The fall in capacity, which was 17.4% lower than the record installation year in 2015, was blamed on the "only 19.5GW" added in China, down from 23.3GW added in 2016.
"The numbers show a maturing industry, in transition to a market-based system, competing successfully with heavily subsidised incumbent technologies," said GWEC secretary general, Steve Sawyer.
"The transition to fully commercial market-based operation has left policy gaps in some countries, and the global 2017 numbers reflect that, as will installations in 2018.
"Wind is the most competitively priced technology in many if not most markets.
"And the emergence of wind/solar hybrids, more sophisticated grid management and increasingly affordable storage begin to paint a picture of what a fully commercial fossil-free power sector will look like," Sawyer added.
GWEC claimed Europe — which added 16.8GW last year driven by the EU member states — India and the offshore markets' record years helped offset the slowing Chinese sector.
GWEC also highlighted the falling prices of wind, with record lows of $0.02-0.03/kWh in Morocco, India and Mexico.
"The dramatic price drops for wind technology has put a big squeeze on the profits up and down the whole supply chain", said Sawyer.
"But we're fulfilling our promise to provide the largest quantity of carbon-free electricity at the lowest price. Smaller profit margins are a small price to pay for leading the energy revolution," he added.
Offshore wind capacity grew by 4.33GW in 2017, GWEC figures show, nearly double 2016's total.
The UK, Germany and China continue dominate, taking a combined 94% of the installed market share. Global offshore capacity now stands at 18.8GW.
China once again dominated the region, with almost 80% of installations taking place in the world's leading market. According to GWEC's figures, China now has 188.2GW installed.
India, however, installed over 4GW (4,148MW) for the first time, up from 3.6GW added in 2016. GWEC warned however, India will be a "victim" to the upheaval brought by a shift to auction systems last year, with installation rates slowing in 2018.
The rest of Asia-Pacific has a positive outlook for GWEC, with "promise" shown in Pakistan (added 200MW in 2017), Thailand (218MW) and Vietnam (38MW), while there were "stirrings in the laggard markets" of Japan (177MW) and South Korea (106MW).
Australia was the only active market in the Pacific region, however, adding 245MW, despite "lots of new contracts in 2017", GWEC said.
As shown in WindEurope figures earlier this week, Europe had a record year.
The region as a whole added over 16.8GW in 2017, with 15.68GW of that in the 28 member states of the European Union (EU).
Overall, European wind capacity now stands at 178GW, according to GWEC.
The global trade body said the 3GW growth in offshore installations in Europe is "a harbinger of things to come".
WindEurope noted the increase was due to the race to make the most of current tariff systems, ahead of a widespread shift to auctions, which may affect 2018 rates.
The US installed 7GW in 2017, down slightly from the 8GW added in 2016.
GWEC said the growth of corporate PPAs is playing "an increasing role in the market".
The appetite for businesses buying wind is expected to offset the moves by the federal government to undermine renewables growth.
The US now has 89GW of installed wind capacity.
Canada and Mexico meanwhile saw record low bids in 2017 tenders. They added 341MW and 478MW respectively. GWEC predicted "substantial growth" in Mexico as we enter the next decade.
As in Asia-Pacific, the Latin American and Caribbean market was dominated by a single country.
Brazil, despite its economic woes, added over 2GW of new wind capacity in 2017, according to GWEC, almost 80% of the market. It now has 12.7GW of installed capacity.
The 295MW added in Uruguay means the southeast South American country edges towards a 100% renewable energy system, GWEC noted.
Meanwhile activity in Argentina, which added just 24MW in 2017, is expected to pick-up following last year's auctions.
Middle East and Africa
The smallest market region with 4.5GW total capacity following an additional 621MW in 2017, all of which took place in South Africa.
The market could be set to grow quickly, though, after auctions in Morocco, Egypt and Saudi Arabia.
There was also project movement in Jordan, Lebanon and Oman last year.
Added capacity in 2017 (MW)
Total cumulative capacity (MW)
Top ten markets by 2017 installations, with total cumulative capacity. source: GWEC