China’s year of churn and rise

China should be content with the way it managed to reverse the United States’ tariff wars, with Sun Tzu’s dictum – “winning without fighting”. The year, however, saw hardships for the Chinese people, exacerbated by economic restructuring towards domestic consumption, unemployment, real estate crisis, local debt, and a relative economic decline.

China crossed $1 trillion in trade surplus this year, thanks to high-quality development and trade diversification to Southeast Asia, Africa, Latin America, and Europe. This is despite the debilitating 145% tariffs imposed by the US. The US-China truce for easing rare earth metal export restrictions, the purchase of US soybeans in exchange for lowered tariffs, and the supply of advanced chips from the US signified China’s stature in the global and regional power structures.

Through summit meetings at Tianjin, the military parade at Beijing, the China-Pacific Island Countries foreign ministerial meeting at Xiamen, and new platforms such as the Global Governance Initiative, China indicated its resolve to “set up a different kitchen” away from West-led political systems. The proposal to set up the SCO Development Bank, upgrading free trade areas, increasing investment in the Belt and Road Initiative (BRI) to $1.3 trillion, and expanding the trade and investment footprint are in line with concerted mercantilist policies aimed at eclipsing the US.

However, China’s restrictions on rare earth metal export rattled the global markets, inviting criticism on the weaponisation of trade and inter-dependence. Beijing’s move has pushed several countries to seek secure and resilient supplies, besides causing a sharp decline in trust in China. It led to the US forming Pax Silica with Japan, Singapore, South Korea, the Netherlands, the United Kingdom, Israel, the UAE, and Australia. The European Union passed the Critical Raw Materials Act, while Indian companies are exploring the tapping of an estimated seven million tonnes of rare earth oxides.

For an order-obsessed Beijing, the cancellation of the German foreign minister’s visit, citing disagreements on several fronts, was a setback. The relations with Japan nosedived after China’s Consul General at Osaka criticised Prime Minister Sanae Takaichi’s comments on Beijing posing an “existential threat” in Taiwan scenarios. Frequent China-Philippines ship collisions and the use of water cannons took the fizz away from the third draft on a “code of conduct” in the South China Sea dispute.

There was controversy in the arrest of Liu Jianchao, the head of the Chinese Communist Party’s International Department, on charges of corruption. In 2023, Foreign Minister Qin Gang was dismissed; his whereabouts are unknown.

China continued to be the largest trading partner for Africa, with over $295 billion in trade in 2024 and $222 billion in the first eight months of 2025. However, the US tariffs are expected to leave an impact on the volumes. Furthermore, Niger’s expulsion of three China National Petroleum Corporation executives in March put in jeopardy the $5-billion investment in the energy pipeline linked to Soraz refinery.

China’s footprint in Latin America and the Caribbean expanded through free trade agreements with Chile, Peru, Costa Rica, Ecuador, and Nicaragua, while the negotiations with Honduras and El Salvador advanced. It released a third white paper on the region that emphasised multipolarity. China became the second-largest trading partner for the region with over $518 billion in trade in 2024. However, with the US renewing its Monroe Doctrine, CK Hutchison, a Hong Kong firm, transferred stakes in 43 ports to US companies. Earlier this year, there was friction over the US’ “pressure” that led Panama to quit the BRI.

India and China continued to engage in different formats and forums. At the 24th Special Representatives meeting in August, there was agreement to establish expert and working groups and discuss “delimitation” of the boundary. Prime Minister Narendra Modi visited Tianjin to attend the SCO summit. The atmospherics, however, was marred by the detention of two Indians by Chinese immigration authorities at Shanghai and Guangzhou.

China’s balancing act was also reflected in the support it extended to Pakistan during Operation Sindoor in May. Its air force issued a note that no new equipment was transferred during the conflict, but Beijing’s “grey zone” tactics did embolden Pakistan. China has also decided to bifurcate the Aksai Chin region into two counties and build multiple dams in the fragile Himalayas.

The 2026 agenda looks packed for China as it navigates differences with the US and countries including Japan, while maintaining the tentative truce on its border with India.

(The writer is the JNU Prof has been Peking behind the Bamboo Curtain for 30 years.)

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)