Business News – Jan 2, 2025

1 - Five Predictions for China in 2025.

From a brewing trade war to opportunities on the global stage, here’s what we’re watching in the new year.

As we enter 2025, China's trajectory is shaped by a blend of challenges and opportunities. Here are five key predictions for the nation in the coming year:

1. Escalation of Trade Tensions with the U.S.

The re-election of President Donald Trump signals a potential intensification of trade disputes between the U.S. and China. Anticipated tariffs on Chinese imports could disrupt trade flows, compelling China to seek alternative markets and adjust its export strategies.

2. Economic Stimulus Measures to Sustain Growth

In response to external pressures and internal economic challenges, Chinese policymakers are expected to implement robust fiscal and monetary policies. These measures aim to maintain a growth target of around 5%, with increased government spending and interest rate cuts designed to bolster domestic demand and counteract the effects of international trade tensions.

3. Advancements in High-Tech Industries

China's commitment to the "Made in China 2025" initiative continues to drive significant progress in sectors such as electric vehicles, renewable energy, and advanced manufacturing. Despite international challenges, China has achieved leadership in several key technologies, including high-speed rail and solar panels, positioning itself as a formidable player in the global tech arena.

4. Diversification of Trade Partnerships

Facing potential trade barriers with Western nations, China is likely to strengthen economic ties with regions like Southeast Asia, the Middle East, and Latin America. This diversification strategy aims to mitigate risks associated with reliance on traditional markets and to capitalize on emerging economic opportunities in the Global South.

5. Domestic Economic Reforms and Challenges

Internally, China confronts issues such as high local government debt, a cooling property market, and the need for structural economic reforms. Efforts to transition from an investment-driven growth model to one focused on consumer spending and technological innovation are expected to continue, with varying degrees of success.

In summary, 2025 is poised to be a pivotal year for China, marked by efforts to navigate complex international relations, stimulate domestic growth, and advance its technological capabilities amidst a rapidly evolving global landscape.

2 - China’s Economy Is Burdened by Years of Excess. Here’s How Bad It Really Is.

Jason Douglas and Ming Li. Jan. 1, 2025.

China’s go-go days are behind it as the world’s second-largest economy struggles with the bursting of the biggest real-estate bubble ever. Now, China’s goal of overtaking the U.S. as the world’s largest economy might take decades longer than Beijing expected—if it happens at all.

China’s economy today is burdened with excess: Millions of empty or unfinished apartment blocks, trillions of dollars in debt straining local governments and ballooning industrial production driving an export surge that is igniting trade tensions worldwide.

China still has strengths: It dominates global manufacturing and has commanding positions in new technologies, such as electric vehicles and renewable energy. Policymakers have proven adept at handling past crises, and are readying bold new stimulus to support the economy.

Nonetheless, the scale of the excesses plaguing China’s economy underscores the perilous position Beijing finds itself in as a new trade war looms.

Historic loss of wealth

China’s property meltdown has since 2021 destroyed around $18 trillion of Chinese household wealth, according to an estimate by Barclays, eclipsing the losses suffered by Americans in the financial crash of 2008-09. That hit, along with the trauma of Beijing’s heavy-handed response to the Covid-19 pandemic, helps explain why Chinese consumers aren’t spending freely.

China’s real estate crunch has