What We Got Wrong About China in 2025
The system revealed itself in fragments. We misread the pieces.
Most people entered 2025 expecting China to either collapse or charge outward. Neither happened. Instead, China spent the year stabilizing decline by tightening incentives, narrowing information flows, and performing confidence with greater discipline than before.
The surface remained calm. The machinery underneath kept grinding.
When analysts missed the mark this year, the issue was rarely about prediction. It was about visibility. A system this large and this opaque rewards anyone who studies incentives and governance, and punishes anyone who studies headlines.
The broader analytic community misread China in 2025 because it watched events instead of following incentives, and the system rewarded that focus with distortion. This is not a list of errors. It is a correction in method. I saw parts of the system clearly because I approached China through a lens of governance and incentives. And I missed others because internal distortions accelerated faster than any external signal suggested.
These misreads reveal a deeper pattern in how China will behave in 2026. The system evolves through constraint, not adaptation, and that creates risk in directions most observers still overlook.
Here are the five misreads that shaped our understanding of China in 2025.
1. Misread: Treating official economic data as meaningful signals
Many analysts approached China’s 2025 macro picture as if the data still reflected economic reality. They tried to forecast growth through traditional models and treated official releases as imperfect but usable.
What actually happened: A set of internal information controls shaped the economic picture analysts tried to read in 2025.
The youth unemployment rate disappeared from release schedules well before 2025 and never returned.
Multiple provinces revised debt figures downward while simultaneously requesting emergency liquidity support.
Several key industrial output indicators fluctuated without underlying changes in demand.
Local government financing vehicles hid liabilities by transferring them to affiliated entities.
These patterns reveal deliberate political control over visibility.
Why the misread happened: Analysts projected Western data norms onto a system that treats metrics as political tools, not measurements. Market models assume transparency. Beijing assumes hierarchy.
2. Misread: Interpreting governance as reactive instead of proactive
Commentary often framed China’s domestic actions as responses to economic slowdown, public dissatisfaction, and geopolitical pressure. The assumption was that China governed reactively, in crisis mode.
What actually happened: Governance campaigns followed a pattern that carried forward into 2025 and shaped the domestic landscape analysts were trying to interpret.
Provincial discipline campaigns began before any public scandals broke.
Fiscal tightening occurred months ahead of expected liquidity stress.
Ideological rectification campaigns intensified even as public sentiment appeared stable.
Technology export controls were drafted before the West finalized its restrictions.
In each case, China shaped the constraint environment in advance. Governance was used as a tool to prevent uncertainty, not to respond to it.
Why the misread happened: Western frameworks often assume governance is a tool of public service or crisis stabilization. In China, governance is a tool of strategic pressure, designed to create stability by narrowing options for everyone inside the system.
3. Misread: Expecting modernization to produce military confidence
Many observers assumed that a modernizing PLA would behave like a modern professional force: more confident, more capable, more willing to execute complex operations.
What actually happened: The PLA entered 2025 with a command climate shaped by earlier purges, and ongoing investigations reinforced that pressure throughout the year.
Several Rocket Force units also saw leadership turnover that replaced technically skilled officers with politically reliable ones.
A joint exercise in the Southern Theater Command relied heavily on scripted operations and pre-cleared maneuvers.
Commissar oversight increased in frontline units to ensure political discipline during training.
Reports surfaced of officers delaying decisions during exercises for fear of post-event political scrutiny.
These patterns reflect a military that follows orders precisely because it cannot afford initiative.
Why the misread happened: Western analysts often assume modernization leads to autonomy and initiative. In China, modernization increases the stakes of political obedience. The PLA is updated, but it is not empowered.
4. Misread: Seeing narrative as messaging instead of battlespace
Many analysts saw China’s rhetoric in 2025 about sovereignty, rejuvenation, or external hostility as propaganda for domestic consumption.
They missed the central fact: narrative was the battlespace. China governed identity, legitimacy, and perception as strategic terrain.
What actually happened: China’s narrative strategy operated on a long arc, and the 2025 information environment reflected patterns already in motion.
The rollout of “Taiwan Restoration Day” created an annual, state-sanctioned historical claim to sovereignty.
State media coordinated multi-week arcs around “economic confidence” unrelated to underlying performance.
Chinese embassies deployed synchronized messaging across X/Twitter, Facebook, and YouTube to shape diaspora sentiment.
Messaging around “strategic helplessness” lowered expectations of international responsibility while deepening ties with Global South partners.
The structure and coordination show that these campaigns functioned as governance, not messaging.
Why the misread happened: Analysts underestimated the extent to which the CCP sees narrative as a system for governing reality, not describing it.
5. Misread: Projecting Western political incentives onto China’s leadership
A common theme in 2025 analysis was the assumption that domestic pain, economic stagnation, or diplomatic pressure would force Beijing to moderate.
What actually happened: China’s leadership continued making choices that prioritized political control over economic performance, reinforcing patterns analysts struggled to interpret in 2025.
Several coastal provinces postponed economic liberalization that would’ve boosted growth because it risked elite autonomy.
Anti-corruption purges expanded into sectors that were already struggling economically.
Social campaigns replaced policy adjustments in youth unemployment, housing, and fertility, reinforcing political goals at the expense of economic ones.
Provincial and municipal leaders prioritized ideological discipline over local revenue targets.
These patterns reflect the system functioning exactly as it was built to function.
Why the misread happened: Western analysis often conflates economic incentives with political incentives. China does not. The CCP governs risk through control, not performance.
Collection Priorities: What to Watch Instead
For intelligence professionals recalibrating collection priorities, these misreads point toward specific indicators that matter more than traditional metrics:
Track personnel movements inside governance institutions, not just policy announcements. Leadership reshuffles, commissar assignments, and discipline campaigns signal strategic direction months before public policy shifts.
Monitor information control patterns rather than the information itself. When Beijing changes what it measures, hides, or emphasizes, those choices reveal strategic priorities more clearly than the underlying data.
Focus on constraint mechanisms over capability assessments. How China limits its own options—through regulations, campaigns, or structural changes—predicts behavior better than measuring what it could theoretically do.
Watch for preemptive governance moves in provinces and sectors before problems become visible. Early tightening signals where Beijing expects pressure, often well ahead of economic or political indicators.
These patterns become visible through governance analysis long before they surface in traditional economic, military, or diplomatic reporting.
Misreads occur when familiar frameworks get projected onto a system built around control, incentives, and information asymmetry. When you examine China through those mechanisms, the patterns become visible long before they surface.
The year ahead will test how far Beijing can push its governance model abroad and how much pressure the system can absorb at home. To see what comes next, we have to track the incentives, not the signals.
Coming next Tuesday:
Five Strategic Gambits Beijing Will Attempt in 2026 (and Their Hidden Weaknesses)
We’ll examine the moves Beijing is most likely to make in the year ahead and map the structural vulnerabilities embedded in each one.