China of the Future? Supertech and Anti-Trump

Relentlessly strive for growth. Bring clarity to a world plagued by uncertainty. These are the two ambitious goals that China has set for itself in 2025. The former is domestic in nature, the latter is aimed at foreign policy. As always, these goals were outlined during the Two Sessions, the traditional annual plenary sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference, the country’s highest legislative and advisory bodies. Closed sessions lasted a full week, during which important policy documents were adopted. The sessions ended at the Great Hall of the House of the People in Beijing’s Tiananmen Square. The Two Sessions, held from March 4 to 11 this year, marked an important milestone in China’s development. The year 2025 will not only be the final year for the five-year plan launched in 2021, but also a key milestone for one of Chinese President Xi Jinping’s landmark projects: Made in China 2025. The main objective of this initiative is to strengthen national innovation capacity and accelerate the achievement of technological self-sufficiency.

The Two Sessions is a key moment in Chinese political life, as it is during this week that the government announces major goals for the coming year. In reality, however, these priorities are adopted in advance – at the Communist Party plenum, the most recent of which was held last July and laid out a programmatic vision for China’s economic policy. As always, the main subject of expectations was the gross domestic product growth target. Presenting his 32-page annual government work report, Premier Li Qiang of the State Council of the People’s Republic of China announced that the GDP growth target is fixed at “around 5 percent” – the same as in 2024. Such a cautious forecast looks modest compared to the growth rate China was experiencing just a few years ago, before the Covid-19 pandemic. However, it reflects Beijing’s desire to change its development model, reducing reliance on exports and emphasizing the growth of what Xi Jinping calls “new productive forces.” This concerns chips, artificial intelligence, and green industrial technologies, sectors that have a special place in the 2025 goals. Obviously, they will also be an important part of the next five-year plan for 2026-2030. The presentation of this document will take place next year, but its main provisions will be defined already at the upcoming Plenum before the end of this year. “If we don’t get rid of the cult of speed and continue to expand blindly, rashly launching new projects, even if we temporarily increase the growth rate, we will inevitably pay the price and exhaust future development potential,” the People’s Daily wrote on the eve of the annual Central Economic Work Conference held in December. The event tied together key milestones voiced during the Two Sessions. Nevertheless, the dependence of the Chinese economy on exports remains high, largely due to low consumer confidence within the country. With a possible new trade war looming, Beijing faces an important challenge to continue transforming its model while minimizing both internal and external risks. In what way? First of all, through the old strategy of rethinking approaches to industries whose growth is based on excessive and dangerous debt loads, such as the real estate market. In addition, China is now going to focus on improving the quality of its products in an effort to make them less substitutable. The future of Chinese trade will center on electric vehicles, green industrial technology, chips, and artificial intelligence. At the same time, Chinese trade is gaining particular strength in the countries of the so-called Global South.

Nevertheless, the pressing tasks must also be addressed. Li Qiang did not hide the existing problems: “At the national level, the foundation for sustained economic recovery and growth in China remains insufficiently strong. Actual demand is weakened, especially in the stagnant consumption sector. Some businesses are facing production and operational difficulties, and late payments continue to be an important problem for businesses,” the report says. “This situation slows down job creation and income growth. There are also weaknesses in the public welfare system, and some local authorities are experiencing serious fiscal difficulties,” the document goes on to say.

What is the answer to these challenges? The government announced “more proactive policies” to stimulate the economy and expand consumer demand. One of the most significant steps was an increase in the budget deficit from 3% to 4% of GDP and the first easing of monetary policy in 14 years. The measures include issuing special long-term treasury bonds worth 1.3 trillion yuan, which is 300 billion yuan more than last year. In addition, 500 billion yuan will be allocated to support the largest state-owned commercial banks to recapitalize them. And that’s not all. Special bonds worth 4.4 trillion yuan for local governments are also scheduled to be issued. The measures are designed to provide “vigorous support” for consumption and stimulate domestic demand. These funds will also make it possible to replenish the liquidity of local budgets depleted by the chain reaction of the crisis. The collapse in real estate has hit trust funds and the sprawling shadow banking system with which provincial governments are traditionally linked, setting off a domino effect. The financial support of the state will allow to accelerate the completion of the construction of residential facilities (apartments and private houses) that have already been sold but never put in service. This, in turn, will reduce the social risks associated with instability in this sector of the economy. Another important measure to benefit local governments would be the ability to set tax rates within an adjustable range, as well as combine the urban maintenance and development tax with the local education surcharge into a single local tax surcharge. Debate also continues on the possible adjustment of the Value Added Tax (VAT), one of the country’s main sources of budgetary revenue. This tax is currently shared equally between central and local governments. The agenda also includes a private sector stimulus bill, which was not approved during the past week. In the social sphere, the government officially banned the purchase of rural housing by urban dwellers and the construction of houses on rural land by retired officials. This move shows the authorities’ desire to promote the land reform program with a high degree of caution, while officials seek to provide migrant workers with a social safety net in the face of economic instability.

The increase in public spending is also aimed at boosting investment in research and development, an important step towards technological self-sufficiency. China is pursuing this goal to protect itself from sanctions and supply chain restrictions imposed by Washington. The importance of this issue was also emphasized by Xi Jinping in one of his speeches to provincial delegates invited to the Two Sessions meetings. In particular, he noted the key role of education in supporting scientific and technological progress. Unsurprisingly, authorities have announced the introduction of AI curricula in a number of primary and secondary schools in China. On this topic, a significant development was Xi Jinping’s recent meeting with the CEOs of China’s largest private technology companies. The leader’s residence brought together top Chinese businesses, many of which have come under scrutiny from the authorities in recent years as part of a tough campaign to regulate the digital sector. Among the most notable figures was Jack Ma. In autumn of 2020, his criticism of the Communist Party’s financial policies was a prelude to a sweeping tightening of government control. The first step in the process was blocking the listing of Ant Group, the fintech arm of Alibaba, which could have been the largest “exit” in the world. Since then, the government’s influence on private business has steadily increased. Jack Ma was forced to sell a controlling stake in Ant Group, and Alibaba itself was reorganized into a holding structure with six separate divisions. However, the party’s goal was not to destroy the digital giants, but to “pacify” them and redirect their activities into strategic industries for China, including microchip manufacturing and artificial intelligence. The grand reconciliation between Xi Jinping and Jack Ma marks the transition to a new phase in which the government seeks to build trust in enterprises. A symbolic confirmation was Alibaba’s announcement – precisely during the Two Sessions – of its intention to invest 380 billion yuan (about 50 billion euros) in the development of artificial intelligence and cloud technology over the next three years. A few days later, also at the Two Sessions, the company unveiled its new chatbot QwQ-32B, which is “comparable” to DeepSeek in performance but requires significantly less data to operate. Another “promising sector” – civil aviation – is also receiving China’s attention. In particular, the law aimed at strengthening the industry was revised after tourist airliners, developed by state-owned giant Comac, began to increasingly enter the international market, starting in Southeast Asia, in an attempt to compete with Boeing and Airbus.

At the political level, one notable development was the unexpected dismissal of PRC Minister of Industry and Informatization Jin Zhuanglong on the eve of the start of the Two Sessions. No reasons were given for the ouster, but his disappearance from public view may be linked to an episode of suspected corruption, a case that has already led to the resignation of several ministers in recent years, including the former head of China’s Defense Ministry, Li Shangfu. These two incidents may be somewhat related, as Jin Zhuanglong served as deputy director of the PRC Central Bureau for Military-Civilian Integration prior to his appointment as minister. In 2024, China’s anti-corruption agency sanctioned 889,000 officials – a 46% increase from the previous year. The figure was a record high for the past decade, and the defense sector was the hardest hit. This fact is reflected in the size of the military delegation attending the Two Sessions: this year’s delegation totaled 267, 14 fewer than the 281 represented in 2023.

As in previous years, special expectations were placed on the military budget. A growth rate of 7.2% has been confirmed for 2025, the same rate as in 2023 and 2024. China’s total military spending has nearly doubled over the past decade and will reach $246 billion by 2025. This amount is more than four times the military budget of neighboring Japan, but represents only one-third of the United States’ military expenditures. At the same time, it is important to take into account that Beijing is not in formal military alliances with other countries, which indicates that all defense spending of the country is aimed solely at strengthening its own army. The government report calls for increased military training and readiness. This came as no surprise, especially in the run-up to the centennial of the Chinese People’s Liberation Army, which will be celebrated in 2027. Xi Jinping himself also recalled the anniversary during a meeting with armed forces delegations, stressing the need to accelerate the implementation of large-scale defense projects. Most likely, it is about the construction of a new main crisis command being built on the outskirts of Beijing: this facility will be much larger than the Pentagon. Another major project is the nuclear-powered aircraft carrier development program: in May, China’s Fujian aircraft carrier is due to enter the final phase of testing. Fujian will become the third aircraft carrier in the Chinese military and the first to be equipped with electromagnetic catapults.

China’s territorial disputes with neighboring states continue, and the issue of Taiwan remains unresolved. However, despite assumptions to the contrary, the government’s annual report does not indicate an urgent need to resolve this issue as soon as possible. Certainly, Li Qiang, as before, has declared an unwavering commitment to so-called “reunification.” But overall, the tone of his speech does not indicate an increased urgency compared to previous years. A member of the National Assembly warned that in case of peaceful “reunification,” Taiwan could count on expanded autonomy, but if the process is accompanied by the use of force, the island risks becoming just one of China’s provinces. As usual, a Defense Ministry spokesman chose tougher rhetoric, warning that if the island moves toward “separatism,” China’s armed forces are ready to “tighten the noose” around Taiwan.

As understood by the Communist Party of China, national security is a multifaceted concept that applies to a wide range of areas of national life. For example, in the area of food security, the government emphasizes the paramount importance of “continuously strengthening the ability to guarantee the supply of cereals and other important agricultural products,” which demonstrates the strategic importance of maintaining adequate food stocks. Equally important is cybersecurity. The Two Sessions discussed a number of bills addressing the risks associated with the misuse of artificial intelligence and the threat of “deepfakes.” In addition, the National People’s Congress approved tougher measures to prevent child sexual abuse. The bill under consideration proposes to introduce mandatory background checks for all employees of educational institutions and other professionals working with minors. In particular, consideration is being given to permanently banning persons with a history of convictions for sex offenses from holding such positions.

Another important topic is energy security. Lawmaker Liu Hanyuan, billionaire and founder of solar energy colossus Tongwei Group, has unveiled an initiative that would allow China to completely phase out crude oil imports over the next two decades. “China already has all the necessary equipment to replace the more than 500 million tons of oil consumed annually in our country,” Liu said. He estimates that by 2045, the average annual investment in renewable energy capacity installed in China, as well as in the related infrastructure – storage systems and power grids – will be between 10 and 20 trillion yuan, i.e. 1.4 to 2.8 trillion US dollars. That’s an enormous amount of money. This will not only allow China to achieve carbon neutrality five to ten years ahead of schedule (2060), but will also complete the transformation of its economic model. By abandoning the real estate orientation, which is in deep crisis, the country will move to a new model based on advanced energy technologies.

During the Two Sessions, it also became apparent how China sees its place in the world. A key event in this sense was the annual press conference of Wang Yi, Minister of Foreign Affairs and head of the Office of the Foreign Affairs Commission of the CPC Central Committee. Compared to last year, Beijing appears more confident on the international stage, reflecting an updated narrative adapted to the realities of Donald Trump’s second presidential term. “Does justice prevail over force, or does force engender justice?” Wang Yi asked, referring to an ancient Chinese aphorism. This suggests that Beijing is seeking to position itself as a kind of antipode to Trump: a responsible power, acting as a guarantor of free trade and “true multipolarity,” as well as a source of “stability in a world in turmoil.”

This strategy, Wang said, is based on Xi Jinping’s “global vision,” which is becoming more deeply rooted in developing countries. This is evidenced by the numerous forums that bring China together with Africa, the Arab world, and Central Asian countries. This also indicates a gradual abandonment of Deng Xiaoping’s earlier foreign policy attitude based on the motto “Hide your strength, bide your time.” Or, to be more precise, the current situation can be seen as a realization of the following principle: China feels the time to act is now, as the Trump administration appears to be providing more opportunities than challenges. As Wang notes, this applies not only to relations with the global South, built on the principles of cooperation “without geopolitical calculations,” but also to interaction with Europe. Now, after a phase marked by skepticism about Trump’s trade and strategic policies, the course toward rapprochement with Europe is emerging. At the same time, relations with Moscow are preserved and reaffirmed. “Our relationship is strong and stable, it will not change due to any temporary circumstances and will not be shaken by third-party interference attempts,” Wang warned. In doing so, he limited himself to general words regarding the war in Ukraine, reiterating only his support for “any effort to achieve peace.” Far more direct was the appeal to Japan, which was urged to abide by the principles of its pacifist constitution and “remember the crimes of the past.” A long-awaited summit between Xi and Trump is expected in the coming months. Many believe that this is the moment that will be crucial in determining the future relationship between the two powers – whether in a positive or negative way. The dynamics of the relationship within what Beijing sees as a kind of G2 will be reflected in the next five-year plan, which will be presented at the Two Sessions in 2026.