Back in January, Founding Fuel hosted The World in 2025 Masterclass—a forward-looking conversation on how global power equations, economics, and technology might evolve over the year. One of the key voices then was Professor Yao Yang, dean of the Di-shui-hu Advanced Finance Institute (DAFI), Shanghai University of Finance and Economics. Much has changed since that discussion—and some of what he foresaw has unfolded in unexpected ways. In this episode, we circle back to those ideas: How does China view the Trumpian reset of the global order? Has the world’s perception of China shifted? What’s really happening inside its domestic economy? And are we seeing early signs of a thaw with India? To unpack all this, senior journalist Dinesh Narayanan sits down with Professor Yao Yang.

Here are the seven key highlights from Dinesh Narayanan’s 2025 in Review podcast conversation with Prof. Yao Yang (Read Time: 2 mins): 

1. China’s new assertiveness under Trump’s second term

Prof. Yao noted that China has shifted from a reactive to a proactive and assertive stance in its relationship with the U.S. When Trump re-imposed “Liberation Day tariffs,” China retaliated immediately and symmetrically—150% tariffs answered by 120%. This toughness forced the U.S. back to the negotiating table. Five rounds of talks followed, leading to a one-year suspension of many tariffs and export controls, including those on fentanyl and advanced chips.

2. A “transactional” Trump and Chinese public sentiment

Despite official caution, many Chinese citizens view Trump favourably because he is transactional, not ideological. Unlike Biden—who emphasized alliances and ideological coalitions against China—Trump engages in direct bargaining. “If you give him something, he’ll deal,” Yao said, adding that this approach made it easier for Beijing to engage.

3. Development rights as China’s fourth “red line”

Beyond Taiwan, democracy, and human-rights issues, China’s new red line is its “development rights.” Yao explained this as the right to pursue growth without external constraints—whether through climate targets or technology export controls. China now links it particularly to U.S. restrictions on advanced chips to slow down China's development in AI. In response, Beijing has begun leveraging its own control over rare-earth metals as counter-pressure.

4. Fiscal conservatism and local-debt stress

Domestically, Yao called the government “fiscally conservative like Germany.” Even with total debt approaching 300% of GDP, Beijing insists that local governments repay rather than write off liabilities. He likened this to Germany’s handling of Greece—discipline over stimulus—which he warned could delay recovery by enforcing austerity when demand is weak.

5. Uneven growth and generational divide

China’s consumption support programme is not that huge (about RMB 300 billion). Together with rate cuts, it has boosted spending only modestly. Pensioners’ incomes rose faster than the salaries of the young, creating family tensions. The official youth-unemployment rate for 16 to 20-year-olds is around 18%, though it drops sharply to single digits for those in the 20 to 24 age group. “Parents have higher pensions than their children’s salaries,” he observed—fueling discontent and eroding consumption confidence.

6. Real growth slower than official numbers suggest

The domestic economy is growing at a slow pace, “so people don't feel that the Chinese economy has fully recovered from the Covid pandemic”, he says.

While China’s headline GDP may grow about 5%, Yao estimated that deflation is about negative 1.4% and export growth is at about 6-7%—it is probably going to contribute 1.5 or 1.7 percentage points. Those two, added together, contribute to 3% of China's growth. Which means China's domestic growth is only about 2.2%.

He argues that boosting confidence—and not merely aggregate spending—remains the central challenge.

7. Tentative thaw with India

Yao acknowledged a gradual normalization of China-India relations in 2025. He attributed this partly to both countries facing common U.S. pressure. For stability to last, he emphasized two conditions:

1. Stabilize the border, and

2. Deepen economic ties—including Chinese firms investing and transferring technology to India. He cited Xiaomi as a positive example of Chinese industry taking root under India’s industrial-policy framework.

Coming Soon: 

Episodes with 

• Sundeep Waslekar, President, Strategic Foresight Group and author of A World Without War

• Justin Logan, Director of Defense and Foreign Policy Studies, Cato Institute

• Philippe Le Corre, Senior Fellow on Foreign Policy, Center for China Analysis at the Asia Society Policy Institute, and Professor of Geopolitics and Asian Studies, ESSEC Business School 

• Shyam Saran, former Foreign Secretary, Government of India