- Xi must deliver political results: In 2025, the gap between Xi’s enormous power and his ability to deliver tangible government results could widen further. This could exacerbate political uncertainties and economic volatility. While Xi continues to dominate China’s politics, local governments’ financial constraints and entrepreneurs’ mistrust could increasingly hinder the realization of his agenda. China may be forced to develop more innovative approaches to overcome these challenges. The drafting of the 15th five-year plan will be an important indicator of this development.
- Intensification of internal leadership problems: The challenge of maintaining political control while creating economic incentives for the elites will take center stage in 2025. The fight against corruption will continue, with 14 military leaders removed from the People’s Congress in the last two years alone. While Xi’s concentration of power has strengthened discipline within the Communist Party, it also restricts the autonomy of party cadres. Rivalries between factions and movements within the party could intensify further, particularly over Xi’s potential successor.
- Necessary tax reforms: Following the ambitious promises of the Third Plenum in July 2024, comprehensive tax reforms are due, which are long overdue given the financial woes of local governments. The current, highly centralized tax system from the 1990s is no longer sustainable. A reform is planned that includes special bonds worth twelve trillion yuan over five years to restructure local debt and ensure financial stability.
- Development of new productive forces: China increasingly focuses on the concept of „new high-quality productive forces“ to promote innovation at a local level. This concept will play a growing role in the face of economic challenges and technological rivalry with the US. By 2025, it is likely to become a core element of China’s economic strategy.
- Effects of the „zero Covid„: The aftermath of the strict „zero Covid“ policy and its abrupt end continue to influence social sentiment in 2025. A growing sense of injustice and economic uncertainty weigh on the population’s confidence. The middle class is particularly disappointed, and many are considering emigration or capital flight. While Beijing responds with social welfare initiatives and economic stimuli, problems such as unemployment and discontent over reforms – such as the raising of the retirement age – remain unresolved.
- Religion and spirituality on the rise: More and more Chinese people seek moral guidance and meaning. Religious practices such as Protestantism and Tibetan Buddhism are gaining popularity, including among young people frustrated with the economic stagnation. Paradoxically, the government’s restrictive stance has contributed to the popularity of religious practices. This widening gap between party ideals and spiritual needs could further increase discontent among the middle class.
- Beijing’s relationship with the Trump administration: Tensions between the US and China are set to increase once Donald Trump takes office in January 2025. Trump’s aggressive trade policy and possible measures such as higher tariffs and export controls could exacerbate conflicts. There is a particular focus on the Taiwan question: While many of his advisors consider the defense of Taiwan to be key, Trump has often signaled that he would attach conditions to the protection of partners. Beijing will likely seek to negotiate directly with Trump to avoid escalation while continuing to test military boundaries.
- China’s role in climate action: Geopolitical tensions and the election of climate change-skeptic Trump could push Beijing to take a leading role in climate action. Despite progress in renewable energies, China still faces structural challenges. Whether Beijing uses the expansion of sustainable energy to stabilize its own emissions or also engages with international interests will be decisive for global climate development.