Chinese Communist Party (CCP) elites appear to believe that, across a range of metrics, the People’s Republic of China (PRC) is gaining ground in its bid to replace the United States as global hegemon. Americans might, therefore, at least consider the possibility that the PRC is outcompeting the United States.
If the CCP is correct, this success would be due in large measure to Washington’s confusion about, and underestimation of, the challenge it faces. Successive presidential administrations have not only failed to protect the country but have also helped the CCP compensate for its deficiencies and weaknesses—by enabling it to tap American capital, technology, and markets from which it asymmetrically benefits. While it is tempting to think that we have turned the corner since Donald Trump proclaimed in 2016 that the United States was getting “a bad deal” in its economic relations with China, progress has been slow and halting.
Facing a hostile, expansionist, Marxist-Leninist dictatorship in the Soviet Union at the end of World War II, the United States quickly identified the threat and adopted a containment counterstrategy. The architect of containment, George Kennan, warned publicly in 1947:
It is clear that the United States cannot expect in the foreseeable future to enjoy political intimacy with the Soviet regime. It must continue to regard the Soviet Union as a rival, not a partner . . . [and] to expect that Soviet policies will reflect no abstract love of peace and stability, no real faith in the possibility of a permanent happy coexistence of the Socialist and capitalist worlds, but rather a cautious, persistent pressure toward the disruption and weakening of all rival influence and rival power.
Kennan’s containment was therefore defensive in nature, defined as “the adroit and vigilant application of counter-force at a series of constantly shifting geographical and political points,”1 and this reactive counterforce helped the United States win the Cold War.
Decades into the U.S.-PRC contest, however, Washington has mounted no equivalent defense. This is partly because the CCP learned from Soviet mistakes and has applied an alternative approach to surpassing the United States. Rather than trumpet their hostility, CCP officials for many decades professed a desire only to learn from America, while waging a charm campaign to cultivate friends across key strata and sectors of American society.2
As a result, when Xi Jinping took office as CCP general secretary a decade ago and instructed cadres to prepare for the triumph of communism over Western capitalism,3 the United States found itself facing an adversary deeply enmeshed in its own society. This suggests that a primary challenge for Washington is to extrude the CCP, i.e., to reduce the Party’s presence and influence in the United States, in order to enable “adroit and vigilant . . . counter-force” against CCP expansion.
By checking Soviet expansion in the Cold War, Washington gradually sapped Moscow’s capabilities and will. If a new extrusion and containment counterstrategy succeeds, the CCP’s plans will be frustrated, and its ambition curtailed. The United States will have limited influence over any fallout from this CCP disappointment. Nonetheless, because the stakes are so high, prudence demands advance preparation for a range of potential consequences.
This essay begins by reviewing the economic, defense, and diplomatic metrics that likely convince officials in Beijing that they are winning. It then explains how these metrics fit into the CCP’s strategic vision, before outlining a potential U.S. counterstrategy, anticipating and addressing objections to this approach, and discussing end states, or how U.S.-China relations might look if the counterstrategy succeeded.
**Advantage PRC:
Economic, Defense, and Diplomatic Metrics**
If the United States is losing ground to the PRC, this will come as news to many in Washington. As the economist Jacques Sapir explains, “GDP statistics have arguably lulled the West into a false sense of security.”4 This is part of a broader Western insistence that neoclassical liberalism explains all, even when it clearly doesn’t. In lieu of openness to the possibility that the CCP operates according to a different logic, the Acela corridor subsists on a diet of impending “China collapse” articles. These cite the bursting of the real estate bubble, the baby bust, the malaise of Chinese youth, and the emigration of Chinese millionaires as evidence that Beijing’s bull run is ending. Contrary to this soothing narrative, a closer look at trends, informed by CCP metrics, indicates grounds for U.S. concern across the economic, military, and diplomatic domains.
Economics. The conventional wisdom is that over the past three decades, the U.S.-PRC relationship has contributed to American prosperity. U.S. firms have benefited from inexpensive Chinese labor, and American customers have benefited from cheap Chinese products. To keep its currency and wages low, the Chinese government has bought U.S. debt, allowing the United States to deficit spend. On this account, a high point of the mutualistic relationship between Beijing and Washington occurred during the 2008 financial crisis, when macroeconomic cooperation between the two capitals saved the world economy.5
Notwithstanding this win-win narrative, Chinese scholars believe that the dynamics in trade and finance have favored the PRC by giving it power. They say as much when they are speaking internally, in Mandarin. For instance, Justin Yifu Lin, the former World Bank chief economist and a proponent of Beijing’s state-led growth model, points out China’s increasing leverage over America’s leading companies, which would “likely turn from high profits to low profits or even no profits” without access to China.6 For this reason, and due to China’s sheer size and scale, “the United States will gradually lose its technological advantage over China,” he predicts.
A closer look at trends in the U.S.-China economic relationship lends credence to Lin’s argument. Even as American GDP increased in absolute terms over the past several decades, on a relative basis, Beijing substantially closed the gap with Washington. More importantly, America’s absolute gains have been dwarfed by the costs of U.S.-PRC engagement. These costs—which have likely been underappreciated—can be divided into balance sheet and strategic losses.
On the balance-sheet side, the United States loses intellectual property (IP) worth up to $600 billion annually to PRC espionage, theft, forced transfers, and so on, according to the U.S. Federal Bureau of Investigation. While the PRC would have pursued this IP regardless of trade ties, there is evidence that Beijing preferentially targets firms that partner with Chinese entities.7 Access encourages exploitation, and Chinese state-backed national champions in turn prosper—not only from this stolen IP but also from CCP policies that suppress labor costs and grant these companies subsidies, enabling them to take market share from foreign competitors.
As the story of Huawei illustrates, with market share comes the opportunity to set standards and achieve platform dominance, entrenching new Chinese incumbents. This means that more than half a trillion dollars in lost IP annually is just the tip of the iceberg. The CCP’s promotion of national champions through theft, wage repression, and subsidies yields dramatic further contraction in revenue for U.S. firms, which in turn means less money for research and development. Meanwhile, $600 billion is roughly five times the value of annual U.S. exports to China, so the United States is not recouping its IP losses through sales to Chinese customers.
Access to relatively cheap manufacturing in China partly incentivizes taking the risk of losing IP, but firms that make this calculation do not factor in the broader societal and strategic costs of their outsourcing. These costs manifest in the hollowing out of American industry and the pitting of the American workforce against a Chinese labor pool that includes both slave labor and workers whose wages are suppressed by currency manipulation. This situation has, over time, consigned many American communities to despair,8 while rendering the United States vulnerable to coercion by its primary geopolitical rival.
The resultant exposure to coercion was demonstrated during the Covid-19 pandemic, when Beijing threatened to cut off supplies of personal protective equipment (PPE) and pharmaceuticals if the Trump administration persisted in questioning its handling of the original outbreak in Wuhan.9 This was a credible threat amid reports that Beijing was nationalizing the output of American-owned factories making PPE in China. Needless to say, the White House muzzled itself, and the CCP has faced no accountability.10
Beyond damaging America’s social fabric and rendering its supply chains insecure, losing the ability to make things domestically implies a range of additional costs that most Western economists have neglected to measure. For instance, the exodus of manufacturing has in some ways weakened U.S. capacity for innovation. This is because improvement on existing techniques often requires familiarity with them. Product innovation comes from process innovation in dynamic (and dual-use) fields such as biotechnology and advanced materials.11 Losing the ability to innovate in these areas compounds the aforementioned balance sheet losses.
Another cost involves wartime mobilization potential. Here, again, the pandemic offered warning signs. At the height of the PRC’s lockdown in February 2020, a prominent scholar of “Xi Jinping Thought for the New Era,” and deputy dean at Peking University, observed how impressed “foreign netizens” were by the PRC’s handling of the contagion. These foreigners, he noted, predicted that “European and American” governments would not succeed as well as Beijing had in maintaining “water, electricity, communications, and living supplies” under quarantine conditions, and this would have negative consequences for their social and political order. Accordingly, the academic predicted that the PRC would outperform others in the pandemic “test of national emergency preparedness” because of its superior industrial and logistic infrastructure.12 He also endorsed a Japanese commentator’s argument that Covid highlighted the advantages of the CCP regime in a war, rendering it “unassailable.”13 In other words, countries that deindustrialized during the period of the PRC’s rise would not dare to fight such a well-equipped foe. If accurate, this judgment raises the question of how Western economists should quantify Beijing’s intimidation advantage.
Defense. This train of thought indicates a connection between economics and national security that the United States has largely honored in the breach since the end of the Cold War. American discussions of the link between economics and defense tend to be limited to the notion that a higher GDP supports greater spending on the military, and the more advanced the economy, the more sophisticated will be the weaponry. These principles have justified much outsourcing in the name of efficiency and absolute GDP growth. It is only recently—since the war in Ukraine—that the depletion of U.S. ammunition stockpiles, and difficulties with replenishment, has compelled Undersecretary of Defense for Acquisition and Sustainment William Laplante to remark on the strategic importance of being able to ramp up defense production.14 Even more recently, Rear Admiral Michael Studeman, the head of U.S. Navy intelligence, released a slide with a dramatic graphic illustrating the PRC’s over two-hundred-fold advantage in shipbuilding capacity relative to the United States.
CCP strategists likely derive confidence not only from the erosion of the U.S. defense industrial base but also from developments in relative capabilities. The American military spent the first two decades of the twenty-first century largely focused on counterinsurgency and counterterrorism operations in Central Asia and the Middle East of questionable strategic value. From Beijing’s perspective, “America’s wars since 9/11” provided a “window” to build up while Washington was “distracted, bogged down, and spending trillions of dollars in Afghanistan and Iraq.”15 During this period, the CCP’s People’s Liberation Army (PLA) transformed from a territorial defense force into a military postured for power projection.
This shift required the PLA to first become confident in its ability to keep the United States from massing forces near mainland China, i.e., to counter the long-standing threat of American—or American-backed—power projection on its doorstep. The PLA accomplished this by developing a suite of precise, conventional missiles to target hostile forces in China’s near-abroad and thus prevent them from approaching its territory. Successive editions of the authoritative PLA textbook, the Science of Military Strategy, published by the Academy of Military Science in Beijing, mark this achievement. While a potential invasion of the mainland was still a concern in the 2001 edition, the next version of the textbook published in 2013 explicitly dismissed that risk.16 This judgment seems to have been confirmed by the U.S. Navy. The author of this essay was in the audience when, in 2013, the then chief of naval operations stated publicly that U.S. Navy surface vessels were “operating differently” around the mainland in light of new PLA capabilities.17
Confidence about its near abroad allowed the PLA to undertake major organizational and investment shifts over the last decade aimed at improving its ability to operate at extended range. Again, Admiral Studeman recently summarized the results, publicly warning colleagues, “You’re going to find a very global, expeditionary Chinese military that will be there to step in anywhere they think China’s interests are jeopardized.”18
This buildup likely emboldens Beijing all the more because it occurred during a period of relative U.S. military stagnation. It is often said that the United States spends more on defense than the next ten countries combined, but the lion’s share of that spending goes to the “operations and maintenance” (O&M) budget category—to keep existing activities and platforms going—rather than to procurement, i.e., investments in new missiles, planes, ships, etc. In fact, of the three budget categories that make up about 85 percent of U.S. defense spending—O&M, personnel, and procurement—procurement is the smallest. It is difficult to compare this with the PLA budget because Beijing typically only releases a single annual topline figure that is not broken down by function, but an independent effort to estimate trends in Chinese defense spending since 2000 suggests that procurement has been the largest budget category, and that the dollar value of annual PLA procurement will exceed that of the U.S. military in this decade.19 Considering that the U.S. military’s procurement is designed to address a range of theaters and missions globally, this means that PLA procurement likely already exceeds U.S. procurement for the Indo-Pacific.
Diplomacy. Trends in diplomacy are difficult to measure, but conventional wisdom in Washington holds that Beijing’s bellicosity over the last few years has backfired, generating resistance or resentment among foreign audiences.20 Some Western experts accordingly anticipate that PRC diplomats will shift from “Wolf Warrior” invective toward more conciliatory rhetoric.21 This focus on tone, however, risks neglecting the substance of Beijing’s strategy. The CCP has been making common cause with the world’s autocrats at the expense of liberal norms and values,22 and likely assesses that this effort is working across large swaths of the globe. While the CCP’s agreements with dictatorial regimes tend to be secret, its propaganda directed at their populations is not, and deserves more attention. A similar concern applies even in the United States and other advanced democracies, where Beijing has been using its access—via information technology, entertainment, and academic channels, as well as business relationships—to reduce popular support for a counterstrategy against the CCP.
Beijing’s progress toward achieving its diplomatic ambitions comes into focus from studying official Chinese commentary on the “Silk Road Economic Belt” and “Twenty-First-Century Maritime Road,” i.e., the “Belt and Road Initiative” (BRI). Ten years after Xi launched the BRI, a special report marking its anniversary last year noted that it had incorporated agreements with “more than 150 countries and 30 international organizations on five continents,” facilitating not just “roads” (or infrastructure links) but also “policy coordination” and “policy communication,” trade and investment, standards harmonization, digital connectivity, educational exchanges, and people-to-people ties.23 It is no accident that the report emphasizes policy coordination. Other CCP assessments do the same because the BRI is fundamentally a political project,24 and one that is relatively far advanced.
China is promoting its illiberal path to development to generate what Xi calls “a community of common destiny [or shared future] for mankind,”25 i.e., a world revolving around Beijing rather than Washington. As part of this campaign, the CCP has worked to substitute “development rights” for “human rights” in international forums such as the Human Rights Council of the United Nations. A major drive to that end began with an address by Xi in Geneva in January 2017 and saw multiple resolutions that included Chinese verbiage in the ensuing months.26 By the end of that year, Xi would celebrate at a conference of returning diplomats in Beijing that the world was undergoing “great changes unseen in a century,”27 i.e., that the global balance of power was tilting toward China.
Independent data backs up Xi’s confidence in the diplomatic realm. Consider, for instance, relative acceptance of Chinese versus American perspectives on world events in third-party countries. There is widespread evidence that Russian and Chinese propaganda themes on the war in Ukraine have found purchase in the developing world,28 and China’s propaganda apparatus is outperforming American efforts to shape third-party views according to a recent academic study.29
One might expect to see a major increase in U.S. State Department funds to shore up America’s “discourse power,” to borrow Beijing’s term for messaging abroad. Instead, the State Department’s Global Engagement Center, established in 2016 to counter foreign propaganda and disinformation, is on the verge of being defunded by Congress due to its grantees’ involvement in domestic censorship.
Which brings us to the homeland. It has taken multiple efforts by the executive branch and members of Congress to begin to address the threat posed by Beijing’s algorithmic control over what was, at least until recently, the fastest-growing social-media platform in the United States, TikTok.30 One in ten Americans gets their news from the short-form video purveyor, and TikTok attracts more traffic than Google. Most TikTok users in the United States are under forty; the majority are under thirty,31 with 67 percent of American teens regularly using the app.32 Perhaps it is not surprising, then, that recent surveys indicate an American generational divide in perceptions of the PRC, with younger respondents significantly “less likely to see China as a threat,” “more likely to say they don’t know how to characterize the U.S.-China relationship,” and “more likely to oppose restrictions on scientific and educational exchanges between the two countries.”33 Similarly, while 54 percent of those aged sixty-five and older support banning TikTok and only 24 percent oppose a ban, among those aged eighteen to twenty-nine, only 19 percent support a TikTok ban and almost three quarters (73 percent) oppose one. And while Congress recently passed, and the president signed, a bill to force Chinese divestment of TikTok, the video platform is far from the only threat. For instance, the multipurpose Chinese-language app WeChat, owned by Tencent, another PRC-based company, also has millions of users in the United States, as do the Chinese-founded shopping apps Shein and Temu.
This situation must be all the more satisfying to CCP strategists when they consider the asymmetry between their access in the United States and American access on the mainland. U.S. social media companies are banned from China. Further, during Xi’s tenure as general secretary, he has exploited new technology for purposes of Party control, accelerating China’s transition into a police state with more cameras than people in its cities. The CCP under Xi has also used nonrenewals of visas, new national security data laws, and the threat of exit bans to reduce and deter the presence of foreign meddlers.34 American attempts to exert influence on the ground have thus faced mounting obstacles.
CCP Strategy
Beijing and Washington apply different metrics to assess their competition because they have divergent outlooks. The U.S. outlook can be crudely summarized as follows: the American way of organizing the country is superior economically and politically, and it will prevail. This view reflects a free market orthodoxy, along with lessons drawn from the end of the Cold War about liberal democracy’s inevitable triumph.35 To wit, most Western economists believe the only real economic strategy should be a hands-off, laissez-faire approach to ensure maximum capital efficiency—because if markets are free to allocate supply and demand and global trade can occur securely, then a rising tide will lift all boats, promoting prosperity, innovation, and peace. The CCP, by contrast, has remained committed to central economic planning and steering,36 and drew very different lessons from the end of the Cold War.
The CCP bases its economic strategy on a careful study of prevailing trends, but the underlying assumption is that the party can and must use plans and policies to disproportionately benefit the PRC. An example of this outlook in practice is the doctrine of “two markets, two resources,” which party officials propounded in the late 1970s and early ’80s as they were pursuing increased interaction with the outside world, and which continues to be frequently invoked. As the Hong Kong–based historian Frank Dikötter has recently shown, by Mao’s death in 1976, the ravages of his Great Leap Forward and Cultural Revolution had left China poorer than it had been at “liberation,” when the Chinese Civil War ended in 1949.37 Mao’s successors embraced increased engagement with Japan and the West out of desperation, not admiration, as they sometimes let their foreign interlocutors believe,38 and in their internal discussions used language that was clarifying about their intentions. Whereas Americans interpreted Beijing’s turn to “reform and opening” under Deng Xiaoping to mean “gradual liberalization,” senior cadres spoke at home of “learning to swim without being drowned,” i.e., “using all foreign factors that can be used for our purposes and taking advantage of the world” while “sticking to the principles of socialism and the direction of communism.”39
A high-level internal speech from 1982 further clarifies: “Not long ago, the Central Secretariat unanimously agreed that our socialist modernization construction must use two kinds of resources, domestic resources and foreign resources; open up two markets, domestic and international markets; and learn two sets of skills, organizing to build domestically and to develop foreign economic relations.”40 “Two markets, two resources” therefore represented a scheme to ensure that policy goals were met in the process of increased interactions with foreign powers, by intervening rather than letting the market freely determine outcomes.
What were these goals? First and second were “attracting foreign funds” and “introducing [i.e., acquiring by any means available] foreign advanced science and technology.”41 The main mechanism for achieving them would be harnessing China’s “low-wage labor force” and inducing foreign firms to build factories on the mainland while seeking to increase exports by preventing goods made in these factories from being sold in China.42 In other words, from the beginning, the strategy involved intervening and manipulating the market rather than letting it operate freely, but the architects of this approach enjoined those who would be dealing with foreigners to obscure this. They should pair “strict internal discipline” with “external flexibility” and remember to speak to foreigners in the language they expected, i.e., of “contracts, equality, and mutual benefit” rather than “obedience.”43
“Two markets, two resources” continues to guide Beijing’s economic strategy, but a more recent addition to the lexicon involves the CCP doubling down on its commitment to technology extraction and market manipulation with less attention to concealment of these aims. The new addition is the diagnosis that the world is undergoing a “Fourth Industrial Revolution” revolving around the “intelligent interconnection of people, machines, and resources.”44 Chinese economists believe that this revolution favors Beijing’s strategy of “introducing” foreign technology, becoming a fast follower, and promoting national champions to dominate whole markets for several reasons. First, because the contemporary research and development cycle is short, “human capital has become the most critical element,” which plays to the PRC’s population advantage. Second, new technologies require new standards, and the PRC has standard-setting power by virtue of the size of its market. And third, the PRC’s aforementioned world-leading manufacturing infrastructure means that “the path from an innovative technological idea to the mass production of finished products will be the fastest and least costly in China.” It is in this context that we should understand Beijing’s “talent” programs, aimed at luring or, as necessary, coercing academics and researchers in foreign countries to bring their expertise to China, together with successive national plans targeting advanced manufacturing, biotechnology, new energy, new energy vehicles, artificial intelligence, robotics, and the like.
Even when the CCP spells out its intentions, the American impulse is to discount the Party’s chances of success.45 Chinese enthusiasm about copying and dominating has few takers here given the deep-seated belief that intellectual property should be protected and innovation rewarded as a matter of both morality and prudence. At the same time, U.S. universities, hungry for Chinese grant and tuition funds, are invested in the mainland through their endowments, and downplay the importance of Beijing’s talent programs. University administrators, and their lobbyists, argue that they are engaged in basic research that doesn’t merit protection and that by its very nature will disseminate freely. And yet the Chinese pay. (For instance, before it was shut down by the Biden administration, the Justice Department’s China Initiative revealed that Harvard University’s Charles Lieber, an expert in dual-use technology for implanting nanowires in the brain, had failed to disclose his employment by a PLA-linked university in Wuhan, China.) Further, Americans consider sponsorship of national champions or monopolies suboptimal because they breed corruption and misallocation of resources while forgoing the creative energy unleashed by competition. The end of the Cold War reinforced this credo, as Washington discovered that Moscow couldn’t keep up with American dynamism and therefore lost faith in communism.
The Cold War’s conclusion offered a very different set of lessons for Beijing—lessons that did not include faith in the inevitable triumph of democracy. To be sure, the collapse of the USSR, on the heels of the Tiananmen Square uprising and on the eve of the lopsided U.S. victory in the First Gulf War, was very distressing.46 The CCP’s preexisting fear of “peaceful evolution”—or being molded out of communism by the United States and the broader West—became more acute. But the outcome was to reinforce the wisdom of the course that post-Mao leaders had already charted, lest they succumb to the same weakness that undermined the Soviets. In CCP jargon, only by “adapting” external influences to “Chinese circumstances” could the party avoid the isolation and impoverishment that had doomed Moscow. This logic covered both the decision to deviate from the Soviet Communist Party’s influence by embracing international commerce and the decision to pursue that commerce with an eye toward strengthening socialism, not abandoning it.47 Thus the CCP redoubled its effort to protect against “spiritual pollution” from the United States and its allies in the 1990s, even as it intensified its efforts to extract capital and know-how from the West.
At a deeper level, the CCP’s revolutionary inheritance likely made it comfortable with this path. From the party’s earliest days, it pursued self‑preservation while drawing resources from stronger enemies in its midst—rivals with which it had to appear to be cooperating.48 While this experience applies to most insurgencies, the set of lessons the CCP learned from its founding era would have been especially powerful considering how long the Chinese Civil War lasted and the range of adversaries the Party ended up working with from 1920 to 1949, including, among others, self-interested Russians, rival Nationalists, and ideologically opposed Americans. The experience of nominally partnering while holding back the real agenda, avoiding indoctrination or assimilation, and pursuing asymmetric gains was built into the Party’s DNA.
A Potential New American Strategy
In light of the vast gulf between Washington and Beijing’s perspectives, the first task is to weigh the significance of the fact that, by the CCP’s metrics, China is winning. If Beijing’s view is judged to hold merit,49 a new defensive strategy for Washington might initially have a domestic focus, with the goal of protecting against the kind of blackmail or coercive pressure that the Trump administration faced during the pandemic while ensuring that the United States can move to check CCP inroads at home and abroad. A concomitant objective would be to reduce the ability of the CCP to leverage American assets and resources in pursuit of global hegemony—i.e., to extrude the party from the United States as much as possible. Because the United States is a democracy, a new defensive strategy would have to proceed from a significant domestic political effort before attending to the economic, military, and diplomatic balance areas.
That is, to get from where the country is today to where it needs to be to protect itself, the new strategy would require both signaling initiatives, aimed at public education, and substantive moves to reduce CCP access and influence here.
On the back of this public education, Washington could begin to counter the leverage Beijing has acquired over the United States through its economic statecraft. The Biden administration has recently announced its intention to secure U.S. ports by replacing their Chinese “smart” cranes and to protect the U.S. auto industry by blocking imports of Chinese-connected vehicles and potentially also components. But how well these efforts will be executed remains a question. Meanwhile, initiatives to wean ourselves off Chinese inputs in other critical industries such as pharmaceuticals and biotechnology remain pending. A foundational, procedural move would be to close the commercial and academic loopholes in current Foreign Agent Registration Act regulations. That should accelerate progress in all of the above areas and enable other measures to create opportunities for domestic or allied manufacturers to serve the American market, such as holding Beijing accountable for abusing its WTO membership by rescinding Permanent Normal Trading Relations and expanding tariff and sanctions barriers against PRC firms.
With regard to capital flows, the goal should be dramatic curtailment of both portfolio and direct investment. The latter was the subject of the Biden administration’s August 2023 executive order prohibiting investment in companies developing semiconductors and microelectronics, quantum information technologies, and artificial intelligence capabilities in China. While this was a worthwhile initial step to block “smart money,” the lion’s share of U.S. investment into the mainland comes from Chinese entities’ inclusion in passive investments such as index funds. Further action in this regard might require new regulations to evict PRC-based firms from U.S. exchanges and indices, though that process should already be underway as a result of the Holding Foreign Companies Accountable Act of 2020. Such initiatives would help rebalance a corporate playing field that is today tilted toward Beijing.
American defense against the CCP’s strategy will thus have a sizeable domestic component. To say that strategy begins at home is trite, but in this case it may also require initiative from the private sector and greater public-private cooperation. Legal barriers impede the Defense Department from implementing strategy domestically, while the Federal Bureau of Investigation, the Department of Homeland Security, and various other departments’ inspector-general offices lack the authority or resources to cover down against an aggressive near-peer competitor operating in the United States. One metric of success would be whether the number of prominent Americans lobbying in favor of laws banning TikTok and other PRC propaganda and surveillance applications from the United States exceeds those lobbying against such measures. Another would be a revitalization of something like the Justice Department’s “China Initiative,” focused on preserving research integrity and protecting against grant fraud in the United States—to prevent researchers affiliated with Chinese talent programs and military-civil fusion initiatives from benefiting from U.S. funding.
A virtuous cycle could then ensue. Perhaps most important, transparency with regard to the CCP challenge and U.S. counterstrategy would give the White House space to lead. Closing off access to the U.S. market and preventing investment on the mainland would create opportunities and free up public and private capital for new manufacturing and other strategic enterprises in the United States and in nearby, friendly countries, while liberating influential American elites from Beijing’s sway.
Increasing and reallocating defense spending would be a necessary corollary. While the PRC has been engaging in a major conventional and nuclear buildup, the United States could revitalize its arsenal and use its network of forward bases to reinforce deterrence. In other words, as containment worked in the Cold War, so might it again in the future, but it would require a restructuring of current competitive dynamics.
Success in leveling the playing field by extruding CCP influence from the United States would force the CCP to contend with its own limitations. The contest would then be a fair one, and the United States and its allies would have the opportunity to apply the fruits of their systems against those of the CCP’s autocracy and its clients. This is a competition America could win. Unlike the PRC, which suffers from major resource and economic constraints at home, the United States could regain hemispheric independence in key resources and products and then use its global military alliances to secure free trade with allied and friendly nations. Though Beijing has been building out a global military in waiting, the PLA lacks experience with power projection and would likely struggle to compete with U.S. forces if Washington shifted the contest into this realm.
Diplomatically, if the United States took the steps above it would be much freer to counter the PRC’s inroads in international institutions by presenting evidence of Beijing’s violations of universally held norms and values. Here, too, a form of public-private partnership may be necessary, as the U.S. government pays for data that it could share with scholars and journalists who would be best-positioned to describe the CCP regime’s activities at home and abroad. The evidence from commercial sources is available, waiting to be further exploited, of Beijing’s genocidal activities at home and export of pollution and repression abroad. Exposure of this evidence would shrink the space for Chinese diplomats to pitch themselves as avatars of an alternative, superior system, even as the economic steps outlined above would likely reduce their budget for such messaging. More fundamentally, by depriving Beijing of access to American know-how, capital, and markets, extruding China would also reduce the viability and, therefore, attractiveness of the CCP model in third-party countries.
Weaknesses and Risks
What if Beijing’s confidence about its rise is misplaced? The assumptions behind the new strategy outlined above could be contested on several grounds. Some commentators question the viability of the CCP’s model or the depth of the Party’s ambition and hostility. One could also contest the idea that the United States is currently losing by arguing, as the Biden administration might, that it is quietly putting the country onto a sounder competitive footing without openly antagonizing Beijing in the way that the strategy proposed above would be certain to do. Finally, one could object to the escalation risks associated with the proposed strategy.
The idea that the CCP’s model is foundering or that the party-state might fall of its own weight is attractive in that it absolves the United States of the need for action. But the Chinese demographic, economic, technological, and environmental weaknesses to which proponents of this view tend to point are the ones for which the party is compensating through access to foreign resources. For example, skeptics of the PRC’s prospects often point to the aging and shrinking of the Chinese population, together with the country’s failure to advance beyond export-driven growth, and predict that it will “get old before it gets rich,” or succumb to the middle-income trap. The reality is that Xi Jinping has already announced his claim to the labor of the “sons and daughters of the Yellow Emperor” around the world, including in the United States and allied countries. Whether or not this feeling is reciprocated, the PRC has been increasingly leveraging the output of workers in Chinese-owned factories from Southeast Asia and Africa to South America, as well as the science and technology “talent” of students (both of Chinese and of non-Chinese descent) at universities from North America and Europe to Japan, Australia, and New Zealand.
Similarly, many China “bears” cite the mainland’s terrible pollution and real resource constraints—e.g., limited arable land—as likely to put a ceiling on its rise, but in this case as well, the CCP’s strategy appears to be paying off, as much of China’s pollution was generated in the process of becoming the world’s factory, which, as mentioned, rendered Washington and other capitals dependent on the PRC, granting Beijing coercive leverage over them. As the world proceeds with the green energy transition, China has become the dominant supplier of rare earth minerals, solar panels, batteries, electric vehicles, and many of the other components essential to this transition.
Even without believing that the CCP is bound to falter or collapse, one might assert that it is not as hostile or ambitious as feared, obviating the need for Washington to undertake a more active defense via extrusion and containment. This would again be convenient, but would seem to base America’s defense on hope, without offering a reason to mistrust the evidence in favor of a more pessimistic reading of Beijing’s intentions. This evidence includes not only the outlook described above, based on authoritative internal statements, but also the record of PRC treatment of groups with alternative outlooks over whom it has power, from Xinjiang and Tibet to Hong Kong.
Another objection would be to contest the severity of U.S. weaknesses. The argument would be that the United States is not really losing because steps are being taken to shore up vulnerabilities. As some of these measures will require months or years to implement, the current strategy involves buying time by avoiding confrontation during this period. The implication is that it would be a mistake to adopt a more directly or transparently competitive course of action for fear of provoking the CCP before its leverage has been countered. While this reasoning makes sense in the abstract, in practice the concessions that the United States appears to be making to avoid a clash in the near term are in areas that benefit the PRC over the medium to long term. This raises questions about how much progress on defense is really being made.
For instance, in the area of semiconductors, the administration has moved to shore up American vulnerability to a loss of access to high-end chips from Taiwan—e.g., if the mainland invaded and took over or destroyed the factories there that produce them. The approach has been to fund production of high-end chips domestically while limiting exports of high-end chip-making components to the PRC, on the theory that U.S. exposure and Beijing’s incentives for aggression would only increase in a world where the United States, and not the PRC, is dependent on high-end chips from Taiwan. Under pressure from both Beijing and domestic chip makers, however, the White House has sought to limit its export controls as much as possible, while continuing to allow U.S. imports of legacy (or non-leading-edge) chips from the mainland and issuing licenses in spite of the controls as a rule rather than the exception. This undoubtedly limits the sting of the recent restrictions; it also perpetuates the mainland’s leverage over U.S. firms, leverage that can be used to develop or extract know-how over time, consistent with Justin Yifu Lin’s prediction about how China will overtake the United States technologically.
A less tailored approach would be more escalatory and possibly more expensive in the near term, but also clearer and therefore potentially more effective in constraining the PRC’s access to U.S. capital and technology over the middle to long term. This case is unfortunately representative of a broader class of areas where tailored measures have left open loopholes and exemptions that render Chinese sources confident about continued access.50
Finally, one could object purely on the grounds that the proposed strategy entails unacceptable escalation risks. It is true that a more active defense would be more confrontational insofar as it would require taking the initiative to redress current asymmetries that favor Beijing. The CCP is likely to object and to do its best to thwart such an effort. The question is what the alternative is, especially considering that the CCP has already chosen to escalate and confront, as in the aforementioned pandemic episodes. Refusing to fight against an aggressor typically guarantees defeat, so there is a risk in prioritizing escalation avoidance above all other considerations.
An Uncertain Future
According to Beijing, at least, trends in key areas of the U.S.-PRC competition indicate that progress and momentum belong to the PRC, not the United States.51 And yet the U.S. government and national security establishment have offered only limited responses to this threat to American prosperity and the American way of life. Even now, no senior political leader is publicly communicating the breadth or gravity of the challenge.
Comparing the situation today with that which prevailed when Kennan authored his diagnosis of the Soviet threat is instructive. Back then, he could conclude:
The United States has it in its power to increase enormously the strains under which Soviet policy must operate, to force upon the Kremlin a far greater degree of moderation and circumspection than it has had to observe in recent years, and in this way to promote tendencies which must eventually find their outlet in either the break-up or the gradual mellowing of Soviet power. For no mystical, Messianic movement—and particularly not that of the Kremlin—can face frustration indefinitely without eventually adjusting itself in one way or another to the logic of that state of affairs.52
Today, the United States is effectively reducing the strains under which the CCP must operate, by allowing the party-state to access American capital, technology, and markets.
While for Kennan, “there was never a fairer test of national quality than this [Cold War],” the United States is currently not in a fair contest. Rather, the U.S.-PRC competition is structurally biased in the latter’s favor given the asymmetries of access that favor Beijing. The United States may not be able to win if it is competing partially against itself—i.e., against a competitor that can use American resources to offset its own deficiencies.
If this analysis is correct, the United States must move to redress the current asymmetries. Reciprocity or fairness would compel Washington to curtail the CCP’s access to American capital, technology, and markets. If this happened, and if the United States pursued a containment strategy to induce allies to follow suit, Beijing would find itself operating under heightened strains.
Where could this lead for China? Kennan was modest about his ability to forecast the end of a successful U.S. counterstrategy against the Soviets, and modesty is once again in order today. Faced with real limits on access to external help to compensate for internal deficits and challenges, the CCP could become internally preoccupied. Perhaps it would be compelled to “mellow,” in Kennan’s terms, or to retrench and retreat from international aggression. Over time, this might even create the conditions for the emergence of a CCP Gorbachev, who could use patriotic arguments to make the case for liberalization and perhaps even for self-determination on behalf of members of the mainland’s diverse ethnicities and cultures.
Alternatively, the accumulation of pressure internally could deepen preexisting tensions and divisions within the CCP. There were hints in the run-up to Xi’s accession that such divisions have geographic and PLA-related contours.53 Could there be civil strife in China, with Party elites in various areas aligning with local security forces to press their claims to rule? If so, whom, if anyone, would the United States want to back? What would be the U.S. response to the involvement of third parties—e.g., regional countries—in such a conflict? Given the stakes, even if the likelihood of U.S. involvement in addressing such questions is small, careful advance consideration is warranted.
Still, Americans would prefer to have to deal with these futures than one in which the United States and its allies are PRC vassals. The evidence is clear—at least in Beijing—that the CCP is on the march. If it continues to encounter accommodation and access rather than resolute opposition, the future of the American experiment is at stake.
This article originally appeared in American Affairs Volume VIII, Number 3 (Fall 2024): 24–45.
Notes
Photo credit: Getty Images.
1 George Kennan, “Sources of Soviet Conduct,” Foreign Affairs 25, no. 4 (July 1947). (Emphasis added.)
2 Alex Joske, Spies and Lies (San Francisco: Hardie Grant, 2022).
3 Xi Jinping, “Uphold and Develop Socialism with Chinese Characteristics” (speech, January 2013); highlighted by Tanner Greer, “Xi Jinping’s 2013 Speech,” Palladium, May 31 2019.
4 Jacques Sapir, “Assessing the Russian and Chinese Economies Geostrategically,” American Affairs 6, no. 4 (Winter 2022): 81–86.
5 “Paulson Praises China’s Cooperation in Easing Financial Crisis,” New York Times, October 22 2008; Henry M. Paulson, Jr., “America’s China Policy Is Not Working,” Foreign Affairs, January 26, 2023.
6 Justin Yifu Lin, “以理论创新贡献中国式现代化—新结构经济学的视角 [Contributing to China’s Modernization with Theoretical Innovation—The Perspective of New Structural Economics],” 国家现代化建设研究 [National Modernization Research] 5 (2023).
7 Sean O’Connor, “How Chinese Companies Facilitate Technology Transfer from the United States,” U.S.-China Economic and Security Review Commission, May 6, 2019.
8 David Autor et al., “On the Persistence of the China Stock,” Brookings Institution, September 8, 2021. Autor and his coauthors write: “Labor markets more exposed to import competition from China experienced more plant closures; larger declines in manufacturing employment, employment-population ratios, earnings for low-wage workers, housing prices, and tax revenues; and larger increases in childhood and adult poverty, single-parenthood, and mortality related to drug and alcohol use, as well as greater uptake of government transfers. . . . [T]he fact that the losses from trade are regionally concentrated and long-lasting suggests that existing policies failed to insulate workers from the disruptive impacts of globalization.”
9 Josh Rogin, Chaos Under Heaven: Trump, Xi, and the Battle for the 21st Century (Boston: Houghton Mifflin Harcourt, 2021). Australia also found that this line of questioning invited credible threats from Beijing, as the PRC retaliated by suspending imports of Australian wine.
10 Jeanne Whalen, “3M Will Import Masks from China for U.S. to Resolve Dispute with Trump Administration,” Washington Post, April 6, 2020.
11 Gary Pisano and Willy Shih, “Does America Really Need Manufacturing?,” Harvard Business Review (March 2012).
12 Han Yuhai, “韩毓海：抗疫，为什么让日本学者说中国是一个“不可与之开战”的国家 [Against the Epidemic, Why Do Japanese Scholars Say That China Is a Country That ‘Cannot Go to War’],” Guancha, March 9, 2020; Han Yuhai,“《中国青年》专访韩毓海：青年人应从这次抗疫中读懂什么？[‘Chinese Youth’ Interview with Han Yuhai: What Should Young People Learn from This Anti-Epidemic?],” Peking University Media, February 29, 2020.
13 Han, “Interview.”
14 In October 2022, LaPlante gave a public talk featuring the line, “Production Is Deterrence.” See John Tirpak, “Strategy & Policy: Production Matters,” Air & Space Forces Magazine, December 2, 2022.
15 Yun Sun, “China’s Strategic Assessment of Afghanistan,” War On The Rocks, April 8, 2020.
16 Science of Military Strategy (Beijing: Academy of Military Science), 2001, 2013.
17 U.S. Naval Institute, “WEST 2013: Sea Service Chiefs,” YouTube, February 1, 2013.
18 Jeff Seldin, “Top US Commander Warns ‘Front Line’ with China Now South of Border,” VOA, March 16, 2021.
19 Jacqueline Deal, “China Could Soon Outgun the U.S.,” Politico, May 27, 2021.
20 Peter Martin, “China’s Wolf Warriors Are Turning the World Against Beijing,” Bloomberg, June 8, 2021; Kathy Huang, “China Is Locked into Xi Jingping’s Aggressive Diplomacy,” Foreign Policy, December 2, 2022.
21 John Ruwitch, “A ‘Wolf Warrior’ Is Sidelined, as China Softens Its Approach on the World Stage,” NPR, January 12, 2023.
22 Nadège Rolland, “Examining China’s ‘Community of Common Destiny,’” Power 3.0, National Endowment for Democracy, January 23, 2018.
23 “特别报道|“一带一路”十年丰硕成果 [Special Report: The Belt and Road Initiative Has Achieved Fruitful Results in the Past Decade],” 中国经济时报北京 [China Economic Times], October 16, 2023.
24 Li Xiang, “黄平:“一带一路”是互利共赢之路 [Huang Ping: The ‘Belt and Road’ Is a Road of Mutual Benefit and Win-Win Results]”; “高质量共建“一带一路⑫ [High-Quality Joint Construction of the ‘Belt and Road,’ 12],” 中国社会科学网 [China Social Sciences Network], November 14, 2023.
25 Nadège Rolland, China’s Eurasian Century? Political and Strategic Implications of the Belt and Road Initiative (Washington, D.C.: National Bureau of Asian Research, 2017); Rolland, “Examining”; Liza Tobin, “Xi’s Vision for Transforming Global Governance: A Strategic Challenge for Washington and Its Allies,” Texas National Security Review 2, no. 1 (November 2018); Nadège Rolland, “China’s Vision for a New World Order,” National Bureau of Asian Research, January 2020; Daniel Tobin, “How Xi Jinping’s ‘New Era’ Should Have Ended U.S. Debate on Beijing’s Ambitions,” Testimony for the U.S.-China Economic and Security Review Commission, March 13, 2020.
26 Andrea Worden, “China Pushes ‘Human Rights With Chinese Characteristics’ at the UN,” China Change, October 9, 2017.
27 “习近平:放眼世界,我们面对的是百年未有之大变局 [Xi Jinping: Looking at the World, We Are Facing a Major Change That Has Not Been Seen in a Century],” 中国之声 [China Radio International], December 29, 2017; Xu Guangchun, “中国共产党百年辉煌与百年未有之大变局 [The 100 Years of Glory of the Communist Party of China and the Great Changes Unprecedented in a Century],” 红旗文稿 [Red Flag Manuscript], April 1, 2021.
28 Ingram Niblock, Samantha Hoffman and Jake Wallis, “Chinese and Russian Propaganda Work in Tandem to Blame the West for War in Ukraine,” Australian Strategic Policy Institute, May 26, 2022.
29 Daniel Mattingly et al., “Chinese State Media Persuades a Global Audience That the ‘China Model’ Is Superior: Evidence From A 19-Country Experiment,” OSF Preprints, August 25, 2022.
30 TikTok’s parent company is headquartered in Beijing, and Chinese social media companies must comply with the CCP’s content moderation (i.e., censorship and propaganda) guidance and security laws guaranteeing the party access to user data.
31 Brandon Doyle, “TikTok Statistics—Updated May 2024,” Wallaroo Media, May 7, 2024.
32 Werner Geyser, “36 Vital TikTok Stats to Inform Your Marketing Strategy,” Influencer Marketing Hub, May 24, 2024.
33 Craig Kafura, “Generational Differences on US-China Relations,” Chicago Council On Global Affairs, January 14, 2022.
34 The PRC has even moved to control where Teslas can drive because of concerns about the data collected by their cameras. No such restrictions apply to Chinese-made electric vehicles in the United States, though tariffs have limited their sales.
35 Aaron Friedberg, “The Growing Rivalry Between America and China and the Future of Globalization,” Strategist 5, no. 1 (Winter 2021/2022): 106.
36 Liza Tobin, “China’s Brute Force Economics: Waking Up from the Dream of a Level Playing Field,” Strategist 6, no. 1 (Winter 2022/2023).
37 Frank Dikötter, China after Mao (London: Bloomsbury, 2022).
38 While they recognized and coveted Western technological sophistication, managerial know-how, and capital, Chinese economists consistently reported on capitalist decay and perennially predicted U.S. and broader Western decline. Dikötter, China after Mao.
39 “[胡耀邦诞辰100周年] 胡耀邦:关于对外经济关 系问题 [(Hu Yaobang’s 100th Birthday) Hu Yaobang: On the Issue of Foreign Economic Relations],” 胡耀邦史料信息网 [Hu Yaobang Historical Information Network], November 17, 2015.
40 “Hu Yaobang: On the Issue of Foreign Economic Relations.”
41 “Hu Yaobang: On the Issue of Foreign Economic Relations.”
42 “Hu Yaobang: On the Issue of Foreign Economic Relations.”
43 “Hu Yaobang: On the Issue of Foreign Economic Relations.”
44 Justin Lin, “China Must Lead the New Industrial Revolution,” Asia Times, October 15, 2021.
45 Daniel Tobin’s above-cited testimony for the U.S.-China Economic and Security Review Commission highlights this tendency toward problems-based analysis of China.
46 Rush Doshi, The Long Game (Oxford: Oxford University Press, 2021).
47 Deng Xiaoping and the other senior party members who reached this judgment were also following longstanding CCP precedent in deviating from the CPSU’s example—e.g., Mao’s decision to pursue revolution from the countryside instead of the cities in the 1930s.
48 Jacqueline Deal and Eleanor Harvey, “CCP Weapons of Mass Persuasion,” Andrew W. Marshall Foundation, December 20, 2022.
49 The rest of this section draws on arguments from a paper that the author presented at a Reagan Institute Strategy Group meeting in July 2023. Jacqueline Deal, “Why We Are Losing & How to Start Winning: Visions of Victory over the Chinese Communist Party,” The Future of Conservative Internationalism, vol. 4 (Reagan Institute Strategy Group, 2023).
50 “Improving Congress’s Pending China Bills (With Hints from Beijing),” Forum for American Leadership, May 12, 2022.
51 Parts of this section also draw on the author’s paper for the Reagan Institute Strategy Group. See Deal, “Why Are We Losing”
52 Kennan, “Sources of Soviet Conduct.”
53 During the endgame of the power struggle between Xi Jinping and Bo Xilai in 2012, Chinese media speculated about the significance of Bo’s ties to the PLA in Chongqing and a visit he made to a museum on a base in Yunnan honoring the unit Bo’s father commanded in the 1930s.