the Manchu rulers to keep the loyalty of the Chinese disappeared. When the rebellion began on 10 October 1911 in Wuchang, other provinces followed suit. By December it was over, and Sun Yat-sen became the Provisional President of the Republic of China.

So that's why the Qing declined. The Self-strengthening Movement, using the slogan "Chinese learning for substance, Western learning for function" could not adopt the modern/western educational system to master the imported guns, cannons, and ships and motivate the people through nationalism. They couldn't do so because Confucianism and the civil service exams were the glue keeping the Manchus and the Han Chinese together. And when they dropped Confucianism and the civil service exams, the dynasty collapsed shortly thereafter.

If the dynasty used Manchu nationalism, the Han Chinese would resent the government. If the dynasty used Chinese nationalism, then there would be no reason to have a Manchu emperor. The long years of trying to keep Manchu separate from Han made it impossible to suddenly fuse the two ethnicities. A revolution was necessary before China could adopt nationalism and a modern/Western education.

Abridged version:

At this period in time the Qing was already weak. There were rebellions, natural disasters and the like, and many people were unhappy with the way the state was being managed. At the end of the millennium there was an anti-foreign and anti-Christian rebellion, the Boxer Rebellion, which resulted in an invasion of China by foreign powers.

This was after China fought two wars with Great Britain and after the signing of the unequal treaties, which had already further weakened China, as well as the Taiping Rebellion which didn't do the government any favours.

In reality China was already weakened significantly by 1894. Then, to just grab a sentence off the Wikipedia page for the First Sino-Japanese War because it's more concise than I'd write otherwise, "The war for China revealed the ineffectiveness of its government, its policies, and the corruption of the Qing administration."

Basically, your assessment of how strong China was in 1894 isn't quite right, and the decline was already in full swing by then.