The Dragon and The Eagle (Part I)

by Ambassador Thomas Graham (Retired) and David Bernell

(This article is the first of what will be a series addressing political, military, and economic elements of the relationship between the Unites States and China.)

While the Trump administration continues to attack the foundations of American democracy and the American people at home, it is also substantially changing the direction and practice of U.S. foreign policy, and not for the better. This is marked by a wide variety of undertakings, all revolving around the president’s rejection of the role the United States has played in the world since World War II. This includes the ever-worsening relations with NATO allies, the embrace of Putin’s Russia, indifference to the future of Ukraine, the imposition of high tariffs on trading partners and friends, and the decimation of foreign aid programs, to name only a few. The latest high-profile actions by Trump – ousting and capturing the Venezuelan president, and picking a fight with NATO allies over Greenland – are only the most recent of what will surely continue to grow as a long list of surprising and ultimately harmful ventures that will weaken and isolate the United States.

As the administration focuses on places like Greenland, and allows its transatlantic relationships to deteriorate, it diverts attention from what is certainly a more significant and long-term challenge: the growing economic, military, and political power of China, and what this will mean for the United States and the rest of the world. The United States can be expected to face significant ongoing challenges from China and will continue to do so in the coming years and decades. The U.S., however, seems ill-prepared to meet these challenges.

For as long as the United States has been a global power, and even since its very founding, its relationships with other great powers have been paramount to the country’s security, prosperity, and well-being. Moreover, particularly since the end of World War II, much of the rest of the world has found its own fortunes in some part dependent upon the actions and policies of the United States. To the extent that the United States does not carefully and thoughtfully address its relationship with China, the likelihood increases of these challenges turning into further American economic vulnerability or dependence on China, or worse, calamitous economic or military conflict. At the very least, American negligence of its own long-term interests, or outright hostility to the interests of those who have long been American allies, will have adverse impacts on its own – and the world’s – economic, military, and political fortunes.

Chinese Industrial Prowess

In looking at today’s strategic situation, Vladimir Putin’s Russia commands great attention. It is a significant power, and it has been successful as both a spoiler to the United States and Europe, as well as the global leader of what writer Anne Applebaum calls “Autocracy, Inc.” But Russia doesn’t hold nearly the economic, military or political power that China does.

The basis by which China has been able to develop and extend its political and military power is its economic growth and strength. That economic growth is widely understood as remarkable for both its scale and the speed in which it has been achieved. In industries as diverse as manufacturing, energy, transportation, information technology, construction, shipbuilding, and many others, China’s abilities and accomplishments are impressive. One doesn’t have to look hard to find examples.

• The Center for Strategic and International Studies reports that China’s “largest state-owned shipbuilder built more commercial vessels by tonnage in 2024 than the entire U.S. shipbuilding industry has built since the end of World War II.” And as of today, China accounts for over 50 percent of all shipbuilding in the world, while the United States accounts for 0.1 percent. Another report, “How China Became the World’s Biggest Shipbuilder,” notes that China’s shipbuilding capacity is more than 200 times that of the U.S. An example of this in actual practice is that in 2023 the United States delivered seven commercial ships to customers. China delivered 972.

• Dan Wang and Arthur Kroeber have noted that in the area of transportation infrastructure, China has built in the last 30 years a national highway network that is twice the length of the American interstate system, as well as a high-speed train network with more miles of track than the rest of the world combined. Its ports are also formidable. The one in Shanghai moves more cargo in some years than all U.S. ports put together.

• Graham Allison wrote (in 2018) that in every two-year period from 2008 to 2017, the increment of growth in China’s GDP was the equivalent of India’s entire GDP. In 2015, China’s economy produced the equivalent of Greece’s annual economy…every sixteen weeks. And in 2005, the country’s construction was so massive that it was building the square foot equivalent of Rome every two weeks.

• And in one of the more mind-boggling examples, Daniel Yergin has written that in one three-year period, from 2011 through 2013, China consumed more cement than the United States did in the entire twentieth century.

It should come as no surprise that China is also the world’s largest producer of steel, aluminum, ships, computers, smartphones, solar panels, electric vehicles (and their batteries), and rare earth materials. It is also the world’s largest market for energy, cars, smartphones, plastics, luxury goods, fertilizers, food, and e-commerce. (These lists are just a sampling.) It is also making great technological leaps in advanced semiconductors, computing, and artificial intelligence. Meanwhile, the country seeks out opportunities in the deep sea, the Arctic, space, cyberspace, and the international monetary system.

Governance of the Global Economy

These numerous and perhaps startling examples of China’s economic heft have implications not only for the many industries in which China excels, but on the larger structure of the global economy and the rules, institutions, and practices that govern it. The United States since World War II has been the leader of the global economy. It’s not simply that the American economy has been the largest, and that it has been central to powering global growth and economic development for decades. It has also been the American establishment and maintenance of a global trading and financial system that has governed and set the contours of global economic activity. The World Trade Organization, the World Bank, the International Monetary Fund, the system of currency exchange, and numerous other institutions, rules, and practices have been central to global economics, and American leadership has been at the center of all this.

However, the system is eroding. One reason is that long before Trump came to office, but now even more so under Trump, the United States has used its economic position as a tool of political coercion. This has greatly involved imposing economic sanctions on countries with foreign policies the United States opposes, such as Russia, Iran, North Korea, and Cuba. But these actions have also been extended to companies from other nations that do business in the countries facing American sanctions. One of the most impactful sanctions involves withholding access to the global banking and financial system as political leverage, as this can make international trade close to impossible for a sanctioned entity. This is one way in which the United States and its allies have sought to punish Russia for its invasion of Ukraine. American economic coercion has often (but not always) been for very admirable and desirable ends, such as stopping war or the making violators of human rights pay a price. But whether or not such sanctions received support in some quarters, their very use has produced blowback over time.

Since Donald Trump came to office, the United States has used its economic position as a political weapon even further, imposing tariffs on countries all over the world in an effort to either force a political concession (such as agreeing to the American acquisition of Greenland), or to ensure greater economic benefit to the United States at the direct expense of other nations.

China is one of those countries that bristles at how the United States uses it economic power to impose and enforce its will upon others, and it is taking action to combat this. The country is seeking to challenge the dominance of the dollar in global trade, as more of its global financial transactions use are carried out in its own currency, the RMB, as opposed to the dollar. It also seeks to provide alternatives to Western financial systems. While China still greatly uses and relies upon Western entities such as SWIFT and CHIPS to transfer funds and settle cross-border transactions among financial institutions, it has also developed its own alternatives such as the Cross-Border Interbank Payments (CIPS) system and the China Foreign Exchange Trade system.

All of these responses to American power and influence diminish the benefits that the U.S. and the West have gained from providing the economic “platforms” that countries around the world have used for decades. As the United States increasingly transforms these platforms from tools that provide benefits for others into potential sites of vulnerability, other countries will look to leave them and find alternatives.

This is becoming more apparent every day, as it is not only America’s rivals that oppose it, but its historic friends. This change is best exemplified by the speech given at Davos in January by Prime Minister Mark Carney of Canada. In response to Donald Trump’s economic threats against NATO allies opposing the president’s designs on Greenland, Carney stated that in the past, “American hegemony helped provide public goods, open sea lanes, a stable financial system, collective security and support for frameworks for resolving disputes.” But now, he argued, “This bargain no longer works.” This is because, “great powers [and by this he meant the United States] have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited.”

It was no accident that Canada and China signed a major economic agreement in the midst of the crisis over Greenland. The United States government is isolating itself and driving its friends further into the arms of China. And this is happening as China continues to excel in countless industries. When China becomes the world leader in building electric vehicles and the batteries to power them, and when it signs an agreement with Canada to sell more of these products in Canada, this represents a growing economic and political challenge to the United States. And what’s worse, it is the United States itself that is accelerating these challenges.

The Military Element

The evolving trends in global economic activity and the political relationships that are both cause and consequence of one another have military implications as well. China has used its newfound wealth and power to build a bigger, stronger, more capable military that can achieve the country’s growing ambitions and match its increasing economic and political muscle.

Suffice it to say that China now possesses a first-rate military, and the American military knows it. China has made rapid and significant advances in both the quantity and the quality of its conventional forces, and it is carrying out a massive expansion of its nuclear weapons as well. It has established a formidable navy with more ships than the United States (395 vs 296), and it continuing to expand its navy (though sheer numbers don’t automatically translate into capabilities, as this article notes). It has also amassed an arsenal of roughly 600 hypersonic missiles. These can travel at five times the speed of sound and are very difficult to intercept and shoot down. The United States has none deployed.

The objective of this military capability (of which these examples are only a small part) is ultimately being able to defend itself against the United States, either via deterrence or if necessary, outright military victory. The Chinese military has felt the power and presence of the U.S. Navy in the Western Pacific, and it is very familiar with the deployments of U.S. forces in Japan and South Korea. American military power is immense.

At the same time, however, the Chinese military increasingly understands the vulnerabilities of the American military and how it can counter U.S. forces. This includes building newer weapons such as hypersonic missiles, or simply building massive quantities of smaller, less expensive weapons such as drones and short and medium range missiles, all of which can sink an American aircraft carrier costing more than $10 billion, and which cost far less than the aircraft carriers and other warships they can destroy. The Ukrainian military is proving this type of approach to combating bigger forces, as it has effectively neutralized the Russian navy in the Black Sea at a relatively low cost.

The American military is well aware of these problems too. It has tested these respective capabilities in a series of assessments and war game exercises based on a scenario in which China tries to take Taiwan by force and the United States acts to defend the island. The Pentagon’s report, known as “The Overmatch Brief,” is a comprehensive review of U.S. military power and how it would fare against China. As the New York Times reported after obtaining a copy of the report, “it catalogs China’s ability to destroy American fighter planes, large ships and satellites, and identifies the U.S. military’s supply chain choke points.” The news is not good for the United States: “the picture it paints is disturbing….we lose every time.”

Losing every time is a daunting and sobering prospect. The topic warrants much more attention, and it will be the focus of our next article on the United States and China, as we discuss in greater depth the military components of China’s power and what this may mean for the United States and the world.