Small business explainer: What’s Going On in the World in 2025? Part 1 – China

In the second half of 2024, questions that frequently came up in coaching sessions were: “What is going on in the world? What does it mean for Australia, and how might it impact my business?”

These questions were based on global and local factors:

China: We heard about the Chinese economy faltering and the Chinese government having to provide stimulus.

Trump policies: We heard Donald Trump was going to impose big tariffs on other countries and then learned he will become President again.

Australian productivity: We kept hearing about Australia’s productivity problem, but no one seemed to have a clear perspective on how to address it.

Understanding World Changes in 2025 and What They Mean for Your Small Business: Part 1 – China

My role as a business coach for small businesses is to help clients understand and interpret these topics as they apply to their own businesses.

I’m going to start the year’s briefings by trying to decode what you might hear in the media. I’ll also give you signals to watch for so you can steer your business, all the while avoiding the noise.

I’m writing this as a 3-part series covering China, the US and then Australia. Let’s start with China.

China has many issues it is dealing with. I’ll summarise the 3 key issues then I’ll explain what it means for Australia, what signal to watch for and what to do as a business owner. If you want to read more, I’ve included references at the end of this section.

Issue 1. China’s population is getting old

As I noted in my briefing on China’s population and property ownership (you can revisit it here: Indicators to Watch in the Next 3-5 years | Oct 2023), China is expecting an 18% increase in retirees in the next 2 decades.

This means there will be less people in the future who will be of working age. With less people working, the country will struggle to collect more taxes to pay for government services. It is exactly at this time, when older people are a higher percentage of the population, that the Chinese government needs more tax income to provide healthcare and retirement support. This was caused in part by the ‘one child policy’ China had in place for 35 years.

Summary point: China’s ageing population is a social challenge that will become a financial problem for the country.

Issue 2. China heavily relies on manufacturing production and then exporting these goods to other countries

This economic formula has made been the major contributor to their success over the last 25 years, providing jobs and raising the living standards across much of their population. With countries like Germany worried that China is looking to replace global sales of BMWs and Audis with Chinese-made BYDs, many countries are wary of cheap Chinese imports. The US put tariffs on Chinese imported goods to protect their own manufacturing industry.

Summary point: China’s manufacturing industry is out of favour with much of the rest of the world.

Issue 3. Chinese provinces (equivalent to Australian states) have very high levels of debt

Many Chinese have moved from farming in regional areas into cities in industrial provinces to work in the factories. The Chinese provinces have invested in transportation infrastructure such as roads, railways and airports, utilities infrastructure such as water, electricity and gas supply and social infrastructure such as education and healthcare. Because the increase in urbanisation of the Chinese people has been so rapid, the investment in infrastructure spending required huge levels of borrowing.

Summary point: Normally, infrastructure in most cities is built up over time, allowing for it to be funded based on taxes. China has had to borrow significant amounts to keep up with the speed at which infrastructure is required.

What do these factors in China mean for Australia?

While none of these things are necessarily important to Australians, the tax we receive in Australia from mining companies like BHP is extremely reliant on the continued success and growth of the Chinese economy. Consider the three factors above in context to Australia:

1. As the population of China shrinks, they have less need for new housing, therefore less iron ore and metallurgical coal is required to produce steel for construction.

2. If the Chinese manufacturing sectors doesn’t grow as fast as they have previously, then less factories requiring steel will be built and less thermal coal will be required to power Chinese factories.

3. If the urbanisation of China slows down and the Chinese provinces begin to struggle with servicing their high debts, then less infrastructure will be required and built, and less mined minerals will be exported from Australia.

If the Australian federal government doesn’t receive as much tax from the mining companies and there aren’t as many well-paid mining employees spending their wages, this will have an impact on Australia’s prosperity.

Signal to watch: Iron ore price

Source: https://www.marketindex.com.au/iron-ore

What we can then expect:

• A lowering of the global price of iron ore from its current level at around US$100/tonne.
• Big federal government budget deficits.

What to do as a business owner:

• Prepare your business for a time when the Australian economy doesn’t grow as fast as it has. This could include an Australian recession.
• Prepare for government services being wound back and governments increasing taxes. We are experiencing the start of this in Victoria with cuts to road maintenance and healthcare services and many taxes being introduced and increased.

Next up: The US

• President Trump’s policies: trade, deals and tariffs
• How they might impact Australia
• Signal to watch
• What to do as a business owner

Related article: Small business explainer: What’s Going On in the World in 2025? Part 2 – Trump’s US

If you have any comments or questions about the information in this briefing, please contact our team.

Additional reading on the topics covered in Part 1: China

• https://www.linkedin.com/posts/chris-richardson-0086441b6_chinas-real-estate-challenge-activity-7281120827046076416-71-y/
• https://paulkrugman.substack.com/p/stagnation-with-chinese-characteristics
• https://www.aspistrategist.org.au/the-australian-goose-that-lays-the-multi-billion-dollar-iron-ore-eggs/
• https://on.ft.com/4g39xR1: The China commodities supercycle is over. Will there be another?

Cheers,
Ash

Ashley Thomson B.Eng. (Hons), Grad. Dip. Mgmt, MEI
Managing Director
Tenfold Business Coaching