As China navigates economic challenges, trade tensions, and AI innovation, Janet Mui(pictured), head of market analysis at wealth manager RBC Brewin Dolphin, tells us why the Year of the Snake symbolises renewal, resilience, and adaptability.
What is the symbolic meaning of the Year of the Snake?
In Chinese culture, snakes symbolise renewal, agility, and resilience. Their cycle of hibernation and shedding skin is often seen as a metaphor for rebirth and regeneration, adding to their aura of mystery. Known for their strategic and calculated approach to hunting, snakes are also associated with intelligence and adaptability. Additionally, their resilience and ability to thrive in challenging environments highlights their strong survival instincts.
What does the Year of the Snake hold for China?
On the economy, there remains multiple challenges, which are both cyclical and structural, as well as both internal and external. The elephant in the room is the struggling property sector, which has depressed investment and suppressed consumer confidence.
Deflation threats result from oversupply and a reluctance to spend, with the view that prices may still go lower. People of working age are also finding it increasingly hard to find a job, or worrying about job security, which challenges income stability and reduces their desire to start a family.
In the Year of the Snake, external challenges will be particularly prominent as U.S. President Donald Trump looks likely to impose trade tariffs on Chinese products.
The Chinese need a renewal of confidence
What is critical for China in the Year of the Snake is a renewal of confidence.
While the Chinese authorities are unlikely to implement a significant fiscal injection due to budget constraints, there needs to be some bolder policy in 2025 to boost confidence with businesses, consumers, and markets.
The housing market plays an important role in creating confidence via the wealth effect, whereby economic behavioural theory suggests that consumers spend more when their wealth increases, even if their income does not. On a positive note, the fall in house prices and sales has stabilised. But a significant reduction in home inventory will take time and demographics remain a challenge to demand in the long-term.
The Chinese tend to have great spending power with a high savings rate. However, people seem reluctant to spend at the moment and the desire to save has risen. Again, confidence is key to unlocking spending power. It is encouraging that the government has pledged to focus more on fiscal policy to support domestic consumption, but more needs to follow through.
Agility and resilience amidst trade risks
We expect that China’s reaction will be agile depending on how the tariff issue continues to develop. So far, President Trump has announced a 10% tariff on China, much smaller than his previous threat of up to 60%. Escalation is probable, as China has vowed to impose retaliatory tariffs on the US.
China will explore all means to boost its economy, including allowing a more competitive exchange rate. It will remain cautious in managing the pace and extent of the yuan depreciation, but it is unavoidable, given the macro fundamentals and trade tariff risks.
The potential trade war between China and the U.S. will pose risks to China, but such threats and constraints will ultimately accelerate China’s transition from exports and investment toward domestic consumption.
Persevere, adapt and innovate in the artificial intelligence (AI) race
One ground-breaking development at the turn of the Chinese New Year is DeepSeek. This Chinese AI start-up has developed a robust, open-source AI model at a fraction of the cost used to train ChatGPT. A lack of high-end graphics processing units (GPUs) due to U.S. export controls forced Chinese AI developers to work with limited resources and constraints, which ultimately sparked innovation and cost efficiency. This revelation has shocked the world but is a reminder of the resilience, agility and survival instinct of the Chinese.
In the Year of the Snake, we are likely to see more technological breakthroughs from China thanks to a strong STEM (science, technology, engineering and mathematics) talent pool, large data sources, industrial facilities, determination, adaptability and a history of innovation. The world will be watching with interest.
