One day ahead of China’s Two Sessions, I shared my thoughts on Beijing’s economic priorities, the rise of DeepSeek, bloated bureaucracy, private sector, Hong Kong, Taiwan, Donald Trump and more.

reprinted from today's South China Morning Post

China watcher Wang Xiangwei on red tape stifling growth and why Trump may bring calm

China watcher Wang Xiangwei says ‘bloated bureaucracy’ is stifling growth

Journalism professor and former Post editor says China must walk the talk to reassure private sector, with lessons from DeepSeek, Ne Zha

Wang Xiangwei is a veteran China watcher teaching journalism at Baptist University in Hong Kong, and a former editor-in-chief of the South China Morning Post. As a witness to and recorder of key events involving China for more than three decades, Wang talks to the Post on the country’s challenges and opportunities in a fast-changing world. This interview first appeared in SCMP Plus. For other interviews in the Open Questions series, click here.

What can we expect from this year’s “two sessions”? How significant will it be in shaping the trajectory of China’s development in the coming years?

When unveiling China’s economic development plans each year, its leaders would inevitably use the words “momentous” and “extraordinary”, their favourite official catchwords, to describe challenges and opportunities for the past year and the year ahead.

The year 2025 is set to be “momentous and extraordinary” in every sense of those two words.

We can expect liberal use of those adjectives in the high-sounding slogans at the coming two sessions [starting on March 5], but whether China’s leaders will follow up with concrete actions remains to be seen.

In other words, what we expect from the two sessions this year and what the government will deliver can be quite divergent if past experience is any guide.

Premier Li Qiang is expected to announce China’s economic growth target at 5 per cent, which should not come as a surprise. The economy achieved 5 per cent growth in 2024 thanks to a moderate rebound in the final months.

All eyes will be on whether China’s leaders take bolder economic policies and boost domestic consumption to restore confidence and reflate the economy as growing international uncertainties follow Donald Trump’s return to the White House.

Back in 2020, China became the only major economy to expand after the economic and financial damage caused by the coronavirus pandemic.

But it failed to sustain the momentum because of policy missteps, not least because of extreme caution over lifting pandemic controls until late 2022, becoming the last major economy to do so. As the country slid into a deflationary cycle, the leadership waited too long to launch stimulus measures to re-energise the economy – which came only last September.

China should have launched the stimulus package in March 2023, when a new cabinet led by Li was sworn in.

That gives rise to another interesting question: why did Beijing drag its feet for so long?

That is mainly because China’s leaders are still smarting from the aftermath of the 2008 stimulus package, which saw the central government pump 4 trillion yuan (US$551.8 billion) into the economy. Counting the investments by the local governments, the stimulus package totalled at least a whopping 30 trillion yuan (US$4.1 trillion).

All that money quickly revived the economy, with double-digit growth rates, but it has contributed to enormous industrial overcapacity, wasteful white elephant projects, and energy-intensive and high-pollution industries – all issues with which the current government is still grappling.

More importantly, President Xi Jinping might have consolidated absolute power in his own hands over the past 10 years, but the fact remains that local provincial party chiefs still wield considerable influence over local economic and investment priorities.

Another round of monetary and fiscal loosening similar in scale to 2008 would lead to another intense round of poor-quality redundant developments. Every province or municipality would want to have their own electrical vehicle assembly or semiconductor plants.

As a result, the government has decided to use relatively mild easing steps to stimulate economic growth. But its intention to fix long-term structural problems had been overtaken by the short-term crisis of confidence permeating the economy – share prices and property prices fell more than 30 per cent in 2023 and in the first half of 2024.

Beijing has long relied on two traditional engines of growth: exports and infrastructure spending. Now, with Trump’s tariff threats and rising trade tensions with the European Union, China’s export outlook for this year remains bleak. Beijing thus has little choice but to boost domestic consumption, the importance of which the leadership acknowledges publicly but has yet to give top priority to.

China’s efforts so far to boost domestic consumption by providing subsidies to households to upgrade their electrical appliances and vehicles are welcome but clearly not enough.

China needs more concrete actions, including relaxing regulatory and political constraints on private firms and boosting social security benefits for the low-income groups, to make consumers and entrepreneurs feel confident enough to spend again.

The recent symposium between President Xi Jinping and private enterprises sent the strongest ever signal on government support for private business in China. How can the government translate promises to concrete moves to empower the private sector?

The meeting is definitely welcomed. From my point of view, it should have taken place two years ago when China lifted the pandemic controls. Still, better late than never.

China’s economy is facing an uphill battle and needs a more energetic private economy to boost economic growth.

But more must be done to boost confidence. The lack of confidence or “lying flat” tendency among China’s private entrepreneurs is now one of the biggest grey rhino risks for the economy moving forward.

I am pleased to hear that the National People’s Congress [China’s legislature] is fast-tracking the law to promote the private sector and the government has set up the bureau of private economy at the national and local levels. The intention is good.

But many entrepreneurs remain very sceptical. What they really want is an environment where they are treated equally, not a new layer of red tape.

The government can definitely send a stronger signal that they consider the private entrepreneurs as “one of us”. The government has been saying this for the past five years, but we have seen that they are not still considered as “one of us”.

The government must make it very clear to stop the illegal practice of trans-province arrests of entrepreneurs involved in business disputes, or the “distant fishing” – where police are like fishermen who venture far out to sea for their catch.

Illicit profit-driven law enforcement actions by cash-strapped local authorities have sparked fears in the private sector and sacrificed long-term potential by “killing the geese that laid the golden eggs”.

Following Xi’s meeting with private entrepreneurs, the National Development and Reform Commission released a statement, pledging to stop such illegal activities, but I haven’t seen any such statements from the Ministry of Public Security, which is responsible for all those profit-driven law enforcement actions.

The government should also take effective measures to eradicate the rampant use of exit bans. Over the past few years, there have been many cases of private entrepreneurs, many of them Hong Kong-based businessmen and fund managers, being prevented from leaving the Chinese mainland. Such practices are very counterproductive and have made foreign investors and private entrepreneurs wary of the investment climate in China.

China should also promote a positive narrative for the private sector. Over the past four years, due to many reasons including an ideological shift, there had been too many unjustified and biased comments about the private sector, giving rise to very negative sentiments towards entrepreneurs, including resentment towards the wealthy.

China’s decision last year to ban Sima Nan, the leading ultranationalist blogger, from social media for a year was a wise one, for all those biased comments against the private sector will make foreign and Chinese entrepreneurs think twice about their investment plans in China.

A more friendly, conducive and inclusive environment is much needed for private and foreign business to thrive in China.

The success of DeepSeek, the animated blockbuster Ne Zha 2 and the wildly popular game Black Myth: Wukong, all from private producers, offers a valuable piece of experience – the government should refrain from micromanagement. If governments can create a more inclusive and accommodating environment, the private sector will thrive.

Chinese are one of the most hard working and innovative people in the world. They should be allowed to play up their potential without too much red tape.

There have been concerns about whether Hong Kong’s status has diminished and that its future may be on the line. How can the city retain its uniqueness while adapting to new realities?

I moved back to Hong Kong in November 2022 and ever since I have written more about Hong Kong. Following the violent protests of 2019 and the imposition of the national security law, Hong Kong’s status as Asia’s leading financial centre is under pressure and perceptions about the city have changed greatly.

But the fundamentals that underpinned the success of Hong Kong have not changed – clean government, the rule of law and the capitalist way of doing business.

Before 2019, when I travelled overseas and introduced myself as being from Hong Kong, the responses were more friendly and enthusiastic, with very positive comments about the city with its international flavour and vibrant energy.

But nowadays, the reaction I get is a sympathetic smile and suspicions that the city’s “one country, two systems” has become “one country, one system”.

Unfortunately, Hong Kong officials are not helping, nor doing a very good job of dispelling this perception. It is understandable that following the imposition of national security law and pronouncements that Beijing has comprehensive jurisdiction over the city, Hong Kong officials have started to look to Beijing for guidance and detailed instructions.

It also means that Hong Kong’s political elites have begun to adopt the mainland style in language and tone, and spend too much time and effort in pledging allegiance to Beijing. All this has in one way or other deepened the perception that Hong Kong might end up with “one country, one system”.

Hong Kong should be integrated further into the mainland and that’s what it has been doing since it returned to Chinese sovereignty. It should also play its unique role by leveraging the “one country, two systems”. The city can do a better balancing act.

Hong Kong’s value to China is precisely its different system – the unique capitalist system and the international connections. History has also approved it. Beijing has made it very clear that Hong Kong’s “one country, two systems” and Hong Kong’s common law system will continue.

Just like the mainland, Hong Kong also needs to find a better balance between security and development. Since the imposition of the national security law, Hong Kong officials have played up the rhetoric of security threats to the city. This has also created some concerns.

Equally important, there have been lots of concerns about the media in the city and the flow of information. I firmly believe that Hong Kong’s prosperity is determined by three factors – the free flow of capital and goods, the free flow of people, and the free flow of information.

As a professor of journalism, I believe that the Hong Kong media still has a very important role to play. A vibrant media in Hong Kong would enhance the message that “one country, two systems” is still alive and vibrant here.

The Hong Kong government needs to do a much better job in communicating the message that the “one country, two systems” formula is still very much alive and will be maintained.

Mainland officials may lack a clear idea of how to run a capitalist city like Hong Kong. So Hong Kong officials need to be more proactive in communicating the message to Beijing and present a plan for what is best for Hong Kong, or the most effective ways to move Hong Kong forward in line within “one country, two systems”.

Apparently because Hong Kong officials failed to communicate well-articulated plans on how to move forward to Beijing or because they are not seen as doing enough, Chinese officials feel compelled to issue detailed instructions to the Hong Kong government.

While the intention is to help the city, inadvertently it is worsening the perception about Hong Kong becoming “one country, one system”.

The central government and Hong Kong should figure out new parameters and talk through what can be done and cannot be done under the new circumstances.

There are also concerns that bureaucratic inertia and formalism, with officials afraid of making mistakes that could jeopardise their careers, have become a major obstacle to China’s economic recovery. How can Beijing motivate local cadres?

It is important for China to streamline the government.

Ever since Donald Trump came to power on January 20, he and Elon Musk have waged a war against the US federal bureaucracy. So far Chinese officials are just happy being bystanders. This shouldn’t be the case. Instead, they should be inspired to look at their own bloated bureaucracy. China’s bureaucracy has become one of the biggest stumbling blocks to boosting its economic growth.

The party leadership’s campaign to fight formalism and bureaucratism is headed by Cai Qi, President Xi’s chief of staff. It indicates the importance that the leadership attaches to the problem. But so far, the campaign has focused only on symptoms rather than the root cause. It has focused on reducing the burden for officials swamped by mountains of paperwork and endless meetings, leaving them little time to perform their duties.

Over the past 10 years, China’s bureaucracy has become increasingly bloated, excessive and intrusive. There are so many bureaucrats within the government who are merely just going through the motions to justify their jobs.

The current leadership should also learn from former chairman Mao Zedong’s move of streamlining the military and reducing bureaucracy in 1941, years before the People’s Republic was founded. The bureaucracy and the military would account for the majority of the budget, which was unsustainable. Mao listened to the advice of scholars and launched the streamlining campaign in the Communist-controlled areas.

Some cynics may question my suggestion. Their argument is at a time when the Communist Party wants to strengthen controls at all levels of society, why would the government want to “turn the blade inward” to cut the bureaucracy.

My argument is: why not? China’s leadership publicly acknowledges that the bureaucracy has hindered economic recovery. Second, a number of regional governments in Zhejiang and other provinces have started to use DeepSeek to reduce paperwork and improve communication. Third, many cash-strapped local governments who are finding it tough to pay civil servants and public sector workers can take a serious look at cutting bureaucracy to ease their financial burden.

In recent years, the party’s anti-corruption investigators have gone after cases involving local officials from more than 20 or 30 years ago, when some of the rules and regulations were practically nonexistent. This is counterproductive, to some extent. I do agree China should do more to discipline officials but it may be better to just focus on the issues of recent years.

Delegation of power and streamlining the layers of approval would also help to better motivate officials.

Is China still uninvestable for foreign investors, and how can Beijing strike a balance between anti-espionage investigations and retaining foreign investment?

Foreign investors in China have faced similar challenges as the private sector, such as excessive non-economic policies and unexplained fines. They have heard so many high-sounding slogans too many times over the past years but have seen too little action.

Foreign investors are watching this very closely: if China has not treated its own private sector fairly and equally, how can they expect them to be treated better?

Amid China’s geopolitical and ideological confrontation with the United States and the EU, foreign investors are under pressure from all sides. Back in 2022 and 2023, some investors labelled China as uninvestable. I think China has realised the problem and I can see that the leaders have started to improve the investment climate. It can do much more to restore confidence and move to a new phase, that the next China is still China.

China has benefited so much from globalisation through reform and opening up. The entire world is undergoing deglobalisation, but Beijing has made it very clear that it will continue to champion globalisation. It is a moment for China to match its words with actions. And the best way for China to counter the decoupling pressure from the West is to open up further to foreign investment and adopt world-class standards such as listed in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the investment pact it has applied to join.

Meanwhile, it needs to find a better balance between national security and development. The government has ramped up the propaganda machine to create a positive narrative about bright prospects of the Chinese economy, but it is not helping. It should improve the policy of coordination, the transparency of the decision-making process so as to boost expectations.

Any country has the right to strengthen its national security, but if we look at the practices of other countries, counter-espionage activities are usually conducted in a very low-key and discreet manner. The high profile campaign, such as encouraging the public to look for spies or posting slogans over the streets of cities, is not conducive to attracting foreign investment, nor in harmony with Beijing’s efforts to welcome foreign investors and tourists.

How soon may Trump meet Xi to prevent bilateral relations from entering a downward spiral? What should China do to prepare for the Trump shock?

Since Trump’s inauguration, all the tentative signs have pointed to a better-than-expected start in bilateral relations in the Year of the Snake. The relationship could be heading for a period of relative calmness, although how long that will last is anyone’s guess.

The past month has shown that both Beijing and Washington have tried not to antagonise each other further. Chinese media have refrained from criticising Trump but talked up the prospects of win-win benefits for both countries and for the world.

The fact that Xi sent Vice-President Han Zheng to attend Trump’s inauguration ceremony, his phone call with the new president, and Beijing inviting the American rock band OneRepublic to perform in China’s Lunar New Year Gala, the nation’s most watched television programme, were all unusual moves and sent strong signals.

Given the many China hawks in the Trump cabinet, the president could ironically be the most pragmatic and reasonable person on China in the line-up. And Trump’s tone on China has been relatively mild so far.

I believe Trump and Xi are going to meet in person very soon. I believe Chinese and US officials are working behind the scenes to reach a deal to stabilise bilateral relations and to agree on tariffs at a level tolerable to both sides.

During Trump’s first term, some Chinese nationalists liked to call him Chuan Jian Guo, or “Trump the nation builder”, implying his presidency would undermine US international influence and boost China’s global standing. But now there has been little mention of that. This is partly because the US economy has emerged from the Covid-19 pandemic much stronger, and Trump 2.0 may not be all gloom and doom as was widely expected.

His announcement of Section 301 investigations and investment curbs are negotiation tactics, and so far China’s reaction has been moderate and restrained. China knows much better how to deal with Trump this time and will do a much better job of appealing to his transactional nature. The confrontation between the two countries will continue in the years to come, but right now we’re looking at a period of relative calmness, and both sides expect to talk things through.

There are some concerns that a warming of the US-Russia relationship could come at China’s expense. And the concerns are valid. But I don’t think [President Vladimir] Putin would be foolish enough to burn the bridges with China just because the US is talking to Russia. Analysts in China are watching closely the rapid changes in geopolitical developments but I don’t think Chinese officials are unduly worried.

How should Beijing handle the issue over Taiwan in managing relations with Trump?

The Joe Biden administration had intensively moved closer to Taiwan over the past four years, plunging relations with Beijing to a four-decade low. Biden was also the first US president since 1982 to not have visited China.

But China has made it crystal clear that it will never make concessions over the issue of Taiwan. Trump is clear about it and about Beijing’s red line. He is unlikely to follow the policy of his predecessor by excessively provoking Beijing over the issue.

For Trump, the importance of Taiwan to the US is only chips and onshore production of semiconductors. His support to the island is not expected to be as pronounced as it was during Biden’s presidency. Taiwan is facing a dilemma. The issue of Taiwan is always an issue between Beijing and Washington.

Meanwhile, Beijing is expected to become more dismissive of international criticism over Taiwan and the South China Sea, especially from the US. Even before his inauguration, Trump said he wanted to make Canada the 51st US state, that he did not rule out using military force to take Greenland or the Panama Canal, and has since renamed the Gulf of Mexico as the Gulf of America. In this scenario, Beijing will be even more justified in refuting the accusations from the West over Taiwan and the South China Sea.

But China needs to be clear that its influence is determined by its economic power. China is facing major economic challenges, such as deflation and a lack of confidence. Amid the rapid changes in the global situation, China is expected to focus more on fortifying economic resilience, though the geopolitics and Trump’s policies are expected to create opportunities for Beijing to double down on efforts to amend ties with major trading partners, including the EU, Japan, and South Korea.

There is a revival of traditional culture in China, especially among the young generation. How can China strengthen its soft power? What are the challenges and opportunities for the young Chinese?

The success of DeepSeek, Ne Zha 2 and Black Myth: Wukong are very telling of China’s soft power and helpful to reverse the negative perceptions of China in the international community.

It again matters how to tell a good China story. The key lies in the creation of a more tolerant, inclusive and harmonious environment. A thriving private sector will lead to more successes like Ne Zha and Black Myth.

Artificial intelligence poses both opportunities and challenges. While it is making swift progress in uncrewed technology such as unmanned driving and delivery, China needs to carefully address the possible impact on tens of millions of ride-hailing drivers and delivery workers. China should nurture the spirit of craftsmanship and bolster the service sector to create massive job opportunities.