China In 2025
By Dr. Maciej Gaca
(Centre For Intl Relations, Poland)
In 2025, China will be balancing between strengthening its role as a superpower and escalating tensions. From Beijing’s point of view, South China Sea, Taiwan and North Korea as flashpoints have one thing in common: they are valuable and at the same time risky. The logic of China’s actions is classic offensive realism, i.e. striving for dominance, which increases its security but at the same time provokes rivals to react.
As Royal United Services Institute notes: “China in Indo-Pacific is a player that must calculate every move in the context of global reactions – from the US to its closest neighbours.” 2025 will be a key test of whether Beijing is ready not only to consolidate its internal power, but also to boldly shape international order. This is the moment when Xi Jinping’s vision – coherent, yet marked by tensions between ambition and reality – will be confronted with the most difficult challenges of modernity. Xi Jinping speaks of “a nation that has risen, grown rich and grown strong”. Today, the Chairman of the Communist Party of China single-handedly defines the key directions of the country’s actions. “We must focus on a long-term vision, while flexibly responding to challenges that the world brings us. Our goal is to build a modern socialist state that is both an economic and technological powerhouse, and an unwavering pillar of stability in the international arena,” he said during CPC’s 20th Congress, 2022.
2025 looms as a moment of truth for the Chinese economy, which must balance long-term reforms with pressing crises. China must address challenges of income inequality, changing consumer habits, and demographic decline, which are increasingly limiting its growth potential. Yet Beijing continues to pursue global technological dominance, investing in artificial intelligence and green technologies. The coming months will be a test of its adaptability.
The real estate sector, which used to account for up to 25% of China’s GDP, is now a symbol of deep structural problems. The debt of giant companies which exceeded 2 trillion yuan in 2024, has led to a domino effect, threatening financial stability of local governments, which have largely relied on land transactions for their revenues. China National Bureau of Statistics says 30% of their revenues came from this source.
With housing prices falling by 12% and demand falling among younger generations, many local budgets are on brink of crisis. Beijing is facing a difficult choice. On one hand, government cannot allow further bankruptcies in this sector, which could destabilize the entire economy. On the other – further financial support programmes, although necessary, only increase the market’s dependence on state intervention. For years, China has been trying to reduce its dependence on exports and infrastructure investment, focusing on developing domestic market. However, income inequality, deepening because of the pandemic, has significantly limited society’s consumption potential. Only 30% of Chinese households saw their disposable income increase in 2024, while cost of living, including education and healthcare, is steadily rising. China treats development of artificial intelligence as a strategic priority, with plans to achieve global leadership by 2030. According to Stanford AI Index 2024, Chinese investment in AI research currently accounts for 40% of global spending. Key areas include facial recognition technologies, natural language processing, and industrial process automation. However, these pose serious ethical and social challenges. Human Rights Watch points out that AI technologies are used for mass surveillance, especially in regions inhabited by indigenous ethnic groups of Uyghurs and Tibetans.
In the face of US sanctions restricting access to advanced semiconductors, China has accelerated development of its domestic technology industry, particularly in the field of integrated circuits. Potential for Chinese companies to become more competitive in global technology supply chain is not ruled out. It’s expected that by 2025-end, China could reduce dependence on imports of advanced integrated circuits by 15%. In the lithium-ion battery sector, China is set to double its production capacity, becoming a key supplier for the global electric vehicle market.
In 2025 aging of society and shrinking of population is a major problem. In 2024, the population decreased by 850,000; and forecasts indicate by 2030 people over 60 will constitute 28% of population. Consequences will be – from a reduced workforce to a growing burden on healthcare/pension systems. Beijing is considering raising the retirement age and reforms for increasing the birth rate, but previous initiatives have not helped.
In 2025, China will try to combine the role of a mediator in key global conflicts with continuing its policy of competition with the West. In Russian-Ukrainian conflict, “Beijing will avoid actions that could weaken Russia as an ally in the fight against the West.” For Beijing, the war remains both a threat and an opportunity. China will continue to attempt mediation, which allows it to present itself as a global leader responsible for international stability.
Moscow’s success in maintaining annexed territories could strengthen China’s narrative of Taiwan as its integral part, while Russia’s defeat could weaken Sino-Russian strategic partnership. However, China’s attempts at mediation may have limited success, as its interests are seen as one-sided and focused on increasing its own influence rather than achieving international stability.
In relations with the US, inauguration of Trump as US President will open a new stage of tension in Sino-American relations. The expected tightening of trade and technology policies will force Beijing to seek alternative markets and intensify cooperation with countries of global South, including in Africa and Latin America. This is already being noticed in the case of relations with India, despite unresolved border disputes and rivalry in virtually all areas.
The Indo-Pacific region, and especially South China Sea and Taiwan, will be a key area of Chinese geopolitical rivalry in 2025. Beijing’s actions fit perfectly into the framework of American political scientist John Mearsheimer’s theory of offensive realism: “In an anarchic world, every power seeks to maximize its strength, because only dominance ensures relative security.” China is intensifying its military and political presence in the region.
Taiwan is not only a historical issue for China, but also strategic. Control of the island would mean gaining a key position in Indo-Pacific and a significant technological advantage, given Taiwan’s dominance in semiconductor production. Beijing is pursuing a hybrid strategy, including cyberattacks, disinformation campaigns, and diplomatic isolation of Taipei, while also intensifying military maneuvers around it. However, Beijing is likely to avoid open conflict, knowing that intervention by the US and its allies would be almost certain.
In 2025, relations with North Korea will be shaped by closer cooperation between Pyongyang and Moscow. North Korea’s arms deliveries to Russia, which began in 2024, have undermined Beijing’s traditional dominance in relations with Kim Jong-un’s regime. Russia’s growing influence in relations with Pyongyang puts China in a difficult position, forcing it to revise its regional policies to avoid marginalisation in the region. In sum, 2025 will be a time of difficult choices and even more difficult reforms for China.—INFA