At this year’s Aspen Security Forum (which I co-chair) in July, China’s ambassador to the United States, Qin Gang, appealed ^[1] for better understanding of his country. But there was considerable debate among the assembled experts about China’s objectives. President Xi Jinping has announced China’s intention to outpace America in critical technologies such as artificial intelligence and synthetic biology by 2030, and many analysts predict that China’s GDP ^[2] (measured at market exchange rates) will surpass ^[3] that of the US early in the next decade. Is China seeking to displace the US as the world’s leading power by the centenary of communist rule in 2049?

China has made impressive progress over the past few decades, and US strategists describe it ^[4] as the ‘pacing challenge’ in a great-power competition.

What happens over the next three decades will depend on many unknowns. Some analysts see China declining after failing to escape the ‘middle-income trap ^[5]’’ Others envisage it hitting a plateau ^[6] because of demographic constraints, low factor productivity and Xi’s policy of favouring state-owned firms over private companies. In addition, China faces serious problems ^[7] of rising inequality and environmental degradation. Xi’s ‘China dream ^[8]’ and any other linear projection could be derailed by unexpected events such as a war over Taiwan or a financial crisis.

Here again, some experts at Aspen were more pessimistic than others. There is never a single future, only many possible scenarios, and which one becomes more likely will depend in part on what China does and how the US chooses to respond.

Just as there are many possible futures, America risks many possible failures as it responds to the China challenge, so a prudent strategy must consider more than one. The most dramatic failure would be a major war. Even if the US were to prevail, a military conflict between the world’s two largest economies would make the global economic effects of Russia’s invasion of Ukraine look modest by comparison.

Security analysts at Aspen focused on Taiwan, which China regards as a renegade province, as a potential trigger for a Sino-American war. The US has long tried to dissuade Taiwan from declaring de jure independence and to deter China from using force against the island. But Chinese military capabilities have been increasing, and while US President Joe Biden has denied ^[9] that American policy has changed, Chinese officials claim ^[10] that high-level US visits to Taiwan—most recently ^[11] by Speaker of the House Nancy Pelosi—are hollowing out the policy. One could imagine the two sides stumbling into war as Europe’s major powers did in 1914.

A second type of disaster would be a prolonged cold war fuelled by growing demonisation of China in US domestic politics. Such an outcome would preclude Sino-American cooperation in governing the world economy or coping with ecological interdependence, most crucially in responding to pandemics and climate change. Similarly, US–China competition that prevented cooperation in slowing the proliferation of nuclear and biological weapons would be costly for all.

The US would also suffer if it were unable to manage domestic political polarisation and address its social and economic problems, resulting in a loss of focus and a severe weakening of the technological dynamism that enables it to compete successfully with a rising China. Similarly, the growth of a populist nativism that curtails immigration or weakens US support for international institutions and alliances could lead to a competitive failure ^[12].

Finally, there can be a failure of US vision and values. To be sure, realism and prudence are necessary conditions for a successful strategy towards China. The US doesn’t have the capacity to make China democratic; only the Chinese can do that. But a sense of vision about democratic values and human rights also is important to generate the soft power that benefits America by attracting rather than coercing allies. That’s why a successful US response to the China challenge starts at home and must be based on preserving America’s democratic institutions.

The US should also invest in research and development, including through the US$280 billion ‘Chips and Science Act’ recently passed by Congress ^[13], to maintain its technological advantage in critical industries. And America should remain open to the world (including to Chinese students), rather than retreating behind a curtain of fear and declinism.

In terms of foreign and security policy, the US needs to restructure its legacy military forces to adapt to technological change, and strengthen its alliance structures, including NATO and partnerships with Japan, Australia and South Korea. After all, the share of the world economy accounted for by America and its allies is double that of China and Russia combined. The US needs to enhance relations with India, including through the diplomatic framework of the Quad, an informal four-country security grouping that also includes Japan and Australia.

America should also strengthen its participation in and supplement the international institutions it created to set standards and manage interdependence. Lastly, it is important to cooperate with China where possible on issues of transnational interdependence.

In his recent book, The avoidable war: the dangers of a catastrophic conflict between the US and Xi Jinping’s China ^[14], former Australian prime minister Kevin Rudd advocates setting a goal of ‘managed strategic competition’’ In the short term, rising nationalism in China and the assertive policies of Xi’s government mean that the US will probably have to spend more time on the rivalry side of the equation. But if America avoids ideological demonisation, shuns misleading Cold War analogies and maintains its alliances, it can successfully manage the China challenge.