Chinese language folks world wide have simply celebrated the Lunar New Year, which this yr runs from January 28 to February 4.
It’s the greatest pageant of the yr in China, signaling the beginning of spring, and that is the year of the wood snake. In response to Chinese language astrology, the traits of the snake – renewal, potential, alternative and knowledge – will have an effect on the yr forward.
As we begin the brand new lunar yr, it appears like time to look forward to have a look at the prospects for the Chinese language economic system by way of the prism of those traits.
Renewal of conventional financial drivers
China dominates international manufacturing – its manufacturing manufacturing is as giant because the next seven largest opponents mixed. This has earned China the title of the world’s manufacturing superpower – however it has come at a value. The latest data exhibits that China is among the many prime 20 most polluted international locations internationally.
Due to this fact, it’s possible that over the subsequent 12 months, there might be a continued drive in the direction of the renewal, or upgrading, of conventional industrial sectors which have traditionally pushed progress in China however are additionally heavy polluters.
That is a part of a broader push by China to enhance its local weather footprint and cut back emissions. These are targets outlined within the Nationwide Local weather Motion Plan, referred to by the Paris Local weather Settlement as nationally determined contributions.
Potential for a surge into AI
China has recognized the potential for adopting AI, robotics and 3D printing in remodeling its manufacturing base. In the meantime, the nation’s next generation AI development plan units out clear targets to make AI the principle driver of Chinese language financial change and industrial growth. Anticipate to see extra progress in the direction of this objective in 2025.
China’s machine-learning sector has skilled appreciable progress, and is predicted to develop by a median of 34.8% a yr over the subsequent 5 years. Whereas the US is the main competitor and instructions the largest market size, the latest launch of the R1 chatbot by DeepSeek has created a stir.

DeepSeek claims to have developed its newest R1 mannequin at a cost of around US$6 million, which is significantly lower than its US opponents akin to Open AI’s ChatGPT-4, which is reported to have value greater than $100 million.
It’s a sign of the power of innovation which underlines the potential progress of China’s AI sector and is probably going to assist slim the hole with the US.
Alternatives for international funding
Along with upgrading conventional industries, we are able to anticipate to see alternatives round new areas of progress in superior expertise sectors akin to fintech and inexperienced tech. China will proceed shifting its focus to industries by which its companies can add a number of worth, akin to in technology-related manufacturing.
Main funding is required to fund these industries and two main adjustments have occurred in latest months, recognizing that this can not come solely from home sources.
First, the changes to China’s A-share market, which went into impact in December 2024, will make it simpler for a wider vary of abroad buyers to enter. For instance, smaller quantities of capital are required, and international capital can now come from unlisted firms.
Second, in November 2024, China opened up its manufacturing sector to international capital by eradicating all entry restrictions.
Over the subsequent yr, we are able to anticipate to see these adjustments improve the quantity of international capital in China and assist notice these new areas of progress.
The knowledge of opening up
China continues to see the knowledge of opening its economic system when it comes to funding – and due to this fact that it’s critically necessary to stay well-connected to the remainder of the world.
The geopolitical tensions with the US are a problem: the US president, Donald Trump, has mentioned he’ll impose tariffs of 10% on imports from China. However on a extra optimistic word, breaking protocol final month, Chinese language vice-president Han Zheng was invited to, and attended, Trump’s inauguration ceremony.

It’s a sign of the present US administration’s view of the significance of America’s relationship with China.
The yr forward can be prone to convey alternatives for the UK to proceed its efforts to reset its relationship with China. Throughout the latest go to to Beijing by the chancellor of the exchequer, Rachel Reeves, there was a dialogue of a “stable and balanced UK-China relationship.”
Few anticipate, or want, a return to the “golden era” rhetoric of the likes of former UK chancellor George Osborne, who in a speech on the Shanghai Inventory Trade in September 2015 referred to as for Britain and China to work collectively to make sure mutual prosperity: “Let’s stick collectively to make Britain China’s greatest associate within the West. Let’s stick collectively and create a golden decade for each of our international locations.”
Nonetheless, higher dialogue with China could also be attainable, whereas on the identical time rigorously managing the UK’s relationship with the brand new US administration.
China watchers might be preserving their eyes peeled for different financial developments over the yr forward – for instance, the progress of Chinese fiscal reforms and their affect on native and regional funds and revenue distribution.
Additionally, there may be the matter of the actual property market. After significant falls in housing gross sales and funding throughout 2024, home costs are displaying indicators of stabilizing.
China’s economic system will face challenges within the yr forward. However there are additionally some clear alternatives for this manufacturing large, significantly within the tech sector because it begins to slim the hole with the US.
Karen Jackson is reader in economics, University of Westminster
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