NOW that we are in 2025, China and its paramount leader, Xi Jinping, face a confluence of challenges that have the potential to reshape the nation’s trajectory. From demographic shifts to economic hurdles, environmental concerns and geopolitical tensions, the year 2025 will be pivotal for China.
Here’s an in-depth look at these challenges and their implications for Xi Jinping’s Administration. One of the most pressing challenges for China is its rapidly aging population. With nearly a quarter of its people aged 60 or above, the demographic imbalance poses significant economic and social issues. The declining birth rate, exacerbated by high costs of living and social pressures, means that the working-age population is shrinking while the number of retirees is growing. This trend puts immense pressure on China’s pension system, healthcare services and overall economic productivity.
The Chinese government has attempted to address this issue by relaxing the one-child policy and encouraging larger families, but these measures have had limited success. The reluctance of younger generations to have more children due to economic uncertainties and lifestyle preferences continues to contribute to the demographic decline. For Xi Jinping, finding sustainable solutions to this problem is crucial for maintaining social stability and economic growth. China’s economic landscape is fraught with challenges that threaten its long-term growth prospects. The International Monetary Fund (IMF) found global growth decelerating to 2.9% in 2024, which has the potential of further exacerbating China’s economic challenges. Despite having eliminated absolute poverty, the country is grappling with a prolonged economic downturn, with growth forecast to be modest at 4.6%.
The real estate sector, a significant driver of China’s economic growth, is experiencing a crisis marked by oversupply, falling prices and massive debt. Local governments, heavily reliant on land sales for revenue, are facing financial strains. Additionally, deflationary pressures are eroding consumer confidence and spending, further hampering economic recovery. Xi Jinping’s administration needs to navigate these economic challenges by implementing structural reforms, fostering innovation and promoting domestic consumption. However, achieving these goals requires balancing short-term economic stability with long-term transformation, a task that will necessitate a Herculean effort but is achievable.
The geopolitical landscape is becoming increasingly challenging for China. The return of Donald Trump to the US presidency is resulting in a tougher stance on trade, including heavy tariffs on Chinese products. Tensions around Taiwan are also likely to escalate and a cross-Strait crisis could emerge to make the milieu murkier. China also faces semi-hostile attitudes from some of the littoral states in its vicinity in the South China Sea perhaps at the behest of trouble mongers, who want to destabilize the corridor of powers in Beijing. The antagonism towards China which has emerged after Donald Trump’s ascent to power is primarily centred on trade and economic policies. During Trump’s earlier presidency, he had imposed tariffs on Chinese goods, aiming to reduce the US trade deficit with China and address issues like alleged intellectual property theft and unfair trade practices. This led to a trade war, with both countries imposing tariffs on each other’s goods. Trump is adopting similar measures again.
US actions have also extended to technology, with the Trump Administration imposing restrictions on Chinese tech companies and China retaliating with its own tit-for-tat measures. Additionally, geopolitical tensions, such as those related to Taiwan and the South China Sea, have further strained relations between the two economic giants. For Xi Jinping, managing these geopolitical tensions requires a delicate balancing act. Engaging in diplomacy, forging new alliances and safeguarding China’s strategic interests are imperative. However, aggressive posturing could lead to further isolation and economic repercussions, making it a challenging path to navigate.
The urban middle class, once considered the bedrock of China’s economic success, is confronted by stagnant wages, high living costs and limited social mobility. The “996” work culture—working from 9 am to 9 pm, six days a week—has come under criticism for its toll on workers’ physical and mental health. Additionally, political dissent, though tightly controlled, continues to simmer, manifesting in sporadic protests and online activism sometimes fuelled by international vested interests. China’s rapid industrialization has come at a significant environmental cost. Air and water pollution, soil degradation and climate change are critical concerns that threaten the nation’s ecological balance and public health. In recent years, China has made strides in addressing environmental issues, investing in renewable energy and implementing stricter regulations.
However, the scale of the challenge is immense. Unremitting climate events, such as extreme weather conditions, threaten to disrupt agriculture, infrastructure and livelihoods. Balancing economic growth with environmental sustainability is a complex task that requires coordinated efforts across various sectors. For Xi Jinping, advancing environmental policies and integrating sustainable practices into the nation’s development strategy is essential. Failure to address these challenges could result in severe environmental degradation and public health crises, undermining China’s long-term prosperity. In a nutshell, the year 2025 presents a myriad of challenges for China and Xi Jinping. Demographic decline, economic slowdown, geopolitical tensions, social discontent and environmental issues are formidable obstacles that require strategic foresight and decisive action. How China navigates these challenges will have profound implications for its future trajectory and global standing. For Xi Jinping, the ability to address these issues effectively will define his leadership legacy and shape China’s path forward in an increasingly complex world.
The writer, a Retired Group Captain of PAF, is the author of several books on China.
(sultanm.hali@gmail.com)
