How China Is Navigating an Uncertain World

2025 has, so far, been a year of surprises. The United States under its re-elected president, Donald Trump, has not only ramped up the U.S. trade war with China that he began in his first term, but has also unleashed a verbal assault and a barrage of tariffs against its neighbours, Canada and Mexico. It appears the age of globalisation and rules-based free trade is over, at least as far as the giant U.S. economy is concerned.

China now faces a very different international environment from the last few decades, in which all the trends pointed to ever-increasing international economic interdependence. It’s now a less predictable and less stable outlook, with protectionism and economic coercion on the rise. Expect more trade wars, tech wars and heightened risks of real conflict as the battlelines for geopolitical competition are drawn and re-drawn by a populist revolt in the world’s most powerful country against the old order and fear of a new order.

For China, which is the only peer balancing power to an increasingly erratic U.S., and for the world, it is difficult to exaggerate the significance of the choices ahead. Those choices, in simple terms, range from following the U.S. into the vortex of nationalism, unpredictability and confrontation, to maintaining a steady and clear course towards modernisation and internationalism, pursuing domestic development while promoting international cooperation.

The 2025 “two sessions” of China – National People’s Congress and the Chinese People’s Political Consultative Conference – have so far underscored that the Chinese leadership remains committed to stability, to a calibrated transition to new, high-tech and green industries, integrated with the international economy, and to seeking stability – rather than conflict – in a new multipolar order.

Strong signals have been sent this week, and in the lead up to the “two sessions”, of the importance of China’s private sector, which after all provides 80 percent of urban jobs and 70 percent of tech innovation. We can expect to see further market-oriented reform and greater efforts to put private enterprises on a more equal footing with state-owned enterprises. That will be welcome, given the tough times that the business sector has endured in recent years.

While the Chinese economy is expected to continue growing at around 5 percent annually, there were important statements in Premier Li Qiang’s Work Report to the National People’s Congress, acknowledging and addressing structural problems such as the imperative to raise domestic consumption, expand the services sector and improve social provision.

The Chinese government continues to seek stabilisation of the property market and to incrementally manage local government debt, which demonstrate a focus on predictability and local government debt sustainability, rather than to risk sudden changes of direction. A number of new programs seek to mitigate risks and ease pressures, such as state bank recapitalisation, trade-in programs, affordable housing and urban village renovation.

New investments were announced in research and development to support new technologies and industrial upgrading. China is investing in the productive industries of the future and the benefits of innovation are evident in the dominance of the Chinese electric vehicle sector, renewable energy and, most recently, in advances in artificial intelligence.

The big picture for the domestic economy is that it must transform from the capital investment-driven growth of previous years to a more sustainable, consumption-driven model if China is to avoid the “middle-income trap” that has posed challenges for other developing countries. After a difficult few years, the business sector will be carefully watching how the new announcements support growth, productivity and modernisation.

International business will be following the economic reforms closely too. After the opening last year of the automotive sector, hospital and aged care to 100 percent foreign investment, Premier Li foreshadowed more opening in telecommunications, healthcare and education. The welcome mat remains open, but there has been a notable decline in foreign investment in recent years.

The year ahead for China’s economy is consequential for the world economy. China accounts for 30 percent of global growth, one-third percent of global manufacturing and its $18.5 trillion economy is deeply internationally integrated, as the world’s leading trading nation and an increasingly important investor. Indeed, China has become a major trading partner for most of the world over the last two decades, and now it is a more significant trade partner than the U.S. for 70 percent of the world, according to a recent Lowy Institute study.

How China navigates its economic challenges therefore impacts the world, just as the risks and uncertainties of a changing world order impact China and all countries.

Statements so far from leaders at the two sessions demonstrate that China is doubling down on its goal to be recognised – in the developing world, at least – as a firm and powerful supporter of globalisation and of the multilateral system. In short, China is positioned as invested in and building the economic foundations of the “rules-based order”, a phrase often used in the West to describe the post-Cold War world, but a phrase that we are unlikely to hear much more from the U.S.

It’s early days for the emerging world order, but all eyes will be on China to see how it acts as peace maker in areas of conflict, near and far. In the international economy, if China can emerge from its transition from a middle-income to high-income country as a force of innovation and driver of global sustainable development, these uncertain years ahead will be a time not only of risks but also enormous opportunity.

The article reflects the author’s opinions, and not necessarily the views of China Focus.