China 2025: Between accelerated modernization and structural confrontation

XULIO RIOS

In China, the balance sheet for 2025 points to a year marked by the realization of the difficulty of the challenges to be faced as well as by the depth of the change implemented in substantial areas, especially, underpinning the rapid qualitative modernization of its industrial fabric.

The economy, with its growth target of around 5 percent within reach (5,2 percent in the first three quarters), has confirmed that the goal of achieving high-quality development is irreversible. The dual culmination of the 14th Five-Year Plan and Made in China 2025 points to a strategy focused, on the one hand, on familiar topics (innovation, environment, consumption, social justice) but also on persistent challenges (real estate crisis, domestic debt, declining investment, youth unemployment, demographics, etc.), shaping a far-reaching management perspective for 2030-35. Within this timeframe, reducing the gap in wealth distribution is particularly important: the world's second-largest economy ranks 77th in GDP per capita.

Tensions with developed Western countries, awaiting confirmation of a minimal agreement with the US on tariffs, perhaps in April of next year, are broadening their scope to include semiconductors, artificial intelligence, and green industries. It is foreseeable that tensions with developed economies will not diminish in intensity, especially in the case of the EU, which, in this respect as well, is compensating for its painful humiliation before Washington with a disconcerting belligerence toward Beijing. In light of the White House's new National Security Strategy, the expectation of a sharp and prolonged confrontation is confirmed as a structural trend in the international system for the coming decades.

China can respond

What 2025 has given us is a clear message from China: faced with pressure, it can respond and has the political will to do so. Following Mao's protracted war strategy (defense, balance, and offense), this year has clearly placed us in the middle ground, moving away from the defensive strategy implemented during Trump's first term and his trade war onslaught.

In the strictly political sphere, the Fourth Plenum of the CPC Central Committee, focused on defining the objectives of the 15th Five-Year Plan, also emphasized the ongoing fight against corruption, particularly within the military. The centenary of the founding of the People's Liberation Army (PLA) in 2027 is driving a renewed emphasis on discipline, with new and stricter rules that tighten political control, punish disobedience to strategic orders, and suggest harsher penalties for falsifying combat capability estimates.

With the "nine-in-one" local elections on the horizon in Taiwan, halfway through Lai Ching-te's term, the island will be a political priority in 2026 and all signs point to the development of initiatives of multiple natures to advance de facto unification, raising tensions.

In the realm of diplomacy, several key developments stand out. First, the presentation of the Global Governance Initiative, which aims to develop a more ideologically driven diplomacy with a focus on the Global South, advocating for a reform of the international system that better integrates developing countries. These countries likely expect greater political support from China in the face of escalating US hegemonic pressures.

On the other hand, while its relevance in global trade is beyond doubt, its marginal role in crises such as Ukraine or Gaza highlights an asymmetry that reveals the limits of Chinese leadership and its commitment to multilateralism in the face of the resurgence of hegemony under Trump.

Third, there is an increasingly documented global recognition of China's positive role in areas such as development, technology, and the environment, which does not necessarily translate into sympathy for its political model, although it does generate interest in its modernization strategy.

On another level, the viability of the Arctic trade route or advances in thorium nuclear technology reveal signs of a geoeconomic vision that sees space as another means of accumulation for the country's assertion as a central player in all areas.

China continues to gain more ground, relevance, and influence. The next five years appear crucial for resolving the various shortcomings that affect its economy, politics, and diplomacy. 2026 will be a long year, with an eye on the pivotal year of 2027, the symbolic centenary of the PLA and the 21st CPC Congress. Even if Xi Jinping confirms a fourth term then, the selection of successors, already under discussion in key areas such as the military and diplomatic corps, will find its most relevant reflection within the Party itself.

Xulio Ríos is Emeritus Advisor to the Chinese Policy Observatory.