As China reasserts itself on the global stage with increased investments into the Global South, ASEAN has been a clear beneficiary. Despite some headwinds and the volatile geo-strategic environment, the Chinese economy has shown remarkable resilience. The official Chinese government’s GDP growth target in 2025 stands at around 5%, and pragmatic roadmaps to achieve this high-quality growth have been announced. To explore how China’s growth continues to shape Singapore and ASEAN dynamics, the Singapore Institute of International Affairs (SIIA) held a talk on “China’s Revival: How Real It Is and the Role of its Partners” on 18 March 2025.
The talk featured insights from Prof. Alfred Schipke, Director, East Asian Institute, Mr. Suan Teck Kin, Executive Director & Head of Research, UOB Limited, and Mr. Gerry Chan, Chief Executive Officer, CapitaLand China Trust Management Limited. Moderated by Mr. Nicholas Fang, SIIA’S Director of Security and Global Affairs.
China’s Macroeconomics
The talk begun with a significant observation of China’s shifting growth model. China is currently undergoing a significant transition from a growth model heavily reliant on real estate and local government debt, towards one driven by consumption and “new drivers” such as AI, 6G, and bio-manufacturing. Prof Alfred remarked that China’s transition to the newer growth model “is still in a transition process”, and while already acknowledged by the Chinese authorities, is still expected to be a long and patient process.
Attention was then turned to central-local government dynamics, where local governments were noted to be the main drivers of innovation and growth. Traditional local government Key Performance Indicators (KPIs) of investment and growth are gradually shifting towards social stability and sustainability. As the shift solidifies, local government officials grapple with measuring success under these new metrics. Additionally, another challenge presents itself in the form of financing — for far too long, local governments have relied on unsustainable debt financing and land sales to hit the traditional KPIs of investment and growth. Land sales have significantly decreased as a percentage of GDP, creating an alarming fiscal gap. Prof Alfred cites that “gross land sales in 2024 amounted to 2.3% of GDP”, a significant fall from 8% of GDP in 2020.
While there has been short-term stabilisation due to recent government measures and articulation of support from the recent lianghui (Two Sessions), truly addressing these challenges requires fundamental reform of the fiscal relationship between central and local governments. Prof Alfred suggests that the central government should take on more responsibilities and local governments should be provided with more resources to do what they must. However, he also notes that fiscal federalism reform is “notoriously difficult politically” as seen in Western economies, posing a challenge to China as well.
Consumers and the Private Sector
As China accelerates its consumption-driven growth model, the country meets challenges such as poor consumer sentiment and discouraging spending patterns. Consumers are becoming more price-sensitive, or as Mr Gerry articulated, “tight on their purse strings”, favouring value shops and more affordable F&B options over higher-ticket options. For example, Chinese consumers are now spending below 100 RMB per person as compared to their more usual expenditure of 150 RMB at some restaurants.
On the brighter side, Mr Suan Teck Kin pointed out that despite poor consumer sentiment figures, spending during the Chinese New Year period reached record hights, suggesting a potential disconnect between overall confidence and willingness to spend during key holidays. Mr Suan predicts that local Chinese will make a record number of trips in 2025 and push tourism spending to a record high.
Looking towards the private sector, China demonstrated significant strength in major technological changes particularly in AI and the “low altitude economy” despite macroeconomic headwinds. Citing Mr Suan, manufacturing output remains exceptionally high, exceeding the combined output of the US, Germany, Japan, India, underscoring the immense competitiveness of the Chinese economy.
Encouragingly, there is an apparent shift towards empowering the private sector as a key driver of these technological and economic efforts. President Xi Jinping’s meeting with private sector representatives urging a “healthy, high-quality development of [the] private sector” as reported on Xinhua News Agency on 17 February 2025 signalled formal backing to private enterprises, providing a confidence boost to a “beleaguered private sector suffering from weak domestic demand”.
Geopolitical and Regional Dynamics
The ongoing US-China trade tensions and the potential for increased tariffs remain a significant concern that could impact China’s growth momentum in the latter half of 2025 and beyond. China’s increased outward foreign direct investment, particularly into the Middle East and ASEAN, presents opportunities for these regions to partner with China through collaborations and value chains. This shift is partly driven by the challenges of relying solely on exports.
Being ASEAN’s largest trading partner and making up about 20% of trade in the region, China’s economic performance directly impacts the prosperity of the ASEAN region. Mr Suan cited that in 2023, China’s investment in ASEAN reached $22 billion. Hence, ASEAN has opportunities to benefit from China’s outward investment and participate in its evolving value chains.
The evolving consumer behaviour, the strategic implications of US-China rivalry, and the regional economic interdependence should also be noted as crucial factors shaping China’s future. ASEAN should proactively seek to leverage the opportunities arising from China’s economic development, particularly in trade and investment. However, it is equally important for the region to remain vigilant and prepare for potential challenges stemming from the complex and evolving geopolitical landscape, especially concerning US-China relations and their potential economic ramifications.
