China in 2025

In this special issue of our MERICS China Essentials Brief, we take a look at what 2025 has in store for China – and our relationship with it. One thing is for sure: US-China competition will challenge Europe. With Donald Trump back in the White House, China can be expected to use likely transatlantic tensions to court Europe.

“China will try to have it both ways next year, stepping up its support for Russia while reaching out to Europe to get relations back on track,” says Helena Legarda Herranz of our research team for China’s foreign relations. “Without a clear strategy and set of objectives, Europe could turn into an arena of US-China competition.” Read more

Economic headwinds and a possible trade war with the US look set to undermine China’s economy in 2025. But Western businesses and policymakers should not bet that Beijing will resort to stimulus or market-friendly reforms to ramp up growth. MERICS Lead Analyst Jacob Gunter : “State planners in Beijing have demonstrated for years how much economic pain they are willing to inflict on China in pursuit of stability, security and resilience. They are likely to feel vindicated in their choices as they prepare for Trump 2.0.” Read more

On the topic of innovation, global advances in AI will urge Beijing to invest in computing power. Huawei and other technology companies that spearhead China’s all-of-nation effort to develop better semiconductors and more efficient AI software will receive significant state support. “Keeping up with global AI advances in 2025 will require tremendous efforts from China, especially as its access to the latest Western technology is increasingly limited,” says MERICS expert Jeroen Groenewegen-Lau . Read more

2025 also looks set to be a year in which Beijing puts stronger emphasis on bolstering social cohesion – and public security. The focus on industrial upgrading over domestic consumption has left people struggling to make ends meet. “Xi Jinping likes to exhort China’s citizens to be resolute in the struggle for national greatness, but this is an increasingly hard sell”, said MERICS Lead Analyst Nis Grunberg . He expects Xi to double down on his vision of Chinese society as a “hybrid service-security state that has a presence close to every citizen.” Read more

China's trade surplus is set to hit a new record of more than USD 900bn this year, almost tripling since Xi Jinping took power in 2013, as our graphic of the week shows. Surging exports have recently created trade imbalances with emerging economies alongside traditional surpluses with the US and the EU. This suggests that more and more exports are reaching the US via third countries such as Vietnam and Mexico – and that any additional US tariffs will further shift flows without changing China’s global manufacturing dominance. The fact that China sells more to all regions of the world than it buys from them has become a global problem.?Read more

Continue reading this issue of MERICS China Essentials on our website.