China: Staying the course

Western perceptions of China have become more negative, with the United States (US) engaging in an aggressive trade war with China. Meanwhile, China seems to have developed a more routine and calculated response to Western pressures and was—for the time being—able to stay its course of economic self-sufficiency and international engagement. This has led to some seeing China as having the upper hand in US-China trade negotiations[1] and as the major pillar for international green and sustainable development.[2] China’s strength in 2025 and, as we analyse, moving forward builds on interlocking strategies in regional political engagement, technological advancements, green transition, trade and its domestic economy. China’s growing regional political clout was exhibited during the Shanghai Cooperation Organization (SCO) meeting in September 2025, bringing together 24 heads of state in Tianjin – including the first meeting of heads of state from India and Pakistan just weeks after their armed conflict. The ensuing World War II victory day parade brought all but eight Asian economies’ heads of state to Beijing. China also boosted its technological strength in areas such as artificial intelligence (AI), its dominance in green technologies and its credible progress in climate ambitions and used its effective control of various global supply chains, including in critical minerals with their relevance for both civil and military purposes, as an international pressure point. China continued to strengthen the internationalisation of its currency (renminbi – RMB), which worries the proponents of a US-dollar-dominated global economy, and it strengthened its exports. Meanwhile, its domestic economy continued the fight against deflation, weak consumption and a housing crisis – exhibiting certain policy consistency of not providing more government stimulus for short-term gains. Our overall analysis suggests that China’s trajectory and policy positions have exhibited relative predictability and stability in its ambitions and “red lines”, particularly when compared to many short-term economic and policy adjustments seen in Western countries over the past months. We find that Western criticism of China’s development is increasingly seen as hypocritical, lacking moral high ground and economic advantages. Rather, China seems to have become more confident about its destiny as the world’s largest economy (by PPP) while having to chart its own course in a less trusting and more transactional geostrategic environment. This leads us to our conclusion that in this world, we cannot overstate how important a nuanced understanding of China’s role in the region is, where we should neither overestimate nor underestimate China. We must avoid the often-irrational pendulum swings of embracing and distancing ourselves from China, which undermines trust and collaboration opportunities. We see significant opportunities for constructive engagement that address both joint interests and potential conflicts. With significant risks on the horizon, this nuanced strategy will determine whether the region will foster peace and prosperity or face rising tensions and instability.