ANALYSING CHINA’S 2025 GOVERNMENT WORK REPORT

China’s 2025 Government Work Report signals a year of both economic management and long-term strategic groundwork. As the country enters the final stretch of the 14th Five-Year Plan (2021–2025), Beijing is framing 2025 not just as a moment for policy execution but as a critical bridge to the next planning cycle. Premier Li Qiang’s delivery of the report at the opening of the third session of the 14th National People’s Congress highlights a focus on socio-economic stability, social security, and infrastructure development amid growing domestic and global uncertainties. Alongside economic priorities, the report highlights social policies aimed at improving healthcare, education, and welfare systems to address demographic shifts and public well-being. While short-term economic management remains a priority, Beijing is also laying the foundation for structural adjustments that will shape China’s future trajectory.

Employment and Debt-Driven Growth

A cornerstone of the 2025 strategy is the ambitious drive to sustain economic momentum through targeted fiscal measures and job creation. Beijing aims to generate over 12 million urban jobs in 2025 while keeping the surveyed unemployment rate around 5.5%. With the current unemployment rate already at 5.1%, this target raises questions. Is the government anticipating job market strains ahead, or is this target leaving room for statistical manoeuvring?  Stability in employment remains a clear priority, reflecting Beijing’s cautious approach to economic vulnerabilities, particularly in the private sector. However, job creation must align with economic restructuring efforts, particularly in the transition from real estate-driven growth to more sustainable sectors.

On the fiscal front, Beijing plans to increase the issuance of ultra-long-term special treasury bonds to 1.3 trillion yuan, a 300-billion yuan rise from 2024. Notably, while 300 billion yuan is earmarked for large-scale equipment upgrades and consumer goods trade-in programs, the remaining 1 trillion is vaguely allocated to “major national strategies”, security capacity, and industrial upgrades. This raises doubts about how the funds will be allocated and whether they will effectively strengthen economic resilience or simply act as temporary measures to address immediate pressures. Simultaneously, local government special-purpose bonds will rise to 4.4 trillion yuan, primarily funding urban redevelopment, transportation, and rural revitalization. If these new bonds fail to generate sufficient economic returns, they risk compounding financial fragility rather than alleviating it.

The National Development and Reform Commission (NDRC) 2025’s directive for party and government bodies to “economize where possible” adds another layer of complexity. It remains unclear whether this signals a broader fiscal tightening or is a rhetorical measure aimed at tempering concerns over rising debt levels. While the report has claimed that infrastructure projects can boost demand, their effectiveness has waned in recent years, making their viability a growing challenge. The key challenge now lies in ensuring they generate sufficient economic returns in 2025 to justify mounting debt. This is particularly evident in the housing sector, which remains a major source of financial strain.

Policy Tweaks or Structural Reform for the Housing Sector?  

China’s real estate sector remains in distress despite a 21.6% increase in new home transactions and a 7.7% rise in second-hand home sales in Q4 2024, following government interventions such as lower down payments, scrapped policy floor interest rates, and eased transaction taxes. However, this uptick reflects policy-driven demand rather than a market recovery, as homebuyer confidence remains weak and developers struggle with excessive debt. Rather than direct bailouts, Beijing’s GWR 2025 approach focuses on localized policy easing, and adjusting property restrictions city by city. While the report acknowledges market fragmentation, it does not address deeper structural issues like excess inventory, declining urban demand amid an ageing population, and local governments’ heavy reliance on land sales (which fell 16% in 2024). Meanwhile, in 2024 the government had subsidized housing expansion and selective financial aid aiming to stabilize key developers and absorb excess inventory, but they have remained as short-term measures.

The broader financial system is also under strain, as local governments deeply tied to the real estate sector face mounting debt crises. Some provinces now owe more than 110% of their annual fiscal revenue, trapped in a cycle of borrowing that relies on land sales and infrastructure projects with minimal returns. With median returns on assets at just 1% and debt interest rates over 5%, many localities are barely staying afloat. The collapse of the property market in 2024 has further eroded their revenue base, making it difficult to fund even essential public services. While Beijing’s restructuring efforts in the GWR report 2025 such as refinancing and bond rollovers, might provide temporary relief, they would  not resolve the underlying fiscal imbalance. A prolonged financial squeeze on local governments could have ripple effects across China’s banking sector.

Compounding these challenges is the stalled implementation of urban hukou reform, which is crucial for stimulating domestic consumption and housing demand. In GWR 2025, China’s urban modernization drive includes hukou reforms aimed at granting permanent residency to rural migrants, yet the only “concrete step” so far has been Premier Li Qiang’s 2024 pledge in the “Two Sessions” to integrate 300 million workers, an announcement that also remains largely unimplemented. This gap between policy rhetoric and execution reflects a deeper contradiction in Beijing’s economic strategy. While expanding social benefits for migrants could stimulate domestic consumption, the government remains unwilling to shoulder the fiscal burden in 2025. As a result, millions of workers would remain locked out of healthcare, education, and housing, limiting their economic mobility and reinforcing China’s two-tiered urban system. 

Progress and Structural Challenges in Social Security

China’s social policies in GWR 2024 reflected a mix of expansion and structural weaknesses. Social security coverage grew, and the NDRC report states that basic old-age insurance covered 1.07 billion people and urban employee participation rose to 530 million in 2024. Pension benefits increased, and old-age insurance unification advanced. However, sustainability remains a pressing concern in the coming years due to a shrinking workforce and regional funding disparities, which threaten long-term stability.  While wealthier coastal provinces maintain stronger benefits,  as poorer regions struggle. Without systemic fiscal reforms, inequalities will deepen despite planned measures in GWR 2025, such as increasing basic pension benefits for retirees, raising the minimum old-age benefits for rural and non-working urban residents by 20 yuan per month, and boosting per capita government subsidies for basic medical insurance by 30 yuan.  

The NDRC 2025 reports that healthcare saw progress in insurance expansion and bulk medical supply purchases, with subsidies rising to 670 yuan per person. Hospital infrastructure improved, reaching 7.38 beds and 3.59 physicians per 1,000 people according to the report, yet accessibility remains deeply unequal, a reality the report avoids acknowledging. Rural areas continue to lag failing to bridge affordability and service gaps. Elderly care and childcare services expanded, yet demand outstrips supply. Community-based elderly care investments increased, and nursery slots for children under three rose to 3.7 per 1,000 people, but affordability remains a major barrier, particularly for low-income families. Government efforts to support vulnerable groups and promote ethnic integration are prominently noted in the report, but uneven local implementation has already limited their impact in 2024, raising concerns about the effectiveness of similar initiatives going forward. 

In 2025, education policy is also shifting to address long-term economic needs. Preschool is set to become progressively free, compulsory education aims to reduce rural-urban disparities, and high school access is expanding. Higher education growth reflects China’s ambition to build domestic talent, yet a glaring issue remains employment. In 2023, youth unemployment surpassed 20%, exposing a disconnect between university curricula and labour market demands. So, plans to expand enrollment in 2025 without job creation risks would have exacerbated this crisis.  

Recognizing this, China is recalibrating its human capital strategy for the next five years. The push to integrate vocational training with general education in the GWR signals a shift from an overproduction of university graduates toward strengthening technical expertise in strategic industries. If executed effectively, this could align labour supply with economic demands, addressing both employment and industrial competitiveness. However, without parallel reforms in economic diversification and job creation, the mismatch between education and employment will persist just like in 2024, undermining long-term social stability.

China’s 2025 Balancing Act

As China enters the final year of its 14th Five-Year Plan, its economic strategy reveals a fundamental dilemma: maintaining stability while confronting deep-seated socio-economic structural risks. Policies aimed at boosting employment, propping up the housing market, and expanding social security offer short-term relief, but they do little to resolve underlying issues like mounting local government debt, a shrinking workforce, and a misaligned labour market. 

The real test for Beijing in 2025 is whether these measures will pave the way for reform or merely postpone a broader reckoning. Without bolder steps toward fiscal restructuring and economic diversification, China risks remaining trapped in a cycle of crisis management rather than building a foundation for long-term resilience. 

Image credit: Xinhua