The Year in Review 2025

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It has been a year of patience for China, as the country struggles to shake off the lingering economic effects of the COVID-19 pandemic.

Chinese President Xi Jinping appears willing to wait. He has maintained a seemingly unbreakable grip on power, even past the point at which he was expected to step down, with retirement no longer in sight.

This year, Xi has led China through high-stakes trade clashes with the United States and, less successfully, through persistent economic challenges on the home front. Although this year has certainly highlighted Beijing’s economic influence on the global stage, with decades of prosperity now on the horizon, the path ahead is far less clear.

Here are four trends that China will follow in 2025.

Winning the trade war

Many people expected that US President Donald Trump’s tariffs would put the United States on a collision course with China. However, few could have predicted how decisive Beijing would be in this game of chicken.

After Trump announced a broad package of tariffs on most US trading partners in April, which threatened to crush US-China trade, both sides appeared to recognize the need to negotiate. A fragile truce was reached in May, but it quickly gave way to months of renewed escalation and retaliation, followed by an extraordinary decline after the face-to-face meeting between Trump and Xi in October.

Since then, Trump has done his best to accommodate Xi, who has seemed eager to secure a trade deal: he has pressured Japan to soften its stance toward Taiwan, tried to neutralize U.S. government actions that might antagonize Beijing, and agreed to export some of the world’s most powerful artificial intelligence chips to China.

Meanwhile, China has quietly backed away from its pledge to buy US soybeans and is exporting more of the commodity than ever despite steep US tariffs. The Trump administration’s failure to effectively apply pressure on Beijing stems in part from its hollowing out of Chinese expertise throughout the US government — as well as Trump’s personal desire for approval, especially from authoritarian leaders.

But China’s ability to put pressure on global supply chains – thanks to its dominance of the vital metals sector – has also proven crucial. After more than a decade of ignored warnings, the United States is now scrambling to break China’s grip on these resources, but it may lack the experience or state capacity to do so in the foreseeable future.

Weak economy

At home, China remains mired in problems in 2025 – chief among them an economy that has yet to recover from the shock of the coronavirus disease 2019 (COVID-19) pandemic, which has brutally exposed vulnerabilities that have built up for years.

The most serious of these weaknesses is the real estate sector, which accounts for a huge amount of household wealth in China. Even before the pandemic, it was an apparent bubble that Beijing had repeatedly tried to deflate without sparking a broader crisis. But each attempt was met with resistance from the urban upper middle class, forcing the government to back down.

China has so far managed the collapse of real estate giants like Evergrande, but property sales have collapsed, and major developers like Vanke remain on the brink.

The real estate recession, in turn, has devastated local governments, which have long relied on land sales to plug budget gaps. It also revealed unsustainable debt levels, which were exacerbated by the costs of maintaining coronavirus suppression policies. Although the central government has attempted to restructure or absorb some of this debt, it is still struggling to assess the true scale of the problem.

Consistently high unemployment rates among young people exacerbate these pressures and undermine Beijing’s efforts to boost domestic consumption. Taken together, these trends raise the specter of a prolonged recession. The 2020s in China may end up being something of a lost decade in Japan, especially if deflation becomes entrenched.

Technology wins

Even as the broader Chinese economy stagnates, parts of the technology sector are still very hot. The January release of DeepSeek-R1 underscored just how strong a competitor China has become in the global AI race.

DeepSeek’s debut has sparked debate over whether the United States should impose stricter controls on high-end chip exports to China or whether that would accelerate Beijing’s ambitions to develop its own chip sector. That discussion was quickly overshadowed by Trump’s announcement this month that he would allow the export of some advanced chips, as long as the US government gets a share of the sales.

China’s approach to AI has proven to be very different from that of the United States. Instead of chasing the fantasy of artificial general intelligence, Beijing has focused on practical integration with manufacturing and industry. Additionally, the agenda is being set by China’s political leadership, not by the tech tycoons, who have actually been scared off by the government’s 2020-2023 crackdown.

If China is competitive in AI, it dominates green technology – and not just because the US is now ruled by climate change deniers. China is the world leader in the field of electric cars, even though the fierce price war in this sector has pushed many local manufacturers to bankruptcy.

China is also adding renewable energy sources to its own grid at an extraordinary speed and scale, helping to offset its position as the world’s largest emitter of greenhouse gases. In 2025, Chinese companies account for nearly 75% of global clean energy patent applications and 31% of green investment worldwide, more than any other country.

The never-ending purification

Shortly after taking office as president in 2013, Xi began purging potential rivals under the banner of anti-corruption. This year, the campaign intensified, especially within the army. A group of generals were detained throughout the year and then expelled from the Chinese Communist Party en masse in October. (Some of them replaced characters removed in previous purges.)

There appear to be two main factors driving this crackdown. The first is rampant corruption within the People’s Liberation Army’s Rocket Force. The incentives for corruption in the military are strong: budgets are huge, oversight is limited, and because China has long avoided war, there is no fear of corruption being exposed through crisis, as happened to the Russian military in Ukraine.

The second factor is Xi’s emphasis on political loyalty. China’s highest-ranking commissioner, Miao Hua, was dismissed this year for failing to manage the complex system of patronage and bribery governing military promotions. The issue remains particularly sensitive since Chinese authorities discovered in early 2010 that the CIA had secretly funded “promotion fees” for some senior officers.

The purges extended beyond the army. Other high-profile casualties this year include diplomat Liu Jianzhao, widely expected to be the next foreign minister, who appears to have been pushed back by perceptions that he was too close to the United States after a well-received visit in 2024.

If Foreign Minister Wang Yi, who also holds the top foreign affairs post in the Chinese Communist Party, retains his post until next year, it will signal that high-level diplomacy has become politically too dangerous for anyone but hardened survivors.