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Review of Changes in China’s Domestic and Foreign Policies: Focusing on the 2025 ‘Two Sessions (两会)’ |
| April 7, 2025 |
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Jae-Hung ChungSenior Fellow, The Sejong Institute | jameschung@sejong.org
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Amid rising tensions in the U.S.–China trade war following the launch of the Trump 2.0 era, China’s 2025 Two Sessions(兩會), held from March 4 to 11, laid out the country’s key domestic and foreign policy directions. The meetings emphasized boosting domestic demand and innovation in advanced science and technology, presenting various policy measures to this end. Notably, 2025 marks the final year of China’s 14th Five-Year Plan (2021–2025), which the government views as a critical juncture for deepening internal reforms and advancing scientific and technological innovation. China aims to carry this momentum into the 15th Five-Year Plan, further strengthening its internal economic policy measures and revitalizing the economy to sustain a 5% growth rate. To stimulate domestic consumption and increase economic efficiency, the government has announced large-scale policy initiatives: approximately 300 billion yuan (about 60 trillion KRW) for a product renewal subsidy scheme (以舊換新), 735 billion yuan for dual infrastructure construction (兩重建設), around 1 trillion yuan for a new startup investment fund, and 400 billion yuan for R&D investment—a 10% increase from the previous year. These efforts reflect China’s intent to concentrate all state policy efforts on strengthening national capabilities and advancing its high-tech industries. Ultimately, the government aims to enhance the competitiveness of the Chinese economy through sustained expansion of the domestic consumption market and innovation in cutting-edge technologies, leveraging the country’s 1.4 billion-strong consumer base as a long-term growth engine.
At this year’s Two Sessions, the most significant attention was drawn to China’s substantial support for its successful development of the open-source AI model, DeepSeek (深度求索), and the emphasis on advancing cutting-edge technological innovation. Despite intense U.S. sanctions and pressure, China has rapidly strengthened its AI competitiveness, leveraging vast data resources, strong government policy support, independent technological development, and economic strength. It is anticipated that China’s AI sector will continue to accelerate its development. As China continues to innovate in AI, its leadership in the global market is expected to expand. The country has clearly outlined a long-term plan to extend AI innovation across all technological and industrial fields. Through initiatives such as Made in China 2025 and the Next Generation Artificial Intelligence Development Plan (2030), China is increasing its investment in AI R&D and is making significant progress in areas like AI algorithms, model training, and supercomputing. Moreover, China has achieved technological self-reliance through the development of its own AI chips and open-source AI models like Qwen and DeepSeek. Already the world's largest holder of data, China has access to vast datasets essential for training AI models. Although the U.S. has restricted the supply of semiconductors and AI chips (GPUs), China has pursued strategies for hardware and software independence, exploring alternatives. Companies such as Huawei, Alibaba, and Baidu have invested in AI semiconductor development, including Huawei’s Ascend 910B, enhancing China’s technological capabilities. Despite ongoing U.S. pressure and sanctions, China continues to accelerate its development of AI and semiconductor technologies, building a China-led AI ecosystem at an impressive pace.
At the 2025 National People's Congress, the launch of Deep Seek, China's version of AI Chat GPT, attracted significant attention. The government is accelerating the integration of AI with industries such as manufacturing, finance, healthcare, autonomous driving, and smart cities, while also enhancing global competitiveness through integration with robotics, IoT, 6G communication, and cloud computing. President Xi Jinping, emphasizing technological innovation led by private high-tech firms, gathered top executives from companies like BYD, Tencent, Alibaba, Huawei, and Deep Seek on February 17, promising continued government support to enhance their innovation capabilities and secure future growth. China has significantly increased its technical self-reliance in semiconductor manufacturing, and by 2025, China is expected to lead an advanced technology supply chain network. Additionally, China’s focus on stimulating domestic consumption and promoting the digital economy through the government-driven establishment of a CBDC and the Digital Yuan emphasizes the integration of AI and semiconductor progress, creating a new digital-tech-finance model led by China.
China's current key national policy objective is to maintain an average annual economic growth rate of 5%. To achieve this, the government plans to further stimulate the private economy, which serves as the core driver of socialist modernization, economic transformation, and high-quality economic development. This will involve significantly expanding tax reductions and administrative cost cuts (減稅降費), as well as financial support for small and medium-sized enterprises, all aimed at ensuring stable economic growth. Private enterprises account for over 90% of all companies and over 92% of those in high-tech industries, marking a shift away from the state-owned enterprise model towards revitalizing private enterprises and fostering high-tech companies. Additionally, measures to prevent excessive corporate competition and combat corruption will be central to policy efforts. Key institutions under the Communist Party and government will implement actions to create a rational market environment and prevent malicious competition driven by short-term profits, which will help maintain the targeted 5% economic growth rate.
Meanwhile, 2025 will be the final year of the 14th Five-Year Plan (2021-2025) and a year of evaluation, where the achievements of all policies pursued over the past four years will be assessed. There are not expected to be major reforms in internal systems and appointments. The leadership under Xi Jinping is likely to continue emphasizing a political-economic-social management model led by the party and the state, focusing on maintaining economic development and social stability while promoting high-quality economic growth. Through this approach, the government plans to gradually implement the three guarantees—basic livelihood, wages, and operations—to maintain basic-level livelihood stability. In particular, to address local government debt issues and enhance fiscal independence, special bonds totaling 4.4 trillion yuan, a 500 billion yuan increase from 2024, will be allocated to local governments to help revive the stagnant local economy and alleviate local government debt and fiscal challenges. The decision made at the 3rd Plenary Session of the 20th CPC Central Committee on July 18, 2024, titled <Decision on Further Deepening Reform and Promoting Chinese-Style Modernization: 關於進一步全面深化改革、推進中國式現代化的決定>, emphasizes accelerating political and economic reforms to ensure continuous economic development and social stability.
At this year's Two Sessions, the Xi Jinping leadership prioritized strengthening party-centered governance, implementing a strict party control strategy, addressing formalism and bureaucratism, and cracking down on harmful cultural practices to ensure internal political stability. Following the consolidation of Xi Jinping's leadership, key issues such as improving people's livelihoods, preventing extreme social problems (e.g., suicide, murder, arson), and enhancing education, healthcare, housing, and elderly care were highlighted, with a focus on increasing investments and policy support. In 2024, China's elderly population over 60 surpassed 300 million, making elderly welfare and retirement security a critical national task.The government is emphasizing the expansion of social stability by investing more resources into livelihood improvements and stimulating consumption, focusing all policies on sustaining economic growth, social stability, and improvements in living standards. Additionally, efforts are being made to advance sectors such as services, manufacturing, digital economy, platform economy, and rural revitalization. These efforts aim to boost youth employment, modernize agriculture, and promote rural tourism, thus stabilizing the labor market and improving rural living conditions. The importance of livelihood security (民生保障), social ethics reform and anti-corruption (正風反腐), and social governance (社會治理) has grown significantly. The government has stressed the strengthening of macroeconomic policies focused on people's livelihoods (強化宏觀政策民生導向), signaling a shift in the national development strategy towards prioritizing people's livelihoods and social stability over economic growth.
Through the consolidation of Xi Jinping's leadership, China has strengthened the Party's control and internal political unity, responding to the emerging multipolar international order and the US-China strategic competition. This reflects China’s resolve to realize socialism with Chinese characteristics in the new era and achieve the modernization of Chinese socialism. In particular, by reinforcing Xi Jinping's central role, China aims to ensure sustainable and stable economic development, improve people’s livelihoods, stimulate domestic consumption, expand markets, increase investment in advanced technologies, shift its economic development model, resolve local government debt issues, and enhance social security. These efforts are part of a broader strategy to actively address both domestic and external challenges and crises leading up to 2025.
Ultimately, through the 2025 Two Sessions, China is seeking to maintain its economic growth rate and ensure domestic stability while pursuing aggressive domestic policies to secure a technological edge in global competition, particularly in the US-China rivalry. Strong central government support for enterprises and large-scale fiscal investments are expected to boost domestic consumption and global market expansion. China is also expanding its influence in the process of global supply chain restructuring. However, there are significant challenges, including mounting pressure from US and Western sanctions on China’s economy and technology sectors, high local government debt, and limited fiscal autonomy. Additionally, risks associated with the export-dependent economic structure are growing due to intensified US-China competition and global economic slowdown. Some experts caution that domestic economic stagnation and a potential downturn cannot be ruled out. Nevertheless, China continues to emphasize the expansion of global markets and the revitalization of domestic consumption through powerful economic stimulus policies, indicating that the direction of US-China strategic competition and changes in the international order will directly impact China’s strategies. -
At the recently convened Two Sessions, coinciding with the launch of the second term of the Trump administration, China strongly criticized the US’s trade policies toward China. China argued that the imposition of arbitrary tariffs and threats has severely damaged mutual trust between the US and China, while also disrupting global supply chains. China expressed strong opposition to the hegemonic actions and coercive politics of certain countries, as well as unilateralism and protectionism, emphasizing the need for a more equal, independent, and orderly multipolar international order, in stark contrast to US policies. Foreign Minister Wang Yi, during a press conference at the NPC, pointed out the unilateral "bullying" actions of the Trump administration, claiming that the US’s disregard for international norms and principles in US-China relations, under the pretext of economic, trade, and technology security concerns, has led to interference in China's internal affairs and threatens China’s sovereignty and core interests. He suggested that China would employ all necessary measures to respond decisively if its sovereignty or core interests are threatened. Furthermore, Wang Yi stressed that communication and cooperation, based on mutual respect, are the only solutions to the challenges in US-China relations, and he highlighted the importance of constructive cooperation between the two countries in addressing complex issues like economic crises, climate change, and supply chain stability.
During the Two Sessions, China's Ministry of Foreign Affairs issued strong statements against the US’s tariff increases. On March 4, during a regular press briefing, Foreign Ministry spokesperson Lin Jian stated that China was prepared to fight to the end if the US desired a tariff war, trade war, or any other form of conflict. He also criticized the US’s use of the fentanyl issue as a flimsy excuse to justify tariff hikes, emphasizing that China’s response to protect its interests was legitimate. Lin reiterated that the US’s approach of increasing tariffs was not focused on resolving the fentanyl issue but rather exerting pressure on China. In response to US pressure, China rejected the notion that coercive tactics and threats would lead to a resolution, stressing that if the US genuinely sought to address the trade imbalance and fentanyl issues, communication and cooperation based on mutual respect were the only viable solutions. Lin Jian asserted that if the US continued to press China with hidden intentions that harm China’s economic interests, China would not back down and was prepared to counter any such actions, leaving open the possibility of further retaliatory measures.
Moreover, when the United States imposed a 20% tariff on Chinese products, China responded immediately by imposing additional tariffs of 15% on U.S. products such as chicken, wheat, corn, and cotton, and 10% on sorghum, soybeans, pork, beef, seafood, fruits, vegetables, and dairy. Subsequently, China added about 15-20 U.S. companies to its unreliable entities list and announced export controls on dual-use items (items that can be used for military purposes) for approximately 15-20 U.S. companies, demonstrating its strong retaliatory stance. In the work report released during the Two Sessions, China criticized U.S. hegemonic and coercive politics, as well as all forms of unilateralism and protectionism, stating, “China opposes the hegemonic practices of some countries (the U.S.),” and criticized U.S. priority policies. It further condemned U.S. coercive measures under the pretext of national security and called for the prompt cessation of unilateral and unjust sanctions against China.
Meanwhile, the Xi Jinping leadership has begun taking measures to strengthen closer strategic political, economic, and security cooperation with Russia in order to expedite the end of the Russo-Ukrainian war and accelerate the establishment of a new multipolar international order. Specifically, the leadership aims to promote changes in the liberal rules-based international order (RBIO) by aligning with Russia, BRICS, and Global South countries to build a more equitable and orderly multipolar international system. China has already stated that fundamental changes to the liberal rules-based international order are inevitable following the Russo-Ukrainian war, characterizing this period as a major upheaval not seen in a century (百年大變局). In this context, China has made it clear that it will accelerate the construction of a new multipolar international order through closer political, economic, and security cooperation with BRICS countries, including Russia, and Global South nations, instead of relying on a U.S.-centered (or Western) model. During the Two Sessions, China emphasized its commitment to the Belt and Road Initiative (一帶一路, BRI) and the concept of a community of shared human destiny (人類命運共同體), underscoring the importance of three global initiatives: the Global Development Initiative (GDI), the Global Security Initiative (GSI), and the Global Civilization Initiative (GCI). It called for a more balanced and mutually equitable multipolar international order. China is already expanding financial support for the smooth implementation of the BRI across key global regions, including Eurasia, ASEAN, Africa, and Latin America, and plans to increase investment and cooperation in green energy and digital economy-finance connectivity projects. Additionally, the Xi Jinping leadership perceives U.S. hegemonic unilateralism and pressure policies as the greatest challenges and obstacles to China’s economic development, emphasizing the need for a new multipolar era. Through the expansion of the discourse on a new multipolar international order, China points out issues with the Western-centered liberal rules-based international order and is advancing the creation of new global governance led jointly by BRICS, the Shanghai Cooperation Organization (SCO), and the Global South to realize a multipolar international order.
Currently, China is accelerating the establishment of a multipolar international order through the development of a close strategic economic and security partnership with Russia. In December last year, Medvedev, Deputy Chairman of the Russian Security Council, visited China and held talks with President Xi Jinping, during which both sides agreed to further strengthen their mutual strategic cooperation and inherent momentum, and to enhance strategic communication with the United Nations (UN), BRICS, and the Shanghai Cooperation Organization to build a genuine multipolar international order. Notably, on February 28, ahead of the Two Sessions (兩會), Russian Security Council Secretary Shoigu paid a surprise visit to Beijing and, during talks with President Xi Jinping, emphasized strategic cooperation and stated that 2025, marking the 80th anniversary of the War of Resistance Against Japan and the victory in the Anti-Fascist War, would be a particularly important year, during which both sides would promote joint development and revitalization through closer communication. Going forward, the two countries agreed to further strengthen cooperation in energy, trade, economy, and security, not as a move targeting third countries, but as a contribution to the continued stability and development of the Eurasian region. Moreover, China reaffirmed its position of non-interference and non-involvement in the Russia-Ukraine conflict, and emphasized the need for a swift resolution through mutually acceptable security guarantees and negotiation, expressing concern that military support by certain Western countries to Ukraine is exacerbating the conflict and global instability.
Moreover, regarding the possibility of a so-called "Reverse(逆) Nixon" strategy involving a rapid improvement in U.S.-Russia relations aimed at both an early end to the Russia-Ukraine war and containing China, Foreign Minister Wang Yi firmly stated that "China-Russia relations, as friendly neighbors sharing the longest border and as friends who have weathered many historical trials together, cannot be altered by any particular period or incident, nor are they subject to interference or disruption by any third country," adding that such relations cannot again become variables of geopolitical competition as in the past. Notably, President Xi Jinping and President Putin are both scheduled to attend two major commemorative events—the 80th anniversary of the victory in the Patriotic War and Anti-Fascist War to be held in Moscow on May 9, and the 80th anniversary of the victory in the War of Resistance Against Japan to be held in Beijing on September 3—and are expected to hold at least two summits, indicating not only a strengthening of strategic ties between China and Russia but also close coordination and cooperation on global issues. In addition, China, as part of its efforts to bolster national defense and security, has based its defense spending increase of over 7% on strategic security cooperation with Russia, emphasizing ongoing anti-corruption efforts and preparations for informationized and intelligentized warfare. China's defense budget for 2025 has been set at approximately 1.78 trillion yuan (about 356 trillion Korean won), marking a 7.2% increase from the previous year, and will focus on strengthening capabilities in areas such as strategic early warning and joint strike operations, battlefield support, the regularization of realistic military training, and reforms in national defense and the armed forces—all with the aim of enhancing qualitative operational capabilities in new military domains. Already, China is accelerating military modernization through a strategy integrating mechanization, informatization, and intelligentization, with a particular emphasis on intelligent and unmanned capabilities, shifting away from large-scale conventional warfare toward advanced, high-tech, and unmanned operations. Ultimately, through the 2025 Two Sessions, China has made clear its vision to actively advance military modernization while expanding unity and cooperation with Russia, BRICS, and the Global South under a strategic partnership framework aimed at building a new multipolar international order—indicating that strategic rivalry and competition with the United States will likely intensify further. -
The changes in domestic and foreign policy direction under Xi Jinping’s leadership, as revealed during this year’s Two Sessions, are expected to have a direct impact on the situation on the Korean Peninsula. China has made it clear that it is no longer following the West-led rules-based international order and is accelerating the creation of a new multipolar international order based on its economic, technological, and military power. With U.S. President Trump and Russian President Putin expressing their willingness to negotiate for an early end to the Russo-Ukrainian War, it seems inevitable that the situation on the Korean Peninsula will change once the war ends. Especially since the outbreak of the Ukraine and Middle Eastern conflicts, emerging countries from the Global South and BRICS that have been seeking a change in the existing international order are rapidly rising, while the Western G7 economies, which have led the international order since World War II, are gradually losing influence. Moreover, the total trade and economic power of BRICS has surpassed that of the G7, and the gap continues to widen, making a major transformation of the existing international order led by the Western powers inevitable. At the BRICS summit held in Kazan, Russia, in October 2024, Egypt, Ethiopia, Iran, and the United Arab Emirates officially joined BRICS, and Indonesia became a full member. At the Kazan summit, BRICS member countries announced a medium-to-long-term plan to gradually reduce the use of the U.S. dollar in trade settlements among member countries and promote the creation of an independent BRICS currency for payments. Ultimately, the Russo-Ukrainian War has sounded the alarm for the U.S.-Western-led international order, further accelerating the emergence of a new multipolar international order centered around the Global South, the Shanghai Cooperation Organization (SCO), and BRICS.
Moreover, it is expected that both President Xi Jinping of China and Chairman Kim Jong-un will attend the 80th anniversary of the victory over fascism ceremony in Moscow on May 9, 2025. If Chairman Kim Jong-un attends the Russian victory ceremony, the possibility of a summit between President Xi Jinping, President Vladimir Putin, and Chairman Kim Jong-un seems high, and discussions on political, economic, and security cooperation between North Korea-China, North Korea-Russia, and North Korea-China-Russia could become highly concrete. Particularly, if President Putin and Chairman Kim Jong-un are once again officially invited to the Beijing victory ceremony in September, political, economic, and security cooperation between the three countries—North Korea-China, North Korea-Russia, and North Korea-China-Russia—will likely accelerate, leading to significant changes in the situation on the Korean Peninsula. Some experts are speculating that U.S. President Trump might unexpectedly attend the victory celebration, which could open the possibility of a new Yalta-style summit among the U.S., China, and Russia for breakthroughs on the Ukraine, Taiwan, and Korean Peninsula issues. The possibility of the first Moscow summit between the U.S. and North Korea cannot be ruled out either.
The Korean Peninsula, at the eastern end of Eurasia, is closely linked to global changes in the international order, and South Korea faces significant challenges during this complex geopolitical transition. While the South Korea-U.S. alliance, which has lasted nearly 70 years, is crucial for peace and stability on the Peninsula, maintaining balanced and friendly relations with neighboring countries is also essential, considering the region’s geopolitical and geoeconomic complexities. If South Korea maintains an adversarial relationship with China and Russia based on Cold War-era ideological diplomacy, the geopolitical risks on the Korean Peninsula are likely to increase significantly. Ultimately, it is essential to move away from a fixed mindset that emphasizes a hardline approach toward North Korea, the Indo-Pacific strategy, and trilateral cooperation between South Korea, the U.S., and Japan. Instead, South Korea must actively seek regional peace and cooperation through a new, shared, multilateral security perspective and work toward gradually resolving the issues on the Korean Peninsula. Given the centuries of coexistence with neighboring countries, it is crucial to view and analyze the emerging multipolar international order objectively, not through subjective interpretations, and to foster closer collaboration and communication with neighbors to promote regional peace, stability, and prosperity. In the emerging multipolar international order following the Russo-Ukrainian war, South Korea must break away from the existing trilateral framework of South Korea, the U.S., and Japan to reform global governance and strengthen economic and technological cooperation. This entails restoring smaller multilateral dialogue channels (such as South Korea-U.S.-China, South Korea-U.S.-Russia, South Korea-China-Russia, South Korea-China-Japan, etc.) and pursuing larger multilateral arrangements (such as South Korea-U.S.-China-Russia, South Korea-U.S.-China-Japan, South Korea-U.S.-China-Russia-Japan, etc.). Ultimately, South Korea must work to establish a new Eurasian regional multilateral political, economic, and security cooperation system, creating an environment conducive to economic collaboration and peaceful coexistence on the Korean Peninsula through bold policy initiatives and efforts.
| Politics and Economy: Maintaining 5% Growth, Emphasizing Livelihood Stability, Consumption-Driven Growth, and Innovation in Advanced Science and Technology
| Foreign Affairs and Security: US-China Strategic Competition 2.0 and Accelerating Multipolar International Order
| Impact and Implications for the Korean Peninsula Situation
※ The contents published on 'Sejong Focus' are personal opinions of the author and do not represent the official views of Sejong Institue
