China's Strategic Recalibration: The 2025 National People's Congress
Beijing charts a course of technological self-reliance and domestic consumption amid escalating global tensions
Key Takeaways
China has set a 5% growth target for 2025 while pledging to boost domestic consumption as its primary economic driver in the face of mounting external pressures from US tariffs
Beijing has increased its defense budget by 7.2% to $249 billion, maintaining the growth rate from previous years despite economic challenges
"New quality productive forces" centered on AI, quantum computing, and advanced manufacturing form the cornerstone of China's strategy to achieve technological self-sufficiency
China's approach to Taiwan has evolved to emphasize "integrated cross-strait development," signaling a more comprehensive economic and cultural integration strategy
Foreign policy rhetoric positions China as champion of the "Global South" and a "source of stability" in direct contrast to perceived US unpredictability under Trump
The Great Hall's Echoes
The cavernous Great Hall of the People in Beijing once again became the epicenter of Chinese political and economic direction-setting as the annual National People's Congress (NPC) convened in early March 2025. Though largely ceremonial in nature, this gathering of nearly 3,000 lawmakers serves as the primary window into the Chinese Communist Party's priorities and strategies for navigating domestic and international challenges in the year ahead. The decisions announced during this parliamentary assembly carry significant weight by outlining the government's priorities and communicating directives to party members and officials nationwide.
The 2025 session holds particular significance as it marks the conclusion of China's 14th Five-Year Plan (2021-2025), offering crucial insights into Beijing's assessment of its achievements and shortcomings, as well as its strategic recalibration for the years ahead. At its core, this year's NPC reveals a China increasingly focused on self-reliance, technological advancement, and domestic consumption as it confronts a more hostile international environment marked by trade tensions with the United States and growing skepticism from Western powers.
The central narrative emerging from the congress portrays a Chinese leadership doubling down on technological innovation as the panacea for a multitude of challenges—from sluggish economic growth and youth unemployment to strategic competition with the United States. Premier Li Qiang's Government Work Report underscores this technological imperative, calling for the nurturing of "emerging and future industries" while promoting the "transformation and upgrading of traditional industries" through digital innovation. This technological self-strengthening represents not merely an economic strategy but a comprehensive national security approach in an era of deepening US-China strategic rivalry.
The Ceremonial Parliament's Real Significance
The National People's Congress, though often dismissed by Western observers as a rubber-stamp legislature, provides essential signals about China's policy trajectory and leadership priorities. As China's highest formal government body, the NPC operates under the principle of "unified power," with all state organs theoretically subject to its authority. In practice, the congress serves to ratify decisions already made by the Chinese Communist Party while offering a platform for announcing major policy initiatives and economic targets.
The 2025 session carries particular weight as the culmination of the current five-year plan, a critical juncture for assessing China's progress toward its medium-term goals and adjusting course as necessary. As China navigates complex domestic and international challenges—from a property sector crisis and demographic decline to intensifying strategic competition with the United States—the NPC's deliberations provide crucial insights into how Chinese leadership perceives these challenges and plans to address them.
This year's congress also occurs against the backdrop of renewed American trade pressures. President Trump has imposedan additional 20% tariff on Chinese goods exports to the US on top of existing tariffs, prompting retaliatory measures from Beijing targeting American coal, liquified natural gas, and agricultural products. This escalating trade conflict forms the essential context for understanding China's emphasis on domestic consumption and technological self-reliance as pathways to economic resilience.
Economic Priorities: Domestic Consumption and Fiscal Stimulus
China has set its economic growth target for 2025 at "around 5%," matching the targets for 2023 and 2024 but presenting a more formidable challenge given the deteriorating external environment. To achieve this goal, Premier Li Qiang has placed unprecedented emphasis on boosting domestic consumption as the primary driver of growth, a significant shift from China's traditional reliance on exports and infrastructure investment.
The 2025 Government Work Report calls for "people-oriented macro policies" with "a stronger economic policy focus on improving living standards and boosting consumer spending." Concrete measures include enhancing household incomes, easing credit constraints, and stimulating diversified consumption patterns. This consumer-centric approach represents an acceleration of China's long-standing but often delayed goal of rebalancing its economy away from export and investment dependency toward a more sustainable consumption-led growth model.
To support this economic pivot, Beijing has announced the issuance of ultra-long special treasury bonds worth 300 billion yuan to boost consumer spending and infrastructure investment. The government plans to increase fiscal spending by 1.2 trillion yuan to 29.7 trillion yuan, adopting what officials describe as a "more proactive fiscal policy." These stimulus measures reflect growing recognition among Chinese policymakers that external demand can no longer be relied upon as the primary growth engine, particularly as US trade restrictions intensify.
The economic challenges facing China extend beyond external pressures. The country continues to grapple with a struggling property sector, weak consumer confidence, and persistent youth unemployment, officially reported at 15.7% using a new methodology that excludes students (the rate hit a record 21.3% in 2023 under the old calculation method). These structural issues, combined with a rapidly aging population and declining birth rate, create significant headwinds for sustaining economic growth.
The Technological Imperative: New Quality Productive Forces
The most striking aspect of the 2025 NPC has been China's intensified focus on technological innovation as the linchpin of its development strategy. The concept of "new quality productive forces" (NQPFs), first introduced in late 2023, has now become the central organizing principle of China's industrial policy. This concept refers to an innovation-driven growth model where emerging technologies create new industries, economic models, and social structures, while also transforming traditional sectors through digitization and smart upgrades.
The 2025 Government Work Report outlines specific initiatives to advance this technological agenda, including an "AI+ action" to employ artificial intelligence to boost efficiency in the real economy, support for the widespread use of large AI models, and development of smart devices such as connected electric vehicles, AI phones and computers, and robots. These initiatives are complemented by plans to expand 5G infrastructure, accelerate industrial internet growth, and improve the national computing power system.
This technological push gained additional momentum following the remarkable success of the Chinese tech company DeepSeek, whose large language model released in January 2025 surprised Silicon Valley observers with capabilities rivaling American counterparts despite years of US restrictions limiting China's access to advanced AI chips. Chinese economic leaders have announced the establishment of a state-sponsored fund aimed at supporting AI and other technological advancements, projecting an influx of nearly 1 trillion yuan (around $138 billion) in investment over the next two decades.
The emphasis on technology is fundamentally driven by strategic security concerns. As Professor Kerry Brown of King's College London observes, "technology created by Chinese for Chinese is the best form of security" in Beijing's view. The technological agenda is conceived as a comprehensive solution to multiple challenges: low economic growth, environmental problems, youth unemployment, and strategic competition with the United States.
Defense and Security: Measured Expansion Amid Fiscal Constraints
China has announced a 7.2% increase in its defense budget for 2025, reaching 1.784665 trillion yuan (approximately $249 billion), maintaining the same growth rate as the previous year. This defense budget, while lower than the double-digit annual increases of previous decades, remains the second-largest globally after the United States. The consistent growth reflects China's determination to continue military modernization despite economic headwinds, driven by perceived security challenges in the Taiwan Strait, the South China Sea, and in relations with regional powers and the United States.
The military budget increase supports China's ongoing efforts to enhance its high-tech military capabilities across multiple domains, from stealth fighter jets and aircraft carriers to nuclear weapons and space capabilities. These investments align with President Xi Jinping's directive to the People's Liberation Army (PLA) to become a "world-class military" by mid-century, capable of fighting and winning wars across multiple domains.
The defense spending growth, however, must be viewed in the context of China's broader fiscal challenges. With domestic economic headwinds and growing social welfare needs, maintaining this level of defense spending growth represents a significant commitment that may face increasing domestic scrutiny if economic conditions deteriorate further.
Taiwan and Cross-Strait Relations: Economic Integration with Political Intent
A notable shift in this year's NPC was the introduction of new language regarding Taiwan in Premier Li Qiang's work report. Building on China's long-standing position that Taiwan is a breakaway province that must eventually be reunified with the mainland, the 2025 report features a new section on economic and cultural initiatives to promote cross-strait integration. Li stated that China will "improve institutions and policies for promoting economic and cultural exchanges and cooperation across the Taiwan Strait" and "advance integrated cross-strait development to improve the well-being of Chinese people on both sides."
This emphasis on integrated development represents a recalibration of Beijing's Taiwan strategy, complementing military pressure and diplomatic isolation with greater emphasis on economic and cultural inducements. The approach aims to create deeper economic interdependence that would make Taiwan's formal independence increasingly costly and impractical, while simultaneously cultivating constituencies within Taiwan that favor closer ties with the mainland.
The Taiwan strategy articulated at the NPC comes amid continued military activities in the Taiwan Strait. During the NPC proceedings, China deployed a contingent of five aircraft and seven naval vessels near Taiwan, following a larger military operation days earlier. These activities form part of what analysts describe as a broader strategy to exhaust Taiwan's defenses through regular incursions and demonstrations of force.
Foreign Policy: Stability and the Global South
Foreign Minister Wang Yi's press conference during the NPC provided significant insights into China's foreign policy posture. Wang used the term "Global South" 24 times, emphasizing the importance of these countries to China's foreign policy and stressing the need for better representation of Global South perspectives in international forums. This rhetoric positions China as the champion of developing nations against what Beijing portrays as a hypocritical and self-serving Western-dominated international order.
Wang also repeatedly emphasized China's role as a source of "stability" in a turbulent world, creating an implicit contrast with the United States, which Chinese officials characterize as the root cause of global and regional flashpoints. This positioning aligns with President Xi Jinping's broader vision of building a "community with a shared future for mankind," which Wang described as reflecting "not only the fine tradition of Chinese civilization that the world belongs to all, but also the internationalist commitment of Chinese Communists."
The foreign policy stance articulated at the NPC reveals a China seeking to capitalize on perceived American disengagement from global institutions under the Trump administration. Beijing clearly sees an opportunity to fill this vacuum with its own leadership, supported by a network of Global South countries that share its pragmatic approach to international relations. As Wang Yi noted, "We will continue to expand our global partnerships featuring equality, openness and cooperation, actively use the Chinese approach in resolving hot-spot issues, and write a new chapter of the Global South seeking strength through unity."
The Climate Contrast: Environmental Goals Take a Backseat
A notable aspect of the 2025 NPC was the relative downplaying of climate and environmental goals compared to economic priorities. The Government Work Report set an energy intensity reduction target of "around 3%," which analysts describe as "notably weak." The carbon intensity target, a key indicator of China's climate action and its international climate pledge, did not appear in the report, signaling reduced emphasis on carbon reduction efforts.
This approach reflects the difficult balancing act facing Chinese leadership. While committed to its long-term goal of carbon neutrality by 2060, Beijing faces immediate economic pressures that have pushed environmental considerations down the priority list. The emphasis on heavy industry and continued reliance on coal for energy security purposes complicates China's ability to make rapid progress on decarbonization.
Looking ahead, China plans to shift from intensity-based targets to absolute carbon emission controls during the 15th Five-Year Plan (2026-2030). This transition, while necessary for meaningful climate action, also provides what analysts call "a convenient, if temporary, cover for Chinese bureaucrats as they pivot away from intensity targets they are unlikely to meet."
Global Implications: A More Self-Reliant China
The strategic priorities outlined at the 2025 National People's Congress portend significant implications for the global economy, geopolitical stability, and international institutions. China's emphasis on domestic consumption and technological self-reliance signals a gradual but determined shift away from the export-dependent growth model that has characterized its economic miracle for decades. This rebalancing, if successful, would reduce China's vulnerability to external economic pressures while potentially diminishing its role as the world's factory floor.
The technological focus of China's development strategy will intensify competition with the United States and other advanced economies in cutting-edge fields like artificial intelligence, quantum computing, and advanced manufacturing. This competition, while potentially driving innovation globally, also raises the risk of technological decoupling and the emergence of incompatible standards and systems in different parts of the world.
China's positioning as the champion of the Global South challenges Western dominance of international institutions and norm-setting. By offering an alternative vision of international relations based on "non-interference" and pragmatic cooperation, Beijing seeks to expand its influence among developing nations disenchanted with what they perceive as Western hypocrisy and condescension. This approach has particular resonance in the current global context, where many Global South countries have taken neutral stances toward conflicts like the war in Ukraine while criticizing perceived Western double standards.
The defense budget increase and continued military modernization efforts signal China's determination to develop capabilities commensurate with its great power aspirations. This military buildup, combined with assertive policies in the South China Sea and Taiwan Strait, raises the specter of increased security competition in the Indo-Pacific region, with implications for regional stability and the risk of inadvertent escalation.
The Road Ahead: Challenges and Contradictions
As China charts its course based on the priorities outlined at the 2025 National People's Congress, it faces formidable challenges and internal contradictions. The emphasis on domestic consumption as the primary growth driver requires structural reforms to increase household income shares and social security provisions—reforms that may encounter resistance from vested interests within the party-state system. Similarly, the drive for technological self-reliance demands not only massive investment but also an innovation ecosystem that can thrive under the current political constraints.
The defense spending increase amid fiscal pressures highlights the difficult tradeoffs facing Chinese leadership as it balances military modernization with growing social welfare needs and economic stimulus requirements. These tradeoffs will only become more acute as China's population ages rapidly, placing greater strain on public finances.
Perhaps most fundamentally, China's attempt to position itself as a champion of the Global South and a source of global stability sits uneasily with its increasingly assertive actions in its near abroad, particularly regarding Taiwan and the South China Sea. This contradiction between rhetoric and behavior creates vulnerabilities in China's international positioning that competitors may exploit.
The 2025 National People's Congress reveals a China increasingly confident in charting its own developmental path while simultaneously anxious about external pressures and internal challenges. The emphasis on self-reliance and domestic consumption reflects both strategic vision and defensive necessity in a world where globalization is increasingly giving way to bloc formation and strategic competition. Whether China can successfully navigate these crosscurrents while maintaining social stability and economic growth remains one of the central questions of our era—one whose answer will profoundly shape the international order in the decades to come.