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12 October 2022

How not to deal with a rising China: a US perspective

Joseph S. Nye

Abstract

Will China displace the United States as the world's leading power by the centenary of Communist rule in 2049? The outcome will depend on many unknowns including what the two countries do over the next three decades. US leaders are likely to rely on their mental maps of how the world works. The primary sources of their mental maps tend to come from historical analogies and from international relations theories. Both are highly imperfect representations of reality. Historical metaphors and analogies are rife in the debate over how to understand the current rise of China, but three are particularly salient: a Thucydides trap; a new Cold War; and 1914 sleepwalkers. This article discusses the merits and demerits of relying on each of these analogies in turn, and assesses the strengths and weaknesses of prior mental maps that guided US policy-makers during the post-Cold War era. Chinese elites expect to replace the US as the leading global power by 2049. How should the US respond? Two prevalent historical analogies are misleading: a Thucydides trap about power transition, and a new Cold War that ignores the three-dimensional nature of US–China interdependence. More promising is the cautionary narrative of sleepwalking into the First World War. A successful strategy must lay out conditions for a cooperative rivalry starting with a careful net assessment of power resources and the formulation of feasible goals.

Will China displace the United States as the world's leading power by the centenary of communist rule in 2049? Former Singapore prime minister Lee Kuan Yew believed primacy to be a natural aspiration, but doubted China could do it.1 Others such as China's incumbent president Xi Jinping aspire to make it happen.2 Will China succeed in what Rush Doshi calls its ‘grand strategy of displacing American power’?3 The outcome will depend on many unknowns, including what the two countries do over the next three decades. Some see China declining after failing to escape the ‘middle-income trap’.4 One could also imagine a plateau based on its demographic decline and low factor productivity. Not even Xi Jinping knows the answer. His own ‘China dream’ and any other linear projection could be falsified by unexpected events such as a war over Taiwan or a financial crisis. Here again, estimates of probability vary.5 There is never a single future, only many possible scenarios; and which of those become more probable will depend in part on what strategy the United States chooses to respond to whatever China does.

How, then, should policy-makers deal with this uncertainty? Most simply react to events according to their gut instincts; but, as John Maynard Keynes famously warned a century ago, such practical persons are often prisoners of some defunct scribblers whose names they have long forgotten. From my experience, the primary sources of their mental maps tend to come from historical analogies and from International Relations (IR) theories. Both are highly imperfect representations of reality.

Mental maps from IR theory

There are many flavours of IR theories, but the two most prevalent are realism and liberalism. Realists see the world in Hobbesian terms of a war of all against all where only the fittest survive, while liberals see a possibility of Lockean social contracts. In oversimplified terms, each of these models suggests a different mental map to guide the American response to the rise of China.

Over the centuries, realism has been the standard model of international affairs, the mental map that is shared by most policy-makers. But even for those who accept a realist model difficult choices remain, because there are many variants of realism. The classical realism of a Hans Morgenthau allows for managing a balance of power relationship with accommodation and spheres of influence, while the structural offensive realism of a John Mearsheimer foresees the failure of restraint and a higher probability of war.6 Other variants of realism focus on the changing balance of power between an existing hegemonic power and a rising challenger, and see the prospects of conflict arising from their failure to manage the hegemonic transition. For some, such as the political scientist Robert Gilpin, the structural problem lies in the rising power of a challenger like Germany before 1914, but for others such as the economist Charles Kindleberger, the disaster of the 1930s was the failure of the rising United States to produce global public goods such as international order and an open economy as it replaced a weakened Britain.7 In one variant, the rising power comes on too strong; in the other, it is too weak. As Janice Stein pertinently points out in her article for this special issue,8 we should pity the policy-maker who turns to hegemonic transition theory for a recipe describing how to respond to a rising China.

Historical metaphors and analogies

These theoretical differences are often simplified as ‘lessons of history’, as though the bright light of the past could shine through the fog of an uncertain future. While history is an important partial guide to policy, it must be handled with care.9 In the possibly apocryphal words of Mark Twain, at best history sometimes rhymes, not repeats. All too often history lessons are oversimplified and misused as though the future will resemble the past. As the distinguished historian Ernest May used to remark, every time policy-makers are tempted to be guided by a historical analogy, they should draw a line down a piece of paper and list on one side ‘similarities’ and on the other ‘differences’.10 Historical metaphors and analogies are rife in the current debate over how the United States should manage the rise of China, but three are particularly salient: a Thucydides trap; a new Cold War; and 1914 sleepwalkers.

Thucydides' trap

Many people have noted the similarities of the structural situation of the rise of China with Thucydides' account of the rise of Athens.11 Even China's president has noted it. Thucydides argued that the underlying cause of the devastating Peloponnesian War was the rise in the power of Athens and the fear that created in Sparta. By analogy, the rise in the power of China and the fear it creates in the United States could precipitate a war today. Fewer note differences in the nature of the respective contenders, such as the fact that that Athens was a democracy while China is an autocracy, or that Sparta was an inward-looking land power while the United States is a global naval power; or dramatic differences in context, such as the existence of nuclear weapons or the problem of global climate change. And Hal Brands and Michael Beckley argue that China is a peaking or declining power, and that war could arise from Chinese elite fears that its window of opportunity is closing.12

Graham Allison has attempted to quantify cases of hegemonic transition since 1500 and argues that twelve out of his 16 cases have led to major war; but his statistics and methodology have been challenged by other social scientists.13 It is not clear what constitutes a ‘case’. For example, Britain was the dominant world power in the mid-nineteenth century, but it let Prussia create a powerful new German empire in the heart of the European continent through three wars from which Britain abstained. Of course, Britain did fight Germany half a century later, but there were many ups and downs in the relationship before that. If that history is disaggregated into several cases, it changes the statistics. Moreover, the First World War was not a simple Thucydides trap in which an established Britain responded to a rising Germany. In addition to the rise of Germany, that war was caused by the fear in Germany of Russia's rising power, the fear of rising Slavic nationalism in a declining Austria-Hungary, and myriad other factors that differed from those pertaining to ancient Greece.

And transposing historical situations to current events ignores important differences between situations: for example, the fact that today's power gap between the United States and China is much greater than that between Germany and Britain, for Germany had already overtaken Britain well before 1914. Even the classical Greek case is not as straightforward as Thucydides made it seem. He claimed that the cause of the second Peloponnesian War was the growth of the power of Athens and the fear it caused in Sparta. But the historian Donald Kagan argues that Athenian power was in fact not growing. Before the war broke out in 431 BC, the balance of power had begun to stabilize. It was Athenian policy mistakes that made the Spartans think that war might be worth the risk.14 Athens' growth had caused the first Peloponnesian War earlier in the century, but then a thirty-year truce doused the fire. Kagan argues that to start the second, disastrous war, a spark needed to land on one of the rare bits of kindling that had not been thoroughly drenched but rather continually and vigorously fanned by poor policy choices. In other words, the war was caused not by impersonal structural forces, but by bad policy decisions. Piling up logs may increase the potential for a fire, but that structure can also serve as a warning against playing with matches.

So what should a policy-maker conclude are the lessons of history for how the United States should respond to a rising China? If the second Peloponnesian War was caused in part by the rise of Athenian power, it was also caused by the fear created in Sparta. American policy-makers may not be able to control the rise in the power of China, but they can affect the degree of fear that it creates in Washington. Exaggeration can mobilize domestic support, but if it is excessive and leads to miscalculation, that would be the ultimate Thucydides trap.15 Metaphors from Greek history can be useful as general precautions, but they become dangerous if they convey a sense of historical inevitability. Maybe the better lesson from Greek history is from the Odyssey: ‘Beware of Greeks bearing gifts.’

Moreover, as mentioned earlier, there is a second problem related to hegemonic transition that can be called the ‘Kindleberger trap’. The MIT economist Charles Kindleberger argued that the disasters of the 1930s were caused when the United States replaced Britain as the largest global power but failed to take on Britain's role in providing global public goods. The result was the collapse of the global system into depression, genocide and world war. Today, as China's power grows, will Beijing help provide global public goods? At the global level, public goods—such as a stable climate, financial stability or freedom of the seas—are provided by coalitions led by the largest powers because they can see the effect and feel the benefit of their contributions. When those powers do not do this, global public goods are underproduced. When Britain became too weak to play that role after the First World War, an isolationist United States continued to be a free-rider, with disastrous results.

To date, the record is mixed. Chinese leaders talk about public goods; China is now the second-largest funder of UN peacekeeping forces, and heads four of the 15 most important UN agencies. China has also benefited from multilateral economic institutions—but, like other powers, it tries to manipulate these institutions to serve its own interests.16 China has also created parallel institutions such as the Asian Infrastructure Investment Bank (where it has a veto), and uses its Belt and Road Initiative to compete with the United States.17 China offers public goods on its own terms, and seeks to tilt the rules in its favour.18 When the Philippines challenged China's territorial claims in the South China Sea, China rejected the judgment of the Permanent Court of Arbitration in The Hague.19 At the same time, in some areas such as non-proliferation or climate change, China's behaviour has become more cooperative over time. It is neither a purely revisionist nor a purely status quo power. Its behaviour illustrates both the Thucydides and the Kindleberger versions of the structural dilemmas of hegemonic transition. Competition is most likely, but metaphors that focus only on competition can blind policy-makers to areas of cooperation. Ancient Greek history, and its application to the onset of the two world wars, can provide useful cautionary notes but not policy answers.

A new Cold War

The rhetoric of a Cold War has proven useful for political leaders seeking to mobilize domestic political support, and the metaphor is used by some analysts to describe a prolonged conflict. The distinguished historians Hal Brands and John Gaddis answer ‘yes and no’ as to whether the world is entering a new Cold War.20 Some say that President Donald Trump launched a new Cold War, but Trump was not the sole source of the problem. He poured petrol on a smouldering fire, but it was China that lit the fire.21

After the Great Recession of 2008 called American leadership into question and increased belief in American decline, Chinese leaders abandoned Deng Xiaoping's strategy of hiding capacity and biding their time and became more assertive, in ways ranging from building artificial islands in the South China Sea to economic coercion of Australia to abrogating guarantees to Hong Kong. On the trade front, China tilted the playing field with subsidies to state-owned enterprises, coercive intellectual property transfer and cyber theft. Trump clumsily responded with a tariff war that included penalties on allies as well as on China, but he defended the US against Chinese companies such as Huawei, whose plans to build fifth-generation (5G) telecommunications networks posed a security threat.22 Some people in Washington began to talk about a general ‘decoupling’; but it is a mistake to think that the United States can decouple its economy completely from China's without incurring enormous economic costs.

That is why the Cold War metaphor can mislead US policy-makers about the nature of the challenge they face from China. In the real Cold War, the Soviet Union was a direct military and ideological threat, and there was almost no economic or social interdependence in the relationship. Containment was a feasible objective. With China today, the United States has half a trillion dollars in trade and millions of social interchanges, including those of students and visitors. Moreover, with its ‘market-Leninist’ political system, China has learned how to harness the creativity of markets to authoritarian communist party control in a way the Soviets never mastered. China cannot be contained in the same manner as the relatively weak Soviet economy. More countries have China than the United States as a major trade partner, and while they want an American security guarantee against Chinese military domination, they are not willing to curtail their economic relations with China as Cold War allies did with the Soviet Union.23

Interdependence is a double-edged sword. It creates network effects of sensitivity to what is happening in other countries, and can thus foster caution and deter rash actions. But where it is asymmetrical, it also creates vulnerability, which can be used as a political weapon by the less vulnerable party.24 That is what makes the current relationship with China so different from the Cold War. With the Soviets, the United States was involved in a standard two-dimensional chess game in which it was highly interdependent in the military sphere but not in economic or transnational relations. With China, the United States is involved in a three-dimensional game with different power distributions at each level. At the military level, the world is still unipolar and the United States is the only global power; but at the economic level, the distribution of power is multipolar, with the United States, China, Europe and Japan as major players—and on the transnational level of interdependent networks that lie outside the control of governments (such as climate and pandemics), power is chaotically distributed and no one country is in control.

And when they look at the economic level, US policy-makers have to remember that while symmetrical interdependence can restrain conflict, asymmetrical interdependence creates a weapon for wielding power. They have to plot carefully horizontal moves on the traditional military board of chess (or weiqi if one prefers a two-dimensional Chinese metaphor).25 However, if they ignore the power relations on the economic or transnational boards and the vertical interactions among the boards, the United States will suffer. If you play only two-dimensional chess in a three-dimensional game, you will lose. A good strategy for China must encompass all three dimensions of the interdependence, and the Cold War metaphor is too closely locked into the traditional two-dimensional chess model.

Moreover, the United States and its allies are not threatened by the export of communism in the same way as in the days of Stalin or Mao. There is less proselytizing now than during the real Cold War. Few people today take to the streets or jungles in favour of ‘Xi Jinping thought with Chinese characteristics’. Instead, the problem the United States faces is a hybrid system of economic and political interdependence which China can manipulate to support authoritarian governments, and influence opinion in democracies to prevent criticism of China—witness its economic punishment of Norway, South Korea and Australia after they angered China. As noted above, China has become the leading trade partner of more countries than the United States. Partial decoupling on issues with security implications, such as that of Huawei, is appropriate; total economic decoupling, however, would not only be costly, but—in contrast to the Cold War—would prompt few allies to follow suit.

Moreover, with regard to the ecological aspects of interdependence, such as climate change and pandemics, the laws of physics and biology make decoupling impossible. No country can solve these transnational problems alone. The politics of global interdependence involves power with others as well as over others.26 For better and for worse, the United States is locked in a ‘cooperative rivalry’ with China, in which it needs a strategy that can accomplish two contradictory things at the same time. This is not like Cold War containment.

Meeting the China challenge will require a more complex strategy that leverages US hard and soft power resources at home and abroad to defend a favourable rules-based system.27 Some pessimists look at China's population size and economic growth rates and believe that the task is impossible. On the contrary, if the United States treats its allies as assets, the combined wealth of the western democracies—the US, Europe, Japan—will far exceed that of China well into this century. But allies do not all see China in exactly the same way the United States does.28 Rhetoric about a new Cold War may have more negative than positive effects in the maintenance of alliances. The metaphor of a Cold War may be useful for recruiting domestic political support, but counterproductive as a strategy overseas.29

1914 sleepwalkers

The fact that the Cold War metaphor is counterproductive as a strategy does not rule out the very real possibility of a new Cold War—or a hot one. We may get there by accident or inadvertence. A more appropriate historical metaphor today is not 1945 but 1914, when all the great powers expected a short third Balkan War that would clarify the balance of power. Instead they got a world war that lasted four years and destroyed four empires.

Leaders paid insufficient attention to changes that had altered the process of the international order that had once been called the ‘concert of Europe’. One important change was the growing strength of nationalism. In eastern Europe, pan-Slavism threatened both the Ottoman and Austro-Hungarian empires, each of which had large Slavic populations. German authors wrote about the inevitability of Teutonic/Slavic battles and schoolbooks inflamed nationalist passions. Nationalism proved to be stronger than socialism when it came to bonding working classes together, and stronger than the capitalism that bound bankers together.

A second cause of the loss of moderation in the early twentieth-century balance of power process was a rise in complacency about peace. The great powers had not been involved in a war in Europe for 40 years. There had been crises—in Morocco in 1905–1906, in Bosnia in 1908, in Morocco again in 1911, and the Balkan wars in 1912—but they had all been manageable. However, the diplomatic compromises that resolved these conflicts caused frustration. Afterward, there was a tendency to ask: ‘Why didn't we make the other side give up more?’ Many leaders believed that short, decisive wars won by the strong would be a welcome change.

A third factor contributing to the loss of flexibility in the early twentieth-century international order was German policy, which was ambitious but vague and confusing. There was a terrible clumsiness about the Kaiser's policy of seeking greater power. Something similar can be seen in Xi's ‘China dream’, the leadership's abandonment of Deng's patient approach, as well as the excesses of nationalistic ‘wolf-warrior diplomacy’.30

Policy-makers today must be alert to the rise of nationalism in China as well as populist nationalism in the United States. Combined with the clumsiness of China's wolf-warrior diplomacy, a history of stand-offs and compromises over Taiwan, and clumsiness in American efforts to reassure Taiwan, the prospects for inadvertent escalation exist. As the historian Christopher Clark has summarized in writing of 1914, once catastrophes occur, ‘they impose on us (or seem to do so) a sense of their necessity … Contingency, choice and agency are squeezed out of the field of vision.’ But Clark concludes that, in 1914, ‘the future was still open—just. For all the hardening of the fronts in both of Europe's armed camps, there were signs that the moment for a major confrontation might be passing.’31 Poor policy choices were a crucial cause of the catastrophe.

A successful strategy must protect against such a sleepwalker syndrome. In 1914, Austria was fed up with upstart Serbia's nationalism. The assassination of an Austrian archduke by a Serbian terrorist was a perfect pretext for an ultimatum. Before leaving for his holiday, the Kaiser decided to deter a rising Russia and back his Austrian ally by issuing Austria a blank cheque. When he returned and found how Austria had filled it out, he tried to retract it—but it was too late.

The United States hopes to deter the use of force by China and preserve the legal limbo of Taiwan, which China regards as a renegade province. For years, US policy was designed to deter both Taiwan's declaration of de jure independence and Beijing's use of force. Now some analysts warn that that the double deterrence policy is outdated because of China's growing military power, which may tempt China to act.32 Others believe that an outright guarantee to Taiwan would provoke China into action. Even if China eschews a full-scale invasion and merely tries to coerce Taiwan with a blockade or by taking an offshore island, and there is a ship or aircraft collision that leads to loss of life, all bets are off. If the United States reacts with freezing of assets or invoking the Trading with the Enemy Act, the two countries could slip quite quickly into a real rather than a metaphorical cold or even a hot war. The lessons of 1914 are to be wary of sleepwalking, but they do not provide a solution to the Taiwan problem.33

An effort to bridge the gap

A number of scholars have addressed the important problem of how to bridge the gap between academic expertise, including area studies, and practical policy formation (as discussed by Naazneen Barma and James Goldgeier in this special issue).34 Policy-makers often feel swamped, and have little time for abstract theoretical debates or long academic articles. Those scholars who try to bridge the gap by taking up policy positions usually find themselves spending the intellectual capital that they accumulated before entering government service. That was my experience in approaching the issue of a rising China during the administration of Bill Clinton, first at the National Intelligence Council (NIC) and then in the Pentagon. I tried to combine realism and liberal approaches.

The 1992 election had focused on the slogan: ‘It's the economy, stupid’. Some politicians proclaimed that the Cold War was over, and Japan had won. Early White House meetings focused on the perceived threat from Japan. As a result of participating in study groups at Harvard and Aspen with Asian studies experts such as Ezra Vogel, among others, I came to believe that the threat from Japan was being exaggerated and the issue of rising Chinese power underestimated. There were three major powers in east Asia after the Cold War—the United States, Japan and China. When there are three powers in a balance, common sense suggests that it is better to be part of two than left out as one. Elementary realism suggested the importance of reviving the US alliance with Japan, which was then being discounted both in Tokyo and in Washington as an outdated relic of the Cold War.

I invited Vogel to fill the post of national intelligence officer for east Asia, and he prepared an estimate that outlined eight possible Chinese futures, ranging from collapse to dominance. Some scenarios we clearly had to try to prevent, but many we could live with or try to shape. When I moved from the NIC to the Pentagon and was put in charge of defence policy for the region, including production of an east Asian strategy report, the first steps we took were to restore the US–Japan alliance.35 The Japanese called this ‘the Nye Initiative’. After more than a year of negotiations, the Clinton–Hashimoto declaration of 1996 reaffirmed the alliance as the basis for stability in the post-Cold War era. While China grumbled somewhat about our re-insurance policy, they accepted the reality and focused forward on Clinton's sponsorship of China's membership of the World Trade Organization, which finally transpired in 2001.36

In other words, we based our policy on realism, but then extended the prospect of liberal gains from trade and engagement. We also realized that the prospects of a Cold War-style containment of China would be impossible because other countries would not follow America. In the view of Secretary of Defense William Perry, we were trying to shape the environment in which China's power rose, and thus to shape Chinese behaviour. This policy was continued by the George W. Bush administration, which added the goal of coaxing China to contribute to global public goods and institutions by acting as what Robert Zoellick called ‘a responsible stakeholder’.37 I characterized the policy as ‘engage, but hedge’. To those who argue in retrospect that we should have tried Cold War containment, I would say: not only would we have failed with allies, but we would have guaranteed Chinese enmity. Adding engagement to a policy of balancing power did not guarantee future Chinese friendship, but it avoided discarding all possible futures between full hostility and full friendship.

The Chinese Communist Party's fundamental interests and its basic mentality of using the United States while remaining hostile to it have not changed over the past seventy years. By contrast, since the 1970s, the two political parties in the United States and the US government have always had unrealistic good wishes for the Chinese communist regime, eagerly hoping that the People's Republic of China (PRC) under the CCP's rule would become more liberal, even democratic, and a ‘responsible’ power in the world. However, this US approach was a fundamental misunderstanding of the CCP's real nature and long-term strategic goals.38

Cai was well placed to make a judgement about an engagement policy that began with Richard Nixon in 1972, but some who have described Clinton's policy as naive have ignored the fact that the hedge or insurance policy came first, and that the US–Japan alliance remains a robust and fundamental element of the balance of power in Asia today.

Of course, there were elements of naivety—as when President Clinton pronounced that China's efforts to control the internet would be like nailing jello to the wall. (It turned out that the great firewall of China works quite well.) And more should have been done to punish China's failure to comply with the spirit and rules of the World Trade Organization. There were expectations that rapid economic growth would produce greater liberalization, if not democratization, as China became more wealthy and economically open. China experts such as the distinguished ambassador Stapleton Roy argued that more Chinese citizens were enjoying more personal freedoms than at any time in Chinese history. Other experts noted the freedom to travel, foreign contacts, a greater range of opinions in publications, and the development of NGOs including some devoted to human rights. All this has been curtailed in the Xi era.

Were the assumptions of the engagement part of the policy wrong? Before taking office, two leading officials of the Joe Biden administration wrote in 2019 that ‘the basic mistake of engagement was to assume that it could bring about fundamental changes to China's political system, economy, and foreign policy’, and that a more realistic goal was to seek ‘a steady state of clear-eyed coexistence on terms favorable to US interests and values’.39 On balance, they are correct about being unable to force fundamental changes in China; but questions of lesser degrees of change still remain. Chinese foreign policy changed notably on important issues such as non-proliferation of nuclear weapons and missiles. Some area experts argue that in the first decade of this century China showed increased signs of domestic openness and moderation; but others argue that this was merely a tactical shift, and that it began to change as Chinese elites interpreted the financial crisis of 2008 as a sign of American decline.40

Even if Xi was the highly predictable product of a Leninist party system, there remains a second question about timing. How long does modernization theory take? Was the mistake at the beginning of this century to expect change in two decades rather than in half a century? Or, as Lee Kuan Yew once told me, is it more useful to think in terms of many generations? Xi is only the fifth generation of Communist Party leadership. Or again, as the China expert Orville Schell argues, is it ‘patronizing to assume that Chinese citizens will prove content to gain wealth and power alone without those aspects of life that other societies commonly consider fundamental to being human’?41 Unfortunately, policy-makers work under pressure of time, and have to formulate objectives for the present rather than half a century later. They can, however, try to design policies in a way that does not foreclose the possibility of more benign distant futures, while realizing they are very distant.

The return of great power competition

The American debate over engagement, whatever the time-frame, was called into question with the announcement of President Trump's National Security Strategy in December 2017. There was much to be said for it. During the four decades of the Cold War, the United States had a grand strategy focused on containing the power of the Soviet Union. In the 1990s, with the collapse of the USSR, the United States was deprived of that pole star. After September 2001, the Bush administration tried to fill the void with an overall strategy that it called a ‘global war on terror’; but this provided only nebulous guidance that led to long wars in marginal locations such as Afghanistan and Iraq. Since 2017, the United States has seen the return of ‘great power competition’, which the Biden administration has re-christened ‘strategic competition’.

As a grand strategy, great power competition has the advantage of focusing on major threats to security, economy and values. While terrorism is a continuing problem that must be treated seriously, it poses a lesser threat than great powers. Terrorism is like jujitsu, in which a weak adversary turns the power of a larger player against himself. While 9/11 cost several thousand American lives, our response led us to spend even more lives as well as trillions of dollars on ‘endless wars’. The greatest damage was what the strategy led us to do to ourselves. The fastest-growing part of the world economy is in Asia, and the Obama administration tried to ‘pivot’ or ‘rebalance’ to that area; but the global war on terror kept the United States mired in the Middle East.

A strategy of great power competition helps the United States refocus, but it suffers from two problems. First, it lumps together very different types of states. Russia is a declining power and China a rising power. That could lead to under-appreciation of the threat from Russia; but, as the world sadly discovered in 1914, it was a declining power (Austria-Hungary) that was most accepting of the risk entailed in the disaster of the First World War. Today's Russia is declining both demographically and economically, but it retains enormous resources that it can employ as a spoiler on everything from nuclear weapons to cyber conflict to the Middle East or, as it is currently doing, in Ukraine.42 The United States needs a separate strategy for Russia that does not portray it as similar to the rising China.

A second problem is that the concept provides a necessary but not sufficient alert to a new type of threat the world faces. It is still focused on two-dimensional chess. National security and the agenda of world politics have changed since the days of 1914 or 1945. New threats from ecological globalization are under-appreciated by our strategy. Global climate change will cost us trillions and can do damage on the scale of war. The COVID-19 pandemic killed more Americans than died in the Second World War or all our wars since 1945. Yet our strategy is reflected in a budget for the Pentagon that is more than 100 times that of the Centers for Disease Control and 25 times that of the National Institutes of Health. Meanwhile, Washington debates how to deal with a rising China. Some politicians and analysts call the situation a ‘new Cold War’; but as discussed above, squeezing China into a Cold War ideological framework misrepresents the real strategic challenge the United States faces. Cold War metaphors can mislead us. We and our allies are more deeply intertwined with the Chinese economy than we ever were with the Soviet Union. Moreover, even if it were possible to break apart economic interdependence, we cannot decouple from ecological interdependence, which obeys the laws of biology and physics, not politics. Since we cannot solve these problems alone, we must realize that some forms of power must be exercised with others.43 Coping with climate change or pandemics will require us to work with China at the same time that we compete with China, using our navy to defend freedom of navigation in the South China Sea. If China links the issues and refuses to cooperate, it hurts itself.

Formulating strategy under uncertainty

Since no single future exists, good strategy must allow for multiple scenarios, some of which the United States can affect and some which are largely beyond its control. Rather than planning for maximal outcomes of which we may fall short, a prudent strategy of no regrets aims for a long-term outcome consistent with the Hippocratic Oath: at least do no harm. Rather than a theory of victory involving regime change, the objective should be competitive coexistence in a rules-based international order that is favourable to US and allied interests.44 That is a goal which can bring allies together. Maintaining the alliances that constitute the existing Asian military balance is a necessary condition for a successful strategy, but because the United States is also a global power the strategy requires more, namely cross-regional coalitions. The United States is uniquely positioned to facilitate such diplomacy.

As former Australian prime minister Kevin Rudd has argued, the objective for great power competition with China is not to inflict defeat or gain total victory over an existential threat, but to pursue a ‘managed competition’. Cai Xia herself argues that ‘the nature of the relationship between China and the US is actually one of adversaries and rivals rather than competitors’, but goes on to say that ‘neither one can swallow the other, and a “hot war” between the two would be calamitous for the world’.45 A sound strategy requires the United States to avoid demonization of China and instead see the relationship as a ‘cooperative rivalry’ or ‘competitive coexistence’, giving equal attention to both parts of the description. If China changes for the better in the long term, that is simply an unexpected bonus for a strategy that aims for successful management of a great power relationship in a time of traditional as well as economic and ecological interdependence.

A good strategy must rest on careful net assessment. Underestimation breeds complacency, while overestimation creates fear—either of which can lead to miscalculation. China has become the second largest national economy in the world, and some analysts think that it may surpass the United States in the size of its GDP by the 2030s. But even if it does, China's per capita income remains less than a quarter that of the United States, and it faces a number of economic, demographic and political problems. Its labour force peaked in 2015, its economic growth rate is slowing, and it has few political allies. If the United States, Japan and Europe coordinate their policies, the democracies will represent the largest part of the world economy and will have the capacity to organize a rules-based international order that can protect their interests and help shape Chinese behaviour. A cross-regional alliance working with multilateral institutions sits at the heart of a robust strategy to manage the rise of China.

China is a country of great strength but also significant weaknesses. The United States has some long-term power advantages that will persist regardless of current Chinese actions. One is geography. The United States is surrounded by oceans and neighbours that are likely to remain friendly. China has borders with 14 countries and unresolved territorial disputes with India, Japan and Vietnam that set limits on its soft power. Energy is another American advantage. A decade ago, the United States seemed hopelessly dependent on imported energy. Now the shale revolution has transformed it from energy importer to energy exporter, and the International Energy Agency projects that North America may be self-sufficient in the coming decade. At the same time, China is becoming more dependent on energy imports, and much of the oil it imports is transported through the Indian Ocean and the South China Sea, where the United States and India maintain a significant naval presence. Eliminating this vulnerability will not be easy.

The United States enjoys financial power derived from its large transnational financial institutions as well as the role of the dollar. Of the foreign reserves held by the world's governments, only a few percent are in yuan—most are in dollars. While China aspires to a larger role in digital payments, a credible reserve currency, whether digital or not, depends on currency convertibility, deep capital markets, honest government and the rule of law—all lacking in China and not quickly developed. While China could divest itself of its large holdings of dollars, such action would risk damaging its own economy as much as that of the United States. As argued above, power in interdependent relations depends upon asymmetric vulnerability, and there are too many symmetries in US–China interdependence at this point, though that might change if there is a much more radical decoupling. Although the dollar cannot remain pre-eminent for ever, the yuan is unlikely to displace the dollar until China develops deep and flexible capital markets and a rule of law.

The United States also has demographic advantages. It is the only major developed country that is currently projected to hold its place (third) in the demographic ranking of countries (by total population size). While the rate of American population growth has slowed in recent years, the US population is not shrinking, as it is projected to do in China, Russia, Europe and Japan. Seven of the world's 15 largest economies will face a shrinking workforce over the next decade and a half, but the US workforce is likely to increase while China's will decline.46 China will soon lose its first place population rank to India, but even more important is the unfavourable age profile. Its working-age population has already peaked, in 2015.

America has been at the forefront in the development of key technologies (bio, nano, info) that are central to this century's economic growth, and American research universities dominate higher education. In a 2017 ranking by Shanghai Jiao Tong University, 16 of the top 20 global research universities were in the United States; none was in China.47 China aspires to lead ‘the Fourth Industrial Revolution’, and its government is investing heavily in research and development.48 China competes well in some fields now, and has set a goal to be the leader in artificial intelligence (AI) by 2030. Some experts believe that with its enormous data resources and lack of privacy restraints on how data are used, and the fact that advances in machine learning will require trained engineers more than cutting-edge scientists, China could achieve its AI goal.49


Given the importance of machine learning as a general purpose technology that affects many domains, China's gains in AI are of particular significance. Chinese technological progress is no longer based solely on imitation. If China can ban Google and Facebook from its market for security reasons, the United States can take similar steps with Huawei or ZTE. However, a successful American response to China's technological challenge will depend upon improvements at home more than upon external sanctions.50

American complacency is always a danger, but so also is lack of confidence and exaggerated fears that lead to overreaction. In the view of former CIA director John Deutch, if the United States attains its potential improvements in innovation potential, ‘China's great leap forward will likely at best be a few steps toward closing the innovation leadership gap that the United States currently enjoys’.51

The United States holds high cards in its poker hand, but hysteria could cause it to fail to play the cards skilfully. Discarding the high cards of alliances and international institutions would be a serious mistake. If the United States maintains its alliance with Japan, China cannot push the United States beyond the first island chain, because Japan is a major part of that chain. Another possible mistake would be to try to cut off all immigration. When I asked why he did not think China would pass the United States in total power any time soon, Singapore's former prime minister Lee Kuan Yew cited the ability of America to draw upon the talents of the whole world and recombine them in diversity and creativity, a route that was not possible under China's ethnic Han nationalism. If the United States were to discard its high cards of external alliances and domestic openness, this could change.

Avoiding failures

Just as there are many possible futures, there are many possible failures, as the editors warn in their introduction to this special issue. A prudent ‘no regrets’ strategy must be alert to more than one. The most dramatic would be a major war. Even if the United States were to prevail, the costs would be disastrous. The case of Taiwan and the dangers of 1914 sleepwalking have been noted above. A second type of failure would be a demonization of China and lapsing into a Cold War that would lead to a failure to cooperate in coping with ecological interdependence, as most crucially in the response to climate change. Similarly, competition which led to failure to cooperate in slowing the proliferation of nuclear and biological weapons would be costly for all. On the other hand, a third type of failure would be domestic inability to manage political polarization and deal with social and economic problems that cause a loss of focus and a loss of the technological dynamism that permits the United States to compete successfully with a rising China. Similarly, the growth of a populist nativism that would curtail immigration or weaken US support for international institutions and alliances could lead to a competitive failure. Finally, there can be a failure of vision and values. An attitude of realism and prudence is a necessary condition for a successful strategy, but a sense of vision about democratic values and human rights is also important to generate the soft power that is another American advantage, and one in respect of which China now trails behind.52 There are many ways in which the United States should not try to manage a rising China; and the best place to begin avoiding them is with awareness of them.

Conclusions

A successful American strategy starts at home and must be based on: (1) preserving democratic institutions that create soft power that in turn attracts rather than coerces allies; (2) a plan for investing in research and development that maintains the US technological advantage with attention to particular critical industries; (3) maintaining openness to the world rather than retreating behind a curtain of fear and declinism. In addition, the United States should (4) restructure its legacy military forces to adapt to technological change; (5) strengthen its alliance structures, including NATO and alliances with Japan, Australia and Korea; (6) enhance relations with India; (7) strengthen its participation in and supplement the existing set of international institutions it created to set standards and manage interdependence; and (8) cooperate with China where possible on issues of transnational interdependence.

In the short term, given the assertive policies of the Xi government, the United States will probably have to spend more time on the rivalry side of the equation, but if it avoids ideological demonization and misleading Cold War analogies, and maintains its alliances, it can succeed with this realistic ‘no regrets strategy’. In 1946, George Kennan correctly predicted that it might take decades to succeed with the Soviet Union. The United States cannot contain China in the same way, but it can constrain China's choices by shaping the environment in which it rises or reaches a plateau. The US should avoid succumbing to fear or belief in decline. If this relationship were a card game, the United States has been dealt a good hand; but even a good hand can lose if it is played badly.

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