TEMPORAL SCOPE: 2008 – present (from China’s post–Global Financial Crisis rise and increasing global assertiveness through the current phase of strategic rivalry)
GEOGRAPHIC CONTEXT: Global international system (with primary focus on the United States and the People’s Republic of China; secondary focus on Asia-Pacific, global trade networks, and international institutions)
Case Trigger & Strategic Risk Environment #
U.S.–China relations shifted after the 2008 global financial crisis as China’s growing economic weight and external assertiveness led U.S. policymakers to reassess the long-term balance of power and the resilience of the post–Cold War order. The analytical puzzle is how a sustained great-power rivalry can intensify across trade, technology, military posture, alliances, and institutions without crossing into direct armed conflict. This case is best defined as strategic competition under nuclear deterrence and deep interdependence, where both sides pursue relative advantage while also avoiding uncontrolled escalation and systemic breakdown.
Case Overview #
This case is analytically relevant because it illustrates rivalry as a long-duration governance problem: how states compete when they are economically entangled, institutionally connected, and militarily capable of catastrophic escalation. It shows how competition can be “everywhere but war”—shifting from discrete crises to policy portfolios (export controls, alliance coordination, investment screening, maritime operations, standards-setting, narrative framing). It also highlights why “competition” is not the same as “confrontation”: the core strategic task is managing credible deterrence plus bounded cooperation while each side tries to shape the rules and technologies that structure future power.
Context & Constraints #
Systemic context (post–Cold War order + globalization). The rivalry unfolds inside dense global supply chains, multilateral institutions, and cross-border capital flows—constraints that raise the costs of full decoupling and make many tools (sanctions, controls, standards, industrial policy) more attractive than kinetic force.
Nuclear deterrence and escalation risk. Mutual capability for severe retaliation creates a structural incentive to compete below the threshold of war (deterrence), while crises (e.g., around Taiwan or the South China Sea) remain persistent risk points that require signaling and communication channels.
Technology as a strategic terrain. Advanced computing, semiconductors, AI, and cyber capabilities are increasingly treated as dual-use foundations of economic competitiveness and military advantage, encouraging “small-yard, high-fence” style restrictions and countermeasures. U.S. semiconductor-related controls expanded notably from 2022 onward and were clarified/updated later, illustrating iterative rule-making rather than a one-time shift.
Alliance and institutional entanglement. The U.S. operates through treaty alliances and new minilateral arrangements; China operates through state capacity, market scale, and institution-building strategies. AUKUS (announced 2021) exemplifies how security partnerships can be used to strengthen deterrence and technology cooperation without direct confrontation. 2021-2025.state.gov+2publications.parliament.uk
Domestic political constraints. In both countries, leaders face internal pressures that narrow bargaining space: in the U.S., bipartisan “strategic competition” framing pushes toughness on tech/trade; in China, sovereignty and regime legitimacy pressures reduce flexibility on issues like Taiwan and “containment” narratives.
Key Actors #
United States (Executive branch + agencies).
Interests: preserve favorable balance of power; protect critical technologies; maintain alliance credibility; keep global economic stability.
Resources: market access leverage; export controls and investment restrictions; alliance networks; global finance role; naval/air presence.
Constraints: domestic polarization; legal limits; allied coordination frictions; economic blowback from overreach; escalation management.
People’s Republic of China (Party-state leadership + state institutions).
Interests: secure regime legitimacy; reduce vulnerability to external pressure; expand regional influence; achieve tech upgrading and strategic autonomy.
Resources: large domestic market; state-directed industrial capacity; trade relationships; coercive and inducement tools; expanding military capabilities.
Constraints: export dependence in key sectors; technology bottlenecks; capital/market confidence; reputational and coalition costs from coercion.
Allies and partners (Japan, Australia, EU actors, others).
Interests: avoid forced binary choice; protect supply chains; deter coercion; keep trade flows; preserve regional stability.
Resources: critical nodes in chip equipment, standards bodies, and regional basing; diplomatic legitimacy.
Constraints: economic exposure to China; uneven threat perceptions; domestic politics.
Firms and tech ecosystems (semiconductor, cloud, telecom, finance).
Interests: market access, predictable rules, IP protection, investment security.
Resources: innovation, capital, lobbying, supply-chain control points.
Constraints: compliance regimes, retaliation risks, uncertainty, fragmentation of standards.
Critical Strategic Decisions #
1) Competition design: “bounded rivalry” vs. “comprehensive confrontation” #
Option A: Narrow, targeted competition (focus on a limited set of security-critical technologies and behaviors).
Benefits: limits blowback; keeps cooperation possible; reduces allied fatigue.
Costs: may leave gaps; slower to shift trajectories.
Option B: Comprehensive competition (broad decoupling, maximal pressure, ideological framing).
Benefits: clearer signals; potentially faster constraint on rival capabilities.
Costs: high economic costs; wider coalition resistance; escalatory spirals.
2) Technology governance: export controls, investment limits, and standards #
The U.S. choice to tighten advanced semiconductor and computing controls (and refine them over time) reflects a strategic bet that chokepoints can slow military-relevant tech diffusion while tolerating partial interdependence. bis.gov+2Federal Register
China’s countermove is not only retaliation but substitution and capacity-building, seeking resilience against chokepoints—illustrated by continuing efforts to localize advanced chipmaking capabilities. Reuters
3) Deterrence posture without direct confrontation #
Both sides repeatedly choose risk-managed signaling (presence operations, exercises, declaratory policy, alliance reassurance) rather than direct military engagement—because the downside risk is enormous and because coercion can often be attempted through non-kinetic means (economic pressure, gray-zone tactics, diplomatic isolation efforts).
4) Stabilization mechanisms: high-level dialogue and crisis communications #
Even during heightened competition, leaders periodically re-open channels to prevent miscalculation. For example, the 2023 Biden–Xi meeting emphasized stabilizing communications and managing areas of friction while competition continued. The White House
Theoretical Lens Applied #
Conflict Theory #
Why it fits: This is a rivalry over relative advantage under anarchy, where each side anticipates the other’s moves and tries to improve its position without triggering catastrophic escalation.
Key concepts applied: security dilemma, deterrence, coercion, escalation dominance, signaling.
How it explains observed choices: It clarifies why both sides compete heavily in the “sub-war” domain: deterrence works, but it pushes conflict into economic, technological, and informational arenas where coercion is cheaper and deniable.
Rational Choice Theory #
Why it fits: Key moves (export controls, alliance design, selective decoupling) are policy choices under constraints, where actors compare expected payoffs and risks.
Key concepts applied: cost–benefit trade-offs, strategic interaction, incomplete information, credible commitment problems.
How it explains observed choices: It helps explain why the U.S. targets chokepoints (high leverage, lower direct confrontation risk) and why China invests in substitution (reduce vulnerability) even when short-term efficiency losses are large.
Institutionalism #
Why it fits: Competition is conducted through institutions and rules—trade regimes, export control arrangements, alliances, minilaterals, standards bodies—rather than only through force.
Key concepts applied: rule-shaping, institutional constraints, forum shopping, embedded interdependence.
How it explains observed choices: It highlights why both sides fight over procedures and legitimacy (who sets standards, what counts as “security,” which institutions arbitrate disputes) as a durable way to convert power into influence without open conflict.
Outcomes & Consequences #
Immediate effects:
- Expansion of policy toolkits beyond tariffs to include technology controls and investment restrictions, with iterative regulatory updates over time. bis.gov+2Federal Register
- Intensified alliance and minilateral coordination (e.g., AUKUS as a technology-and-security cooperation platform). 2021-2025.state.gov
Medium-term effects:
- “Selective decoupling” in frontier sectors (chips, AI-related infrastructure, sensitive data), while trade continues elsewhere.
- Higher compliance and uncertainty costs for firms; re-routing and redundancy-building in supply chains.
- Increased salience of crisis-management channels as competitive actions multiply (more “incidents” to manage even without war). The White House
Intended and unintended consequences:
- Intended: slow adversary capability in militarily relevant tech; strengthen deterrence; reduce single-point dependencies.
- Unintended: incentives for accelerated indigenous innovation efforts and gray-market sourcing; pressure on third countries to align; regulatory complexity that can outpace diplomacy. Reuters
Analytical Questions #
- Under what conditions does interdependence reduce conflict, and under what conditions does it become vulnerability that drives harder competition?
- Which tools are more escalatory in practice: military signaling, export controls, or financial restrictions—and why?
- How can alliances deter coercion without creating a spiral of counter-alliances that increases crisis frequency?
- If both sides value stability, why does the competitive frontier keep expanding into new domains (AI, standards, data governance)?
- What would a credible “rules of the road” framework for great-power rivalry look like if neither side trusts the other’s intentions?
