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The Year of the Wood Snake begins on January 29, 2025, marking a time traditionally associated with innovation, adaptability, and steady progress. In Chinese culture, the snake represents agility and wisdom, while the wood element symbolizes growth, flexibility, and tolerance. Together, they create a year that promises progress balanced by careful planning.
The Wood Snake returns every 60 years, with the last appearance in 1965 coinciding with global milestones such as the passing of the U.S. Voting Rights Act and Singapore’s separation from Malaysia. As China embarks on its post-pandemic economic recovery, this symbolic lens could signal a year of transformation and cautious optimism.
Policy challenges in economic recovery
China’s economy met its growth target last year, expanding by 5%, but the momentum appears fragile. Market observers await further details on economic support measures hinted at in 2024.
“The policy pivot initiated in September 2024, while initially spurring a rally in the Chinese equity market, has gradually lost steam,” explains Tracy Chen, Portfolio Manager at Brandywine Global Investment Management. “Instead of optimism, disappointment has set in as the market grapples with the intervention’s smaller-than-expected scale, slower-than-anticipated pace, and lack of concrete follow-through on policy measures.”
Adding to these challenges, an uncertain global environment, including the possibility of escalating trade tensions, underscores the need for decisive domestic strategies to sustain growth.
Traditionally, China sets its annual growth target during the “dual sessions” government meetings in March. While analysts forecast a slowdown to 4.5% growth in 2025 and 4.2% in 2026, many expect the government to maintain a target similar to last year.
“We think there is decent probability the government may set a growth target at around 5% or with a range between 4.5%-5% for 2025,” Pictet Asset Management states.
Fiscal policy will play a critical role. According to Eastspring Investments, China’s response to economic challenges appears more reactive than proactive. Recent announcements by the Ministry of Finance indicate plans to raise the budget deficit to 4% of GDP, issue 2 tn yuan in ultra-long-term bonds, expand the local government special bond quota, and recapitalize major state banks.
“These lead us to expect China’s augmented fiscal deficit to increase by an economically meaningful 1.5%–1.8% of GDP. However, formal specifics will wait for the ‘dual sessions’ government meetings in March, implying a delay in spending until Q2,” notes Vis Nayar, Chief Investment Officer at Eastspring.
External pressures: Trade War 2.0
External challenges for China’s economy loom large. Earlier this week, Donald Trump warned of a potential 10% tariff on Chinese goods entering the U.S. as early as February 1, escalating trade tensions. This fresh wave of tariffs could significantly hinder China’s economic growth.
“While China has taken steps to mitigate the impact of potential tariffs, the larger scale and broader scope of duties threatened by the new Trump administration, coupled with a weaker domestic economy, make the situation more challenging than the previous trade war,” says Tracy Chen from Brandywine Global.
To counter such risks, China has diversified trade toward emerging markets and focused on technological self-reliance. However, as Chen cautions, the effectiveness of these strategies remains uncertain.
