On the eve of Trump’s visit to China, the outline of a new Cold War looms larger. Only the Holy See might help.
In November 2011, President Barack Obama launched the historic “Pivot to Asia.” After centuries of focus on transatlantic relations, the US shifted its attention to the Asia-Pacific (and to China in particular), overall home to 60% of the global population and the source of most economic growth. With the shift came a change in attitude. After decades of optimism about China’s political trajectory and future, a new pessimism was sinking in. The US began to believe that relations with China could grow increasingly adversarial and that a long-term strategy was necessary to address it.
Fifteen months later, in March 2013, the Holy See elected Jorge Bergoglio as Pope, who took the name Francis, after the Italian saint who, in the middle of the Crusades, went to speak to the Islamic Sultan Saladin. He also refocused on Asia and China. He pushed ahead with a massive effort that set aside long-held hesitation to open a new dialogue with China. It peaked with the 2018 signing of an agreement on the appointment of bishops in China, which established the first formal covenant between China and the Pope after four centuries (since the first arrival of the Jesuits in Beijing) of fruitless exchanges. The effort, however, didn’t result in a Pope’s trip to China or even the establishment of a Vatican liaison office in Beijing.
A new US president and a new Pope also arrived in 2015, shortly after each other. President Donald Trump assumed office on January 20, and Robert Francis Prevost was elected on May 8, taking the name Leo XIV. Both have since been trying to redefine their policies toward China while coping with unprecedented friction between them.
Now, on the eve of Trump’s visit to China, the first by a US president in almost a decade, perhaps one should pay attention to Rome, not only to Washington.
Situation in China[1]
The situation in China is extremely complex and not one-sided.
Underemployment and urban unemployment are at 40-50% due to the real estate collapse and, now, to excess industrial production. People have no money; therefore, they do not consume; therefore, the economy is propped up by state subsidies and exports.
State debt is perhaps three to five times GDP when you add everything together: central government debt, local government bodies, and SOEs. The debt holds because the RMB is not convertible and is financed by the trade surplus and the enormous spread between deposit and lending rates at banks. But this taxes and impoverishes ordinary people, who are already hit by the real estate collapse in which they had invested most of their savings. The stock market is also unreliable because it is neither fully open nor transparent; it remains under state control.
Officials are disgruntled because Chinese President Xi Jinping has stripped them of power and wealth through the anti-corruption campaign.
Do people rebel? No, because they have something to lose — their house in the city or the countryside. Even the underemployed can return to the village, where they have a house and a tax-free plot of land that sustains them.
Do officials rebel? No, because if Xi falls — the one holding the organizational pyramid together — everything collapses with him.
The result is a slow internal contraction, with people tang ping — lying flat — as investments in defense and technology grow to counter external threats and enable outward expansion.
However, the defense is also politically unreliable. If generals have to field the army to protect the country after a victory or a loss, they can turn against Beijing’s authority, blaming it for the loss or boasting of their victory against Beijing’s inaction. (See also https://warontherocks.com/the-mountaintop-mirage-why-xis-military-purges-cannot-produce-the-force-he-wants/.)
China should reform its political system to raise incomes and increase tax revenue, but it won’t because the reform is politically divisive.
If the generals are structurally unreliable, the army could become an empty shell and backfire on the top leadership. Still, a military revolution is unfolding after the war in Ukraine. The Ukrainian army is successfully replacing soldiers with drones capable of fighting and winning battles with little or no human ground support. This could offer a solution for Xi’s new PLA (People’s Liberation Army). China, with the world’s largest and most complete industrial complex, could field more and cheaper drones than anyone else. Those drones would hardly need unreliable generals. They could be set up and launched into battle at the push of a button by the supreme leader.
This possibility could reshape many future perspectives. Every other aspect of national well-being becomes less important, and the persistent drive to overinvest in industry and development (see also https://carnegieendowment.org/china-financial-markets/2026/04/is-chinas-high-quality-investment-output-economically-viable) makes sense.
Any other Way?
The Chinese continue on this path not because they believe it’s the way, the Tao, as their ideological Soviet cousins did with communism. The Chinese rulers are pragmatic. They know how to rule China through a structured bureaucratic process rooted in millennia of experience, but don’t know how to rule it with an open society. They also fear that the US, or someone, could take advantage of reform attempts to destroy the country. Therefore, their system is the best for them, given the alternatives.
At the moment, their forced long-term bet is that the US will explode before China does.
Consequently, the US should also have a long-term objective: don’t explode and let the Chinese contraction run its course. It could take many years.
The real divergence, when China set on a different course, occurred between 2005 and 2011, when China believed the US was doomed and that China’s way, its Tao, was superior.
Here, amid the doom of the new dark Cold War that could ravage and turn the world upside down in the next few decades, there is a thin sliver of hope. The hope is that the Holy See could find a peaceful solution.
[1] For the section see: https://www.appiainstitute.org/articles/china/china-one-country-two-economies-two-strategies/ , https://www.appiainstitute.org/articles/china/chinas-gray-economy/ , https://www.appiainstitute.org/articles/america/us-china-summit-on-the-worlds-future/
