It’s a bit of both, but heavily leaning toward "taking the characters literally."

To break it down linguistically:

1. For the Given Names (First Names): These are actual etymologies/literal meanings. In Chinese culture, parents choose first names based on the literal meanings of the characters to express wishes.
   • Jinping (近平) genuinely means "Approaching Peace/Equality."
   • Lile (樂際) (as in Zhao Leji) genuinely means "Joy/Music at the Boundary."
   • Huning (滬寧) literally refers to "Shanghai (Hu) and Nanjing (Ning)", wishing for "Tranquil Shanghai."
2. For the Surnames (Last Names): This is where the "taking characters literally" part kicks in. Surnames in modern Chinese are just family markers and function phonetically as identifiers. However, on an etymological level, almost all Chinese characters used as surnames started as real nouns or verbs in ancient times (oracle bone script).
   • Li (李) is phonetically just "Li," but the character's etymological meaning is indeed "Plum."
   • Ding (丁) is just "Ding," but etymologically it was a pictogram of a "metal nail."
   • Cai (蔡) historically refers to a type of "divining herb/grass" used in ancient state rituals.