Here We Go: Year of the Snake

The sign of the Snake is considered the most mysterious in the Chinese horoscope and symbolizes wisdom, cunning, and intuition. Its year usually brings pivotal moments. It was the year of the Snake, 1953, when Xi Jinping was born. 2013 was also the year of the Snake, when Xi Jinping began his first term as President of the People’s Republic of China with a makeover. And in 2025, after the Lunar New Year on January 29, the Year of the Snake will occur. Xi Jinping is the first Communist Party general secretary in decades to live the full cycle of the Chinese zodiac while remaining leader. This and much more makes this new year of the Snake a major event for China both domestically and internationally.

It is hard to overstate the centrality of economic indicators, which will remain a priority over the next 12 months. Recently, the National Bureau of Statistics announced that China’s GDP will grow by 5% in 2024, which is in line with the government’s target. With the exception of 2020 through 2022, which were the years of the pandemic, the worst since 1990, the year after the Tiananmen Square events. The 5% target was achieved thanks to an acceleration in the fourth quarter, when the economy grew 5.4%. Industrial production had a positive impact, growing by 5.8%, which was reflected in record exports and a trade surplus. However, domestic demand continues to stagnate. Consumption and confidence remain weak, with retail sales growth halved from 2023. As prices, including house prices, have fallen slightly, the deflationary trend has continued for a second year. The crisis in the real estate market continues to have an impact, with investment in the sector falling 10.6%, the worst since 1987. Chinese authorities recognize that China is in a “serious and complicated situation” with “insufficient domestic demand” and “increasing external pressure.”

This refers to Donald Trump’s possible new duties, which risk hitting what is still the engine of the Chinese economy – exports, whose volumes have reached record levels: to be precise, more than 25 thousand billion yuan, that is, almost three and a half trillion dollars, and a trade surplus of just under 105 billion. The driving force is the so-called “new productive forces,” Xi’s new mantra, which applies to technology and strategic sectors such as microchips, artificial intelligence, and (above all) electric cars. Attention must be paid, however, as potential new restrictions on access to the most advanced supply chains could create new obstacles for the West. Yet China has shown that it can find other ways. In fact, for five years, the ASEAN (Association of Southeast Asian Nations) region has been Beijing’s number one trading partner. While the weight of the so-called Global South is increasing, Africa and Latin America are getting more attention. And also because trade growth with Russia, which continues despite Western sanctions, is slowing. The transition was from +26.3% in 2023 to +2% in 2024, suggesting that we may now be close to an achievable peak in trade cooperation between Beijing and Moscow.

Thus, the data for 2024 show that Xi’s desired transformation of the growth model based on domestic consumption and high-quality production is still far from implementation. In the Year of the Snake, we need to accelerate two priorities: domestic consumption and technological self-sufficiency. These two elements are designed to reduce China’s dependence on the outside world by protecting it, at least in part, from international instability. This won’t be an easy mission. To accomplish it, China announced a “more active policy”: a formula that has been lacking for several years. This means a likely increase in the budget deficit to 4% of GDP from the current 3%. It would be the highest since 1994. But there is more. China is also set to ease monetary policy for the first time in 14 years in an attempt to stimulate demand. In his New Year’s speech, Xi also promised to take stronger measures to support education and social welfare. These are sensitive issues, as last year the government was forced to raise the retirement age for the first time in 50 years due to the lack of public funds and the aging population. The demographic problem will remain at the center of Beijing’s attention. In 2024, China’s population decreases by about 1.4 million people compared to 2023. This is the third consecutive year of population decline after 60 years of growth – despite the fact that 500,000 more were born. According to some experts, the phenomenon is coincidental and is linked to the resumption of economic activity in 2023 after the long restrictions associated with the covid pandemic, as well as the anniversary of the Year of the Dragon, which is traditionally considered particularly suitable for the birth of children.

The Year of the Snake will also be crucial to China’s international standing. The focus is obviously on the relationship with the United States with the arrival of Donald Trump in his second term. The first signs were, oddly enough, promising. Since coming to power in 2017, Beijing has sent only its ambassador Cui Tiankai to Washington. Relations were already quite strained after Trump broke all protocols by accepting a congratulatory phone call from Tsai Ing-wen, then president of Taiwan. Never since 1979 has a leader from Washington and a leader from Taipei spoken officially. This episode also started a series of events whose consequences can still be seen today in the Taiwan Strait. This time, Trump did not respond, leaving no room for direct dialog with the administration of Lai Ching-te, whom Beijing considers a “radical separatist.” And not only that. The tycoon invited Xi to his inauguration, and the latter sent Vice President Han Zheng instead, who had expected to meet Trump in Beijing during his first hundred days in office. The caution on Taiwan and openness on the fate of TikTok have been positive signs, even if it seems that Trump, as always, wants to use every dossier on the table as a possible weapon in the negotiations. Of course, Joe Biden never said he wanted to “work with Xi to make the world more peaceful,” as Trump did after the leaders’ phone call that preceded his inauguration. This signal was strongly welcomed by several Chinese commentators. “Trump’s commercial mindset, his business-oriented team, and the growing investment ambitions of Chinese companies point to a clear path: strategic investment and localized manufacturing can transform economic tensions into shared prosperity,” said one analysis signed by Wang Huiyao, founder of the China and Globalization Center think tank. “Such business-oriented approaches may be the most practical way to restore trust between the world’s two largest economies by solving problems through trade cooperation, one deal at a time,” Wang added. All of this should certainly be confirmed over time, given that the threat of new duties is always looming on the horizon, and we can’t forget that there are several anti-China hawks in the Trump administration, starting with Secretary of State Marco Rubio.

Trump’s return brings a number of unknowns for the bilateral relationship, but it also opens up a number of opportunities for China. First, it softens Biden’s rhetoric about the clash between democracies and authoritarianism by removing the ideological obstacle to dialog. Second, Trump’s pursuit of a possible solution to the war in Ukraine may eliminate one of the major recent problems between China and European countries. Third, Trump’s willingness to resume dialogue with North Korea could give Xi an opportunity to play a mediating role, reducing tensions in an important theater in East Asia. Perhaps not coincidentally, Japan is reportedly ready to receive the Chinese president for a visit in the coming months. An event that, if confirmed, would be of historic significance given the centuries-old rivalry between the two Asian giants. China is also watching with hopeful eyes the ongoing political-institutional crisis in South Korea, which could culminate in early presidential elections. In this case, a possible Democratic Party victory would guarantee a more equidistant and dialogical Seoul, less unbalanced in favor of the USA and (recently) even NATO, with which suspended and then-arrested President Yoon Suk-yeol signed a Partnership Document.

Finally, the return of Trump and his protectionist America First rhetoric gives China an opportunity to present itself as the great guarantor of free trade and multilateralism. In terms of multilateral platforms, the Year of the Snake is particularly favorable for Beijing. The presidency of the G20 and ASEAN is held alternately by two friendly countries, South Africa and Malaysia. Even the Pacific Islands Forum is led by the Solomon Islands, China’s main partner in the region. Xi Jinping will use three other international events to emphasize projection into the so-called Global South: the SCO (Shanghai Cooperation Organization) summit to be hosted by China, the BRICS summit in Brazil, and the biennial summit with Central Asian countries in Kazakhstan. Xi Jinping will then travel to Russia to visit Vladimir Putin, and in Beijing he will meet with French President Emmanuel Macron, two figures central to China’s foreign policy. At the 16th Communist Party Congress, then General Secretary Jiang Zemin predicted “twenty years of strategic opportunities” for China. That twenty-year period, thanks to Trump’s first term and the covid pandemic, ended a little early. Giving way to what Xi Jinping has repeatedly called “unprecedented challenges.” In the Year of the Snake, China will try to turn some of these challenges into new opportunities.