In a coal reservoir, matrix shrinkage caused by gas desorption is regarded as a significant factor that can influence natural fracture permeability. It is considered to be a constant and lasting effect throughout coalbed methane (CBM) production based on previous investigations. However, experimental measurements of long-term permeability change have demonstrated that adsorption-induced strain has a time-dependent effect on permeability evolution. This study presents long-term investigations on permeability evolution of coal reservoir during CBM production. A fully coupled two-phase flow model for gas-water is specially proposed. Furthermore, the independent impacts of the matrix swelling during gas adsorption are characterized by a strain-rate-based permeability model. The competing effect between pressure depletion and desorption shrinkage on the permeability change is evaluated during the process of long-term production. The calculations of the proposed model are respectively consistent with experimental and field data and the findings show that matrix shrinkage is the most important factor in permeability evolution towards the wellbore. The effect of matrix shrinkage on permeability enhancement is significant in the primary stage and vanishes with uniform depressurization in the matrix. As a result, matrix shrinkage dominates permeability first, followed by effective stress. A sensitivity analysis of mechanical properties and flow properties on permeability evolution was performed and has demonstrated that the larger the matrix shrinkage-induced strain is, the higher the permeability enhancement is, which can be also enhanced with greater initial permeability and a lower diffusion coefficient of the matrix and the impact of the negative strain induced by decreasing pore pressure is solely related to the bulk modulus. The range of permeability variation is narrowed when porosity is high, which implies that the influence of matrix shrinkage and effective stress on permeability is suppressed. This research will advance the understanding of the permeability change during long-term CBM production.