China is economically and geopolitically weak, but its planning capabilities remain strong. The US is financially and geopolitically stronger, but strained ties with its allies and a lack of long-term plans create openings. Beijing could be in the midst of political corrections.
China’s economy might be described with a bunch of rough estimates. There is almost 50% youth unemployment rate. About 200 million people are in the gig economy, i.e., about 40% of urban workers are underemployed. There are probably 100 million unsold apartments. There is overproduction of everything.
People save all their money because there is no welfare, and they are scared of sudden, unpredictable events like the 2020-2023 Covid epidemics, when the country was in lockdown for almost four years. Ordinary folks have only 40% disposable income compared to 80% of developed countries. It’s why domestic consumption doesn’t pick up fast enough.
All kinds of subsidies, including those from the central and local governments and State-Owned Enterprises (SOEs), could cover 15% of the state budget debt. Economic growth last year was about 5%; therefore, in 2025, the debt-to-GDP ratio could have grown by 10% a year. At this pace, in 4-5 years, China’s total debt could exceed global GDP. To cancel it, China would need growth and inflation, but inflation would make poor people even poorer, making society more volatile and ready to protest.
Yet, the country runs a $1 trillion yearly trade surplus, which is unsustainable for global commerce. It is the only source of real money/growth.
After the recent purges, when scores of senior officers were put under investigation, it’s unclear whether the PLA is reliable or capable of performing its duties. But it has enough weapons in its stockpiles to demonstrate deterrence capability.
Recent maneuvers, mustering 1200 and 2000 large fishing vessels in a 500 km line across Japan, showed that a civilian fleet could be mobilized for military goals. The boats, sometimes as large as frigates, could shield their navy by confusing torpedo or missile attacks or ramming enemy ships.
In this picture, the Russian war in Ukraine may be necessary to keep the US on its toes. This all adds to potential instability.
Explosions?
The figures could look like China is ready to explode. But Beijing runs a tight ship. There are massive population controls. The party apparatus knows that without the top leader, it will be de-legitimized, thus it supports him, although it fears him. And he keeps them on a tight leash.
Many ordinary people feel ok, although they no longer have the hope of growing rich, like decades ago. There is public safety, and no crime. Most have a fallback position in the countryside, with a house and a small plot of land, and no taxes for the first time in thousands of years.
China has a near-monopoly on Rare Earth Elements (REE). On many goods, it has a price-quality advantage that could hardly be recovered by the US or would be at a steep cost. Hundreds or thousands of productions are in this niche. China is indispensable to others but has no real dependence on the outside world. It could close down in a semi–North Korea style, like the Qing dynasty did before the 1840 First Opium War. China doesn’t need a short-term win; it needs to resist. The US needs a long-term strategy to reconquer the world and win.
Therefore, given the structure of the two societies, open in the US and closed in China, if China shuts down its exports to the US, the US will suffer, scream, and protest. If the US does it with China, China might suffer even more, but won’t yell or protest.
China can thus shut itself down slowly into a ‘North Korea’ style. However, the shutdown can last only so long.
If China goes “North Korea” for over a decade, President Xi Jinping, then over 80, may have trouble holding the ship together, and the country could fall apart after his demise. He needs to find a solution relatively soon. His horizon, in any case, is not months; it’s years. He can afford, and it may even be convenient, to wait and see how the US will really move after President Donald Trump’s term.
Therefore, the US needs a long-term strategy to address China. Without it, miscalculations could be easier, and danger would grow exponentially.
China has disrupted the order that the US and its allies established in 1945 in part of the world, and then extended it globally after the end of the Cold War in 1989. Now it is a race to see who will be the first to develop new rules for the global game. The winner must be comprehensively stronger but also provide better rules to accommodate everybody in a different order.
Tweaking or Overhaul
The US needs to reindustrialize and get its society and accounts in order. It’s not impossible; it’s not even hard. It requires long-term political will and determination to do it. The US is better off because it should just tweak the present order and be on top again. But now it’s in the middle of an existential crisis; therefore, it might not be able to.
Beijing has no idea how to run the world. Presently, its model appears to be a complete overhaul and thus difficult. It only knows how to run the People’s Republic of China (PRC) under its present system, which it is scared to change.
The US has Venezuela, Iran, and partly Russia under its belt. It managed to change leadership in Venezuela, it is shaking the Iranian tree, and it has Russia on the ropes. These are geopolitical threats that could translate into potential pressure points over raw materials and oil exports.
China has all the essential advantages in its export industry.
Therefore, the Trump-Xi summit in April could be a pause: geopolitics versus trade. But at the end of the day, China can do without its geopolitics, although it could drive itself insane, but America could suffer more by giving up its Chinese supply chain.
China has a short-term plan but vague long-term goals.
The US has the advantage but lacks a short-term plan, and the long-term exit is unclear. The US needs to strengthen its economy. But if it does, at the cost of tearing apart alliances and international relations, it offers immense advantages for China to exploit. The recent Chinese agreements with Canada and the EU are an indication of that. They felt under pressure and found a way to revamp trade with China, as the US had grown adversarial. The influential FT argued that the US moves make China a model.
The 2025 data on Chinese exports clearly represent this. Its trade surplus reached an unprecedented $1.2 trillion, despite a 20% drop in its surplus with the US. That is, the global trade imbalance with China worsened despite US improvements. This degrades the US’s overall position in the world and improves China’s.
50 years’ legacy
In the past 50 years, China experienced unprecedented growth and development. The Chinese people worked hard, the government contributed, but the main driver was the United States. Since the 1970s and then the 1980s, it provided low tariffs on exports to the US, massive technological transfers, and economic direction through advice from the World Bank.
After the Tiananmen crackdown in 1989 and then again, a decade later, despite bitter IPR controversies, America refused to turn its back on China, accelerating the spread of wealth and the creation for the first time ever of a large Chinese middle class. This changed the context of any Chinese rivalry.
Richer, fewer (because of a drastic drop in birth rates) Chinese are less keen on going to war. They have become unlike their North Korean neighbors, who gladly gathered some 50 thousand volunteers to die for Russia in Ukraine. Chinese confrontation with the US and its neighbors is growing, but an all-out war seems unlikely for now, also thanks to the welfare of the past 50 years.
In this lull, the US has time to reshape the world order by tweaking it. China’s global overhaul could take much greater effort. It could succeed or fail mostly if, in reverse parallel, the US fails or succeeds.
Meanwhile, in a decade or so, poorer and more numerous Chinese, liberated from the one-child policy, with a more powerful country, could feel differently about a war. It’d be the time when Xi, in his 80s, could be slipping from power. The mix could be highly flammable.
China’s political stalemate
Chinese economic troubles have political roots. But it’s hard to deal with them in the present situation.
There may be a stalemate between Xi and the party structure. Xi has more power than any party leader in the PRC before him. Still, his power is not absolute; it depends on the party structure, and the structure’s power depends on the top leader. There is, therefore, a balance of mutual assured destruction. Here, nobody can afford to look soft toward America, because the other side would immediately attack, accusing the soft side of betrayal. Presently, Xi wouldn’t have power without the structure, and vice versa.
However, the balance of power is not absolute. Even in theory, the structure can’t do without a top leader; therefore, their only exit would be to replace Xi with someone else, but this isn’t easy. In theory, Xi could, in parallel, do without the present structure and achieve absolute power, as Hanfeizi (a philosopher of the 3rd century BC) theorized.
It would not be easy, but less so in practice than replacing Xi. However, Hanfeizi’s “absolute power” comes with the ‘wu wei’, non-action – non-intervention of the emperor, who establishes the main drive of the empire but leaves the actual management to his ministers. Famously, Hanfeizi provided the first commentary on Laozi’s Tao Te Ching (Dao De Jing), who first theorized a political wu wei.
It’s now impossible to replicate the ancient Hanfeizi scheme, but political reform and modern democracy could break the political deadlock. The party structure would have to be further de-structured and lose even more power.
Some 20 or 30 years ago, when China was globally less important and enjoyed global goodwill, Beijing could have promoted this type of reform on its own. Now that the country is becoming more critical amid global distrust and tensions. China’s possible internal changes impact the world order and, if carried out alone, could scare half the world more than Trump’s de facto reforms in the US.
Therefore, Beijing should discuss the content of its reforms with the US and other concerned countries. But at present, there is no move in that direction in Beijing, and the deadlock persists amid growing internal strains.
La caratteristica della ‘chiarezza’ è fondamentale.