TRANSCRIPT: Michael Beckley on The End of China’s Rise & the Future of Global Order 

So I’ll get to all that fun, wonderful story in a little bit, but first this idea that China’s rise is reversing. I mean that literally.

China’s Economic Slowdown

So this is China’s economy compared to that of the United States, and you can see that China is actually shrinking relative to the United States, and this is using Chinese government data, which we know exaggerates the size as well as the speed of China’s GDP growth. These are the different growth estimates for China. The red line is what the Chinese government says the Chinese economy is growing at. The other lines are based on objectively measurable data, things like how much electricity is being used at night that you can see from outer space.

If you use those other estimates, then China’s economy is actually at least 20% smaller than the graph I showed you before. And when you dial down into other metrics, you see a similar story. So this is productivity. This is what you really need to grow an economy.

To grow an economy, you can either add more workers, or you can spend more money, or ideally you can become more productive by producing more at lower cost. And you can see that with really the exception of the 2021, the reopening from zero COVID, productivity growth in China has been negative for over a decade, which means that China is becoming less efficient over time. And you see this also reflected in the so-called capital output ratios. So this is how much capital or money do you have to spend to produce every unit of GDP growth.

You can see that in recent years, those have skyrocketed, which means that China is spending more and more to produce less and less. And the natural outcome of this is a huge explosion in debt. So in recent years, China has gone from, you know, about an average developing country level of debt, similar to India, to above and beyond even the American fat cats in terms of its debt, with no end in sight. So if any of you have been traveling to China recently, as I imagine some of you have been, a lot of people come back and say there’s a palpable malaise in Chinese society that didn’t used to exist before.

And you’re seeing that in public opinion surveys. So for the first time, really, in more than a generation, you’re having more and more Chinese citizens saying that their lives are getting worse year by year. You see this reflected in the so-called “lying flat” generation, a lot of the youth who can’t find jobs commensurate with their education level. You see it in the capital flight, the wealthy who are trying to get their kids and their money out of the country as quickly as possible.

A whole host of indicators suggest that all is not right with China’s economy. And I think a lot of people have been saying this slowdown in China’s economy was entirely predictable. A lot of people think that the rise of China was the normal thing, that China would just rise forever, that’s just what it does, and that anyone who argues that it’s going to slow down doesn’t know what they’re talking about. But in retrospect, we now know that China’s rise was the exceptional event.

It was the weird thing that usually does not happen in the international system, and it was propelled by a few fleeting circumstances, a few fleeting tailwinds that have now become headwinds that are dragging China back down. So I just want to walk you through some of these. The first of these tailwinds turned headwinds is just basic security. For much of the last 40 years, China has had the most secure geopolitical position of any time in its modern history.

And that’s really important because China, as you know, is in a very rough neighborhood. It’s surrounded by 19 countries, most of which are powerful or unstable or both. If you play the geopolitical board game Risk, you know that trying to hang on to the territory of China is damn near impossible, and that’s what China has to do every single day. And for big parts of its modern history, China failed to do this.

China’s Geopolitical Challenges

So for 100 years, from the first opium war in 1839 until the end of the Chinese Civil War in 1949, China just gets ripped apart by imperialist powers. It collapses into two of the worst civil wars in history. And then even after the Chinese Communist Party unifies the country in 1949, China almost immediately becomes the chief enemy of the United States because of the Korean War and the direct fighting between the two countries. And then 10 years later, China’s alliance with the Soviet Union falls apart.

And so by the 1960s, China is the top enemy of both Cold War superpowers. And not surprisingly, it’s isolated and impoverished. So it’s not until 1971 and the opening to the United States that China starts to get some reprieve from this geopolitical vice because now it has a superpower on its side. And the Americans actually warn the Soviet Union on multiple occasions, “Do not attack China, otherwise we’re going to have a problem with that.”

The Americans also fast-track China’s entry into Western markets. And the timing of China’s opening up is perfect. So China starts to join the global economy right as this period that we now call hyper-globalization kicks in. So this is the period where in 30 years, from the 1970s to the early 2000s, world trade and investment surges six-plus-fold.

China both propels and rides this wave to become what we know of it today, which is this dominant workshop of the world, a huge manufacturing power and a rising economy. The second factor that China really needed for its rise was decent government. So in 1976, Mao dies. And China’s leaders basically say, “Let’s not do another cultural revolution.”

And so they start to reward lower-level Chinese leaders for good economic performance, not just blind loyalty to the Chinese Communist Party. Actually, ironically, the cultural revolution itself so destroyed the state planning apparatus that there just weren’t as many Chinese bureaucrats running around telling the peasants what they could and couldn’t do. And so the Chinese people were partially freed from that rigid state plan, and they basically formed quasi-private markets and industries and started trading, and you had this big boom of economic activity. And the Chinese Communist Party eventually started to begrudgingly accept that and then expand the range of quasi-private markets around the country.

So China had the right policies to capitalize on its new opportunities at the right time. A third crucial factor was the greatest demographic dividend in human history. So for a big part of the last 35 years, China had anywhere between 10 to 15 workers available to support every elderly retiree. That’s two to three times the global average, and it’s the unrepeatable result of China’s very peculiar population history.

Basically, in the 50s and 60s, Mao inherits this country that has been decimated by decades of war and strife, and he wants to turn China into a superpower. And so the Chinese government starts to incentivize Chinese families to have lots of children, and they do. And so the population explodes by 80% in 30 years. But then the Communist Party starts to worry about overcrowding, and in the late 1970s, they implement the one-child policy.

And so for much of the last 35 years, you’ve had this baby boom generation. In the prime of their working lives, they had relatively few parents to take care of because so many of them had died in the civil wars and the famines. And they had relatively few children to take care of because they weren’t allowed to have them. So this population was absolutely primed for economic productivity.

Demographers think this demographic bubble alone explains at least 25% of China’s rapid growth over the last 35 years. And then the final factor that China had going for it that was really crucial for its rise was abundant natural resources. So up until fairly recently, China was almost self-sufficient in just basic things like water, food, energy resources. And this made growth very cheap because raw materials were cheap.

You could just set up a factory, plow through the raw materials, and grow very quickly. So really from the early 1970s up until, I would say, the early 2010s, China had these four factors working for it to varying degrees. But now each of these assets are becoming liabilities that are starting to drag China down. And this is why we shouldn’t expect a major turnaround in the Chinese economy anytime soon.

Looming Resource Challenges

So for starters, China’s just running out of resources. Half of its rivers are gone. 60% of its groundwater is so polluted that the Chinese government has said it’s unfit for human contact. So you can’t touch the water.

So that means you can’t use it even for agriculture or industry, let alone to drink. Beijing has about as much water available per capita as Saudi Arabia does. It’s a similar story in terms of energy resources. So China’s plowed through most of its exploitable oil.

Even coal is becoming scarce. So as a result, China’s now the top importer of energy resources around the world. It’s also the top food importer in the world. China can’t feed itself anymore because half of its farmland has either become so polluted you can’t use it, or it’s just turned into desert.

And so raw material costs in China have gone up substantially in recent years. And that makes economic growth much more expensive. It’s three times more expensive to produce each unit of GDP today than it was in the 2000s. And that’s rising.

At the same time, China’s running out of people. So that baby boom generation I mentioned earlier is now retiring and falling onto the backs of a tiny one-child generation. Just over the next 10 years, China’s going to lose more than 70 million working-age adults. It’s going to gain more than 130 million senior citizens.

China’s Demographic Challenges

That’s like taking an entire France of workers, consumers, taxpayers out of the country and adding an entire Japan of elderly pensioners, and it’s going to happen just in the next 10 years. That 15-to-1 ratio I mentioned earlier of workers to retirees, that’s going to collapse to 2-to-1, to support every retiree by the late 2030s. Now, managing these problems is going to be increasingly difficult because China is now run by a dictator who consistently sacrifices economic efficiency to enhance his political power. The zero COVID lockdowns, the crushing of Hong Kong, those are just the most obvious examples.

The channeling of subsidies to state-connected firms, the anti-corruption drive that has scared lower-level officials from engaging in any kind of experimentation or entrepreneurship because they don’t want to ruffle the wrong feathers, disrupt the wrong patronage network and end up the target of an anti-corruption probe. The censoring of negative economic news, so youth unemployment data is going off the charts and then that’s just eliminated. All these things just make it harder to course-correct in the middle of an economic downturn and don’t bode well for China’s economy. And then finally, China is starting to lose some of that easy access it had to rich country markets, technology and capital.

So the United States obviously is waging a sort of trade and tech war against China. The European Union, Japan to varying degrees are starting to follow suit and so China just faces thousands of new trade and investment barriers every year that it didn’t face as recently as 10 years ago. And at the same time, China’s security environment is also starting to look a lot more dangerous. So this is a map of US military bases that are currently being expanded.

You don’t need to be a strategic genius or attend the World Knowledge Forum to understand the basic story that’s going on here. This is what Xi Jinping calls “all-around encirclement” by the United States. So China’s boom now is finally coming to an end and unfortunately it’s having shockwaves for lots of other countries today because so many economies tied their fortunes to a rising China and for good reason. And so to sketch this out, I want to take you back to the 2000s.

China’s Impact on the Global Economy

Some of you are probably too young to remember that but for those of you that do remember it, you’ll remember that China was growing at double-digit rates. You might also remember that the rise of China was the most read-about news story in the world by far. Nothing else came close. It was the most decisive event of the first two decades of the 21st century.

Way more than 9-11 or the British Royal Wedding or whatever other news story you want to put out there and for good reason. China generated more than 40% of global economic growth in the 2000s and the 90s. Some scholars compare it to the Industrial Revolution or the Renaissance in terms of its global impact. I don’t know if I’d go that far but it certainly was spectacular to see China rise.

And during this time, China becomes a buying machine. It just starts buying up everything around the world. Soybeans, computer chips, cars, pharmaceuticals, machine tools, whatever it was, China was buying it. And so the China market becomes a gold mine for many countries around the world.

You can see that imports as a share of China’s economy rise substantially. The Economist magazine even created an entire index that they call the Sino-Dependency Index which just showed how incredibly dependent other economies became on China’s economy. Even major countries, Germany, South Korea, Japan, France, had upwards of 10% or more of their fortunes essentially tied up in trade and investment with China. China’s rise, its insatiable demand for resources also just drove up the price of commodities around the world.

And so this had the indirect effect of bringing up countries that weren’t even trading directly with China. They just benefited from the fact that the things they had to sell were selling for a higher price. Russia, for example, the rise of China basically created massive demand for everything that the Soviet Union used to produce whether it was weapons or oil and gas or machine tools. And so China’s rise helped propel the resurgence of Russia as well as dozens of other economies during this time.

At the same time, China wasn’t just buying stuff, it was also lending money abroad. So as it accumulates wealth, it then turns around and starts lending out money mainly so countries could employ Chinese companies to build infrastructure. Roads, bridges, telecommunications networks, soccer stadiums. Over the last 20 years, one out of every three infrastructure projects built in Africa was built by China.

And so China becomes this dominant dispenser of loans. But unfortunately, that era is now over. This era where really countries were getting a triple win from China. A huge market to sell their exports into, a seemingly bottomless supply of loans to finance all their development projects and lots of experienced Chinese companies that knew how to build pretty much anything.

That all has been going away in recent years. Studies show that every 1% decline in China’s economic growth rate reduces the economic growth of its main trading partners by about the same amount. And one reason for this is that China is just buying less from the world than it used to. So this is imports as a share of China’s already slowing economy.

As a result, countries are seeing their exports to China plummet. So South Korea’s exports to China dropped about 20% last year. Germany’s dropped 9%. Commodity producers like Australia, Saudi Arabia, Brazil are starting to feel the pinch.

At the same time, China’s not loaning money anymore. It wants that cash at home. It’s not offering debt relief to other countries. It’s demanding that its partners now pay back the money with interest.

And as a result, lots of economies are being pushed into debt distress because of the massive loans they took from China. You’ve seen just in recent years Venezuela, Laos, Zambia. Lots of other countries are starting to feel this. Pakistan, because of the drying up of Chinese loans.

And at the same time, to make matters worse, in order to save its own economy, China is pumping up its companies with subsidies. It’s manufacturing enterprises. And then flooding global markets with subsidized exports. You’re seeing this obviously in electric vehicles, solar panels, a number of other main manufacturing industries.

And so as a result, many countries’ trade deficits with China have really surged in recent years. And so this is now creating a triple threat to a number of economies because China’s buying less of their stuff. It’s no longer giving them easy loans. And now their markets are being flooded with a wave of cheap Chinese imports that are crowding out domestic producers.

So you’re starting to see this bite. And needless to say, China’s not making a lot of friends during this time. So China’s international favorability around the world has fallen by more than half since the 2000s. Anti-China sentiment around the world has surged to levels we haven’t seen since the 1989 Tiananmen Square massacre.

And this really is a sea change. Because when China’s economy was growing very rapidly, so many other countries were currying favor with Beijing to get access to its markets. The British hand back Hong Kong. The Portugal hands back Macau.

The Taiwanese pursue engagement with China. You have a dozen countries settle their border disputes with China. You have the United States shepherding China into the World Trade Organization. And in fact, writing technology transfer protocols into China’s accession agreement.

So like, please take some of our technology. But that now is flipping. As China’s economy slows, as China focuses on trying to save its own economy and putting other economies at a disadvantage, now more and more countries are seeing China less as a profitable economic partner and more as a potential threat, both economically as well as, in some cases, geopolitically. And so this now is putting China under a lot of pressure, because it’s not only dealing with a slowing economy, it’s starting to get more geopolitical pushback.

China as a Peaking Power

And so this then begs the question, how is China going to react to these pressures? So I actually, because I knew I needed to make slides, I put my presentation notes into chat GPT and just asked it to draw a picture of what I was talking about, and this is what it came up with. Everything’s going to be fine, don’t worry about it. No, look, I don’t want to be alarmist, but I am, my concern is that China is becoming a classic peaking power, which historically have been the most dangerous kind of countries in the world.

So for the past four decades, this rapid growth has pumped China up. It’s equipped it with the money and the military muscle to really make big moves on the international stage. It’s also just puffed up the ambitions of China’s leaders. They think, “Hey, this could be our century and we need to move on it.”

But now slowing economic growth, greater international pushback is giving China the motive to move more aggressively to achieve those lofty ambitions. And when you look back at history, a lot of these peaking powers, really none of them mellowed out and dialed back their ambitions. Instead, as I said, they cracked down on dissent at home and they expanded aggressively abroad. A few even catalyzed massive wars.

So I’ll just give you a few examples of these historical cases so you can kind of see the range of different outcomes, and then I’ll go back to talking about China and how I worry that it’s starting to inch its way down this well-worn historical path. So one of these cases is actually the United States in the late 19th century. Basically after the U.S. Civil War in the 1860s, there’s this big economic boom in the United States where the Americans are no longer fighting each other. They’re starting to spread westward across the North American continent. But then by the 1880s, you have a series of what were at the time the worst depressions in American history. And the Americans started to freak out that the reason their economy was doing so badly was the frontier was closed.

There was no more open land to expand into. There were no more greenfield investment opportunities to exploit. And so the U.S. government did a couple of things. First, it cracked down hard on organized labor. So if you study U.S. history, this is the era of just brutal repression of labor movements, sending in police forces to basically beat workers with clubs. And then at the same time, the Americans started to pump exports and investment into Latin America and Asia. Then the Americans built a giant navy to protect those far-flung investments. And then the United States just started annexing territory overseas.

So when times got tough, the United States really got moving in a big way. This is the era of American imperialism, full-throated imperialism. And it comes right after the worst economic crisis that the United States had suffered up to that point. Russia, around the same time, at the turn of the 20th century, sees its economic boom fizzle out.

And the Tsar responds by putting 70% of the country under martial law and then seizing assets and resources in Manchuria, moving into Korea as well. Russia sends about 200,000 troops into East Asia to take over resources, and they don’t stop expanding there until the Japanese, as you can see on the right side of that screen, boot them out in the Russo-Japanese War. Germany and Japan, we know this story well. The Great Depression, they don’t react particularly well to that.

Historical Examples of Peaking Powers

Japan, in particular, as it’s experiencing these economic troubles, also is feeling the pressure from the United States. But more recently, people forget that Russia’s aggression today also has a peaking power origin. So in the 2000s, Russia was a resurgent economy. It was banging out roughly 8% annual economic growth rates, largely because all those commodity prices were very high.

But then, after the 2008 financial crisis, a lot of the prices for all the things that Russia was selling go down. They take down Russia’s economy and Putin’s popularity with it. He responds, first of all, by jailing more dissidents and dialing up anti-Western propaganda, but he also starts putting pressure on former Soviet states to join the Eurasian Economic Union, this customs union, where he basically says, “I’m going to put tariffs around all of you so that it’s harder for you to trade with the rest of the world, but you have to lower your tariffs with Russia and basically become economic vassals of the Kremlin.” So needless to say, some Ukrainians were not so excited about that idea.

They were much more interested in getting a giant trade deal with the European Union, and we know how that tug of war between Russia and the West has ultimately played out. So you see this pattern over and over again in history. It’s the rapid rise followed by the fear of a potential decline if countries don’t do something, that if you don’t get moving, the international balance of power may eventually turn against you. And so when I look at China today, I see China doing three things that make me very concerned.

China’s Domestic Repression

First of all, China has been dialing up domestic repression. I now use the term fascism, and I don’t use that lightly because I know it’s a loaded term, but if you look at what’s happening in China today, a lot of the classic hallmarks of a fascist regime are starting to show themselves. So first of all, you have the worship of a central leader. If you listen to Chinese propaganda today, they celebrate Xi Jinping like he’s the third pillar of this holy trinity.

So they say under Mao, China stood up. Under Deng Xiaoping, China got rich. And under Xi Jinping, China is going to become mighty again. Hu Jintao and Jiang Zemin, I guess they’re just forgotten.

They’re not even mentioned in this. But you see this extreme worship, and he is centralized power, of course, as no leader has since Mao. Another aspect is dialing up of hyper-nationalism, and not just like “our country is great” nationalism, but this idea of taking revenge on hostile foreign forces that disrupted the golden age of the nation, this golden age that the dear leader is going to eventually restore. You see these themes of national rejuvenation and recovering from the century of humiliation increasingly featuring in schools, in popular media, as well as in government documents.

You also have the brutal repression of ethnic minorities. So Chinese documents increasingly describe the Uyghurs, other ethnic minorities, as a cancer that has to be cut out of the system before it infects the rest of the body politic. And you’ve seen the extreme measures that China has gone to in order to control these minority populations, the reeducation camps, the bulldozing of traditional communities, and so on. You also have the development of this Orwellian surveillance state that can just track massive populations and then discipline people instantly by, if you do something wrong, maybe getting cut off from travel.

And then if worse comes to worse, you can just send in the traditional authorities to crack heads. And then finally, this worship of military strength. And it’s not just the parades and the goose-stepping. It’s more subtle things like the civil-military fusion concept, which is explicitly designed to erase the boundaries between civilian and military life.

Any organization, any company can essentially be commandeered to serve the nation in a geopolitical or military sense. So at the same time, China also is developing a new economic strategy. And it seems to be one that is prioritizing leverage rather than just rapid growth. So I think the basic idea is, okay, our economy is not going to grow as fast as it did, but we can still get leverage over our trade partners by dominating what Chinese documents call the choke points of the global economy.

China’s New Economic Strategy

So these are things that other countries can’t live without, whether it’s medical PPE or rare earths or certain types of computer chips or access to the South China Sea. There are certain strategic industries that China is looking to dominate. And you see that China pairing that with an increased willingness to impose sanctions on other countries. So for example, Australia calls for an investigation into where COVID came from.

And China uses its economic leverage to basically wage a trade war against Australia. The Australians, in typical Australian fashion, kind of react with good humor. They sponsor this “fight communism by buying Australian wine” campaign. And then parliament members and other Western democracies kind of pick this up and, you know, it’s this sort of patriotic thing.

But it shows that China is much more willing to adopt a mercantilist strategy to flex its muscles in reaction to the fact that it can no longer just buy off other countries through promises of rapid growth by partnering with China. And then finally, what worries me the most is this big military buildup. So China is engaged in the largest peacetime military buildup of any country since Nazi Germany. It’s churning out warships and ammunition at an extremely rapid rate.

China’s Military Buildup

You see that reflected in a huge increase in the military budget. So China still claims it only spends about $230 billion a year. American intelligence suggests it’s almost three times that amount. That’s been backed up by think tanks that basically find things that other countries put in their military budgets that China has been leaving out to make its budget look smaller.

But when you factor those things in, you see a major increase in the budget. And you can also just see the results of this military investment with things that you can see with your own eyes. So the number of warships that are coming out of Chinese shipyards has surged in recent years. China is doubling the size of its nuclear arsenal.

And increasingly, China is deploying these military assets in more aggressive ways than it used to. And I think this all reflects a basic calculation that China can no longer rely on economic carrots to get other countries to give it concessions. And so it’s more willing to start using military sticks to try to coerce compliance. So in the Taiwanese case, you know, China used to hope that the Taiwanese would eventually just unify with the mainland through trade and investment links and tourism, that eventually the Taiwanese would come back.

But that has failed, and so now China is sustaining the largest military show of force in the Taiwan Strait in more than a generation. To really underscore that, China has built full-scale models of Taiwanese and American military bases out in the desert, as well as full-scale models of American aircraft carriers so that Chinese forces can do practice bombing raids on those mock military vessels. You’re seeing something similar happening in the South China Sea. So this is a heat map that the New York Times put together that shows just from 2021 to 2023 the increase in the density of Chinese naval and maritime militia operations.

A lot of these are concentrating around disputed features in the South China Sea, and they’re not just increasing the presence. China’s just gotten much more aggressive in the way that it uses these naval and maritime militia vessels. So especially the Philippines has really come in for a lot of coercion just over the last year, where China, you know, blasting Filipino ships with water cannons and lasers, boarding Filipino ships literally with knives drawn. And so you’re just seeing a greater willingness to court risk.

And you’re also seeing something similar happening on the border with India, where you’ve had a number of skirmishes, some of which have actually killed several dozen troops. So it just seems like across the board, China is much more willing to try to extend its security perimeter even having to use force to shove its way to carve out space for itself in what it views as an increasingly hostile world. The last part of this, and what also worries me, is just that China, in addition to building up its own military, has been working increasingly with other autocratic revisionist powers, most notably, obviously, Putin’s war in Ukraine, sustaining that by providing critical components. China recently reaffirmed its alliance with North Korea.

China’s Autocratic Alliances

And then with Iran, really giving it an economic lifeline. There was a massive infusion of Chinese investment recently, at the same time that China sold Iran a bunch of weapons. And so, again, the strategy here seems to be what political scientists call external balancing. There’s internal balancing, where you try to counter your adversary by building up from within your own military forces, your own power.

But if you can’t catch up, then what you can do is external balancing. So I’m just going to get allies to help me do some of that dirty work. And so it seems like China, by cultivating these partners and helping them foment conflict at various points around Eurasia, is stretching Western forces thin. It’s also just gaining military technology.

So Russia is giving China quieting technology for its submarines, stealth technology for its aircraft, early warning systems, etc. So you’re seeing these autocratic links. Some people call it an axis. I think it gives it too much credit.

I don’t think it’s quite on the level of a full-fledged military alliance. But certainly it’s a beneficial partnership, as far as these guys are concerned. So naturally, all of this is fueling conflicts with the United States. And unfortunately, I think it’s going to get worse before it gets better.

Resolving US-China Tensions

Part of that, again, is based on history. So over the last 200 years, there’s been 27 great power rivalries. And these cases really only wound down not with the two sides talking their way out and kind of figuring out how they’re going to divide up parts of the world, but only after one side basically loses the ability to compete, only after there’s a major shift in the balance of power that forces one side to basically make major concessions. And unfortunately, in the vast majority of these cases, that just comes through a massive war where one side beats the other into submission.

There’s like the Soviet case, the Cold War, where the Soviets just run out of gas and have to sell out through peaceful exhaustion. But that’s not the norm. And when you look at… The fundamental problem is that it’s what political scientists call a credible commitment problem, meaning making concessions to the other side that are big enough to reassure the other side also give the other side a huge advantage, strategic advantage, that you have no idea if they’re going to exploit it or not.

And they can’t really credibly promise not to exploit it. So you look at something like Taiwan, and the Americans say, “China, lay off Taiwan. Stop all that aggression.” And the Chinese say, “Yeah, if we do that, the Taiwanese are probably going to drift further and further towards independence.

We have to threaten them in order to keep them in line. Why don’t you, the United States, stop selling arms to Taiwan?” But the Americans say, “Okay, yeah, if we do that, then the military balance is going to shift more in your favor, and that just makes an invasion or a blockade even more likely.” So there’s lots of examples like that where a lot of the main issues in US-China relations are not what the Chinese call win-win.

They’re essentially zero-sum. You can either govern Taiwan from Taipei or Beijing, not both. The South China Sea can be Chinese territorial waters or international waters. Russia can be ground down or propped back up and so on.

So it’s just very hard to walk all of this out. Now, I am cautiously optimistic that in 10, maybe 20 years, just based on the trends I showed you now, there’s a possibility that China won’t be able to sustain the level of military investments and international expansion that we’re currently seeing. I don’t think Xi Jinping would be willing to really dial back his ambitions, but he’s 71 years old. Presumably he’ll move on at some point.

And I could see the next round of China’s leaders, if they’re faced with a declining power ratio to the United States and its allies, having to come back and rebargain, essentially. And there is a potential bargain, I think, that could be had to resolve a lot of the tension between the United States and China, really between the West and China in general, which is basically peace and economic access. So you go back to that bargain. It’s really the bargain that Germany, Japan, France, the United Kingdom, all these mighty empires took, which is we’re going to forego our dreams of regional dominance and territorial acquisition.

And in exchange, we get tremendous economic access to the whole Western network. We basically get security guarantees, and therefore better off for it. So I could see something like that happening between the United States and China somewhere down the line. But I think you’re going to have to have this shift in the balance of power first.

I think the most likely scenario is that China runs out of gas for all those economic reasons I gave. But, you know, it could be we just have the debate. I didn’t see how it went between Harris and Trump. But if the United States tears itself apart and just collapses, well, then that’s a shift in the balance of power, and maybe that’ll get resolved in China’s favor.

Conclusion

The bottom line is something big is going to have to happen for us to break this deadlock. The good news is, in the meantime, a Cold War between the United States and China doesn’t have to go hot. And there are, in fact, fringe benefits to a Cold War. You could have a relatively tense but stable situation where, ironically, the two sides in sort of a space race dynamic push each other to innovate faster.

And as a result, humans get better AI and better climate change-reducing technologies and all other kinds of good things come out of this competitive dynamic between the two of the leading states in the international system. So we’re going to have a Cold War for now. The bad news is I think we’re entering a moment of maximum danger just because of where China is in its life cycle as a great power. But if we can make it through these terrible 20s, I think we can be cautiously optimistic we’ll get to a better place maybe in 10 years.

So on that happy note, thank you so much. And I hope to see you all at the dinner later tonight. Appreciate it.

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