For China, ‘pivotal’ 2025 will put economic choices to the test: Asia Society report

How China deals with simmering trade disputes, weak domestic consumption and advanced manufacturing hurdles ‘will shape its trajectory for years’

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China’s “new quality productive forces” could help form the bedrock for China’s 15th five-year plan. Photo: Reuters

Published: 10:00pm, 9 Dec 2024

Heightened geopolitical tensions and economic decoupling, underpinned by technological and inflationary concerns, will increase “downward pressure” on China’s exports while further burdening its economy in 2025, according to a new Asia Society report.

There will be “an intricate web of internal and external challenges” for China in the coming year, and uncertainty still surrounds Beijing’s potential fiscal reforms, social security improvements and a “whole-of-government effort” to advance cutting-edge technologies.

At a time when the central economic work conference is expected by the market to convene this week in Beijing, with policymakers seeking to stabilise growth amid various headwinds, analysts at the US non-profit group said China’s “response in 2025 will shape its trajectory for years to come”.

“The coming year will prove pivotal in testing Beijing’s resilience and adaptability as it confronts an increasingly hostile geopolitical environment while navigating extremely complex domestic challenges,” added Jing Qian, co-founder and managing director of the Asia Society Policy Institute’s Centre for China Analysis.

US president-elect Donald Trump’s appointment of “China hawks” – Marco Rubio, Howard Lutnick and Jamieson Greer – for his new administration, as well as his recent plan to levy an additional 10 per cent tariff on all Chinese imported goods on top of the tariffs already in place, reflect what looks to be a revival of hardline trade policies. Additionally, some US lawmakers are looking to revoke the normal trade relations that Washington has had with Beijing for more than two decades.

[R]ecord deficits will likely overwhelm Beijing’s mechanisms for managing its fiscal policy

Rick Waters, Asia Society

“Despite rising barriers to exports, China will stay the course set out at the July 2024 third plenum,” said Rick Waters, a non-resident honorary senior fellow at the Asia Society. “With China’s economy rigidly locked into a supply-driven framework, and in the absence of support on the demand side, record deficits will likely overwhelm Beijing’s mechanisms for managing its fiscal policy.”