Main thesis

China’s grand strategy aims to overtake the US as the world’s leading power

  • With a 4000 year old history of regional dominance, 1.4 billion people, and economic output and manufacturing capabilities already matching / overtaking the US, anything less would be surprising
  • “Rejuvenating” China through “wealth and power” has been the explicit north star of the CCP since the 1980s and Deng Xiaoping

Chinese strategy / ambitions has evolved in three phases

  • Weakening the US in Asia + hiding capabilities (1989-2008), starting with Tiananmen Square, the Gulf War, and Soviet Collapse
  • Building Chinese order in Asia (2009-2016), starting with the global financial crisis
  • Expanding Chinese order globally (2017-today), starting with Trump’s election

Support for the thesis

  • The CCP is incredibly centralized and in quasi total control of foreign policy (political, economic, and military), enabling the implementation of a grand strategy
  • Grand strategies rest on perceptions of power and threat. Shifts in these perceptions are driven more by events, especially shocks, than statistical measures, like gradually changing GDP growth rates or fleet sizes
  • References to party texts, especially speeches from party leaders, are thorough and quite convincing

Part 1 - Weakening the US in Asia + hiding capabilities (1989-2008)

Starting point: in three events, China went from seeing the US as a quasi-ally against the Soviets to seeing it as China’s greatest threat and main adversary

  • Tiananmen Square (1989) - reminds CCP of American ideological threat (pushing liberal values is a form of warfare from the party’s perspective) and economic threat (sanctions preventing access to US markets)
  • Gulf War (1990-1991) - reminds CCP of American military threat, Chinese analysts expected the US to be pulled into a long ground war followed by a political defeat (like Vietnam), but the US accomplished its objectives spectacularly
  • Soviet Collapse (1991) - reminds CCP of American geopolitical threat as the prior main threat is gone and the US takes it place in a world where the CCP is completely isolated

China realizes its temporary position of inferiority and follows a strategy of “Tao Guang Yang Hui” (hide capabilities and bide time)

  • It refers to a longer statement from Deng appearing in party texts over many years that China should “observe calmly, secure our position, act calmly, hide our capabilities and bide our time, maintain a low profile, never claim leadership, and develop itself”
  • This was a conscious strategy of non-assertiveness. China did not pursue region-building enterprises that might unsettle the United States; instead, it focused on non-assertively blunting the foundations of US power

At military level: “sea denial” preventing the US from intervening in waters near China with cheap asymmetric weapons (mines, anti-ship ballistic missiles, submarines as opposed to aircraft carriers)

At political level: join Asia-Pacific Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN) to stall progress and reassure neighbors so they wouldn’t join a US-led coalition

  • China shaped APEC as a consultancy rather than a real institution, with required unanimous consensus enabling Chinese veto, and focused only on economic issues (as opposed to political or military)

At economic level: everything hinges on leveraging the US market for exports

  • It enables leveraging US capital and importing US technology - both dependent on exports to US market to make investment in China attractive
  • The highest priority was to obtain permanent Most Favored Nation (MFN) status, which guarantees normal trading relations (no higher tariffs than for any other trade partner)
  • This was very much at risk after Tiananmen Square but China obtained it using its large market to appeal to US businesses lobbying in Washington

Part 2 - Building Chinese order in Asia (2009-2016)

Starting point: global financial crisis (2008) led China to see the US as weakening and emboldened it to shift to an active building strategy

At military level: move from sea denial to sea control, investing in aircraft carriers and capable surface vessels, and overseas bases in Asia

At political level: move from stalling regional organisations to launching its own, like the Asia Infrastructure Investment Bank (AIIB), to shape regional order

At economic level: move from leveraging exports to US to building independent economic capacities, in particular with the Belt and Road Initiative (BRI)

  • The BRI consists in building infrastructure in neighboring countries, ports in particular, often at a loss, to gain leverage on them (through debt, bribes)
  • China has been pushing for diversifying away from the dollar as the only international reserve currency. This has not worked so far globally, but the RMB is already being used to settle more regional trades than any other currency

Part 3 - Expanding Chinese order globally (2017-today)

Starting point: three events lead the CCP to conclude the US is retreating globally at the same time it’s waking up to China’s influence

  • Trump election (2016-2020)
  • Brexit (2020)
  • West’s initial poor response to Covid (2020)
  • Not in the book but also crucial in my opinion: Alphago (2016) ⇒ the CCP wakes up to the opportunity of AI

Taking advantage of “great changes unseen in a century” to accomplish “the nation’s rejunevation” - the CCP’s version of Trump’s “make America great again” - fully replaces “hiding capabilities and biding time” as the party’s guideline in Xi Jinping’s speeches

  • “Great changes unseen in a century” refer to the perceived decline of the West through political instabilities - inequalities and dissatisfaction from lower and middle classes leading to populist movements on the far right and left and social unrest
  • It also refers a wave of technological innovation, referred to as the “Fourth Industrial Revolution” (AI, robotics, quantum computing, biotechnology, etc.)

Xi Jinping puts a 2050 timeline on the nation’s rejunevation, understood by many scholars as taking the number one spot on the world stage

At military level: invest in truly global military with overseas bases around the world

At political level: project leadership over global governance and international institutions (including the UN) and advance autocratic norms

At economic level: weaken the financial advantages that underwrite US dominance + attempt to lead the fourth industrial revolution, investing heavily in frontier technology

US Strategy for competition with China

Strategies likely to fail:

  • Bargaining (e.g., giving away Taiwan for concessions) ⇒ will be perceived as weakness from a US already perceived as declining + won’t get anything reliable in return
  • Evolution towards liberal democracy ⇒ the party is way too embedded in society (~100 million members), and there is not enough widespread discontentment with the party + any perceived interference is likely to be perceived as an existential threat, increase the risk of war, and lead to significant election interference

The only remaining logical alternative is competition

Competition should be as asymmetric as possible as China will likely exceed US resources in the long run given its sheer size

Competition should focus on

  • Undermining Chinese order building
  • Rebuilding the foundations of US order: liberal values (openness and rule of law) make US hegemony less threatening / more acceptable and ensure the country can attract allies, immigrants, and capital that underpin technological innovation (responsible for economic growth), dollar dominance (enabling deficit spending and implementing economic sanctions), and military power

Ways to undermine Chinese order building

  • At military level: invest in asymmetric denial weapons (like long-range precision strike), help allies develop capabilities with such weapons, undermine China’s efforts to establish overseas bases
  • At economic level: counter technology acquisition and theft, provide select financing alternatives with allies
  • At political level: contest Chinese influence in the UN and global institutions, shape and stall progress in Chinese-led regional institutions

Ways to (re)build American order

  • At military level: build resilience to asymmetric denial weapons, build resilient information infrastructure with AI
  • At economic level
    • maintain dollar dominance
    • leverage existing institutions (like the World Bank) and build new ones to extend US economic influence (e.g., through global infrastructure investment
    • create an entity to audit the US supply chain for Chinese dependences
    • reinvest in attracting and retaining worldwide talent (raise visa caps and grant more green cards to STEM graduates)
    • reinvest in basic science research (currently at an all time low of 0.61% of GDP)
    • reform financial markets and tax policy to incentivize longer-term corporate planning
    • build a competitive industrial policy architecture to sustain key US industries and innovation (subsidies, tariffs, strategies to educate and attract targeted talent)
  • At political level: build democratic/allied coalitions for governance issues from technology, to trade and supply chain, to standards

A personal opinion

  • Leading in technology (AI in particular) will likely play a central role - the leading global power has been the one leading in technology (and downstream economy) for each past industrial revolution
  • Biggest advantage of CCP towards this = ability to set and consistently execute on a grand strategy across time through centralized decision making ⇒ strategy 101 for China is to keep pouring money into key technologies
  • Biggest advantage of the US towards this = ability to attract worldwide talent through openness and rule of law guaranteeing economic opportunity ⇒ strategy 101 for the US is to keep this inflow of worldwide talent coming