It would not be unfair to label the prevailing nature of the U.S.-Sino relationship as one of “mutual distrust and recrimination.” While 2022 ended with both Washington and Beijing reiterating in official meetings—such as Joe Biden and Xi Jinping’s Bali meeting on November 14—their shared desire to keep channels of communication open, there were few practical signs of improvement in relations. In fact, both sides are pursuing policies that will deepen competition and confrontation. Although there has been sporadic talk of new “guardrails” that would establish a form of strategic stability, this aim appears diminishingly small due to each side’s perception of what is driving their competition and how that perception frames foreign policy choices and domestic politics.

For Washington, competition with China is driven by the latter’s challenge to American power and leadership, along and its (perceived) desire to change the international order. For Beijing, competition with the United States is rooted in continued American “hegemonic” pretensions to “contain” China amidst its inevitable “decline.” This fundamental impasse makes both sides increasingly perceive their relationship in zero-sum terms. Moreover, the premium placed on competition is negatively impacting both Chinese and American broader foreign and domestic policy agendas.

In this context, is there any hope for an amelioration of bilateral tensions and competition?

“Competing,” but Not Leading?

A core problem for the Biden administration is that measures taken to ensure the United States can “out-compete” China are likely to undermine the former’s capacity to achieve its objective of revitalizing American global leadership of the current rules-based international order.

For all the administration’s use of orthodox liberal internationalist rhetoric—the 2022 National Security Strategy’s assertion, for instance, of America’s continued commitment to, and reliance on, “fair and open trade” and a liberal “international economic system”—such objectives are increasingly being sacrificed on the altar of strategic competition with Beijing.

The administration’s concrete actions reflect a “security first” approach to bolster and burden-share with existing allies, such as Japan and Australia (including through the Quad and the AUKUS agreement), and attempts to forge deeper ties with like-minded actors like India and Taiwan. Simultaneously, Washington has pursued a decoupling of high-tech trade with China, including implementing overtly protectionist trade and industrial policies (such as the CHIPS Act) intended to boost American competitiveness in the context of bilateral U.S.-Sino relations.

This latter trend was reinforced by National Security Adviser Jake Sullivan’s April 27, 2023 speech at the Brookings Institution. Explicitly billed as focused on the president’s “core commitment … to more deeply integrate domestic policy and foreign policy,” the speech effectively made the case for “national security” concerns to guide economic policy. Sullivan argued that the guiding assumption of post-1945 U.S. policy (“that markets always allocate capital productively and efficiently—no matter what our competitors did”) no longer applies as the integration of a “non-market economy” (China) into the global economy has produced “dependencies” that can be “exploited for economic or geopolitical leverage” as “entire supply chains of strategic goods—along with the industries and jobs that made them—moved overseas” in the “name of oversimplified market efficiency.”.

This constitutes an effort to ensure the United States can guide the invisible hand of the market in directions amenable to geopolitical competition with China. The objective of the administration’s new policy is to identify “specific sectors that are foundational to economic growth, strategic from a national security perspective, and where private industry on its own isn’t poised to make the investments needed to secure our national ambitions,” and to apply “targeted public investments in these areas that unlock the power and ingenuity of private markets, capitalism, and competition to lay a foundation for long-term growth.”

Although this may align with the White House’s domestic political agenda of “renewing” American prosperity, it remains to be seen how this approach will enable the United States to achieve its associated objective of rallying allies and like-minded partners to the cause of combating China. This is especially important in Asia and the Pacific, where many observers have noted the shortcomings of U.S. economic and trade policy for at least the past decade. This has been especially visible around the failure to match the Belt and Road Initiative (BRI), as well the lack of U.S. participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP. American schemes around investment in the region have also been long on aspiration and short on delivery. That includes both the Trump administration’s Blue Dot Network and Biden’s Build Back Better World.

The irony, as Susan Shirk has noted, is that the Biden administration’s focus on “competition” with China as the organizing principle of its foreign policy is making the United States become more like its adversary: “nationalist, fixated on security, and politicizing the market economy.” Such dynamic risks making the administration’s claims to be reclaiming a liberal internationalist vision of American global leadership based on a “rules-based order” increasingly hollow.

Preparing for “Choppy Waters” and “Dangerous Storms”

China may be more ideologically girded for such zero-sum competition, but overt competition with the United States is exacerbating existing pathologies in both its foreign and domestic policy, resulting in a variety of self-inflicted wounds. It is perhaps no surprise, for instance, that U.S.-Sino strategic competition has coincided with the rabidly jingoistic wolf warrior diplomacy that has damaged China’s standing throughout the world. Such assertive, nationalistic posturing at the very least undermined some of Beijing’s previous gains in posing as an advocate of economic globalization and “interconnectivity” during the Trump era of American foreign policy.

Of greater significance is the impact of the Chinese Communist Party’s (CCP) greater explicit focus under Xi on security both in an international and domestic setting. This has been markedly sharpened in the past two years as U.S.-Sino ties have deteriorated. The party-state’s linkage of increased pressure in China’s external environment and its domestic security was highlighted in Xi’s report to the 20th Party Congress in November 2022, where he warned that the country was entering “a period of development in which strategic opportunities, risks, and challenges are concurrent” and the Party “must therefore be more mindful of potential dangers, be prepared to deal with worst-case scenarios, and be ready to withstand high winds, choppy waters, and even dangerous storms.” To withstand such high winds, the continued application of a “holistic approach to national security” was necessary, in which the party would have “the people's security as our ultimate goal, political security as our fundamental task, economic security as our foundation, military, technological, cultural, and social security as important pillars, and international security as a support.”

While not entirely new, this framing is notable for its explicit connection of the CCP’s “political security,” domestic “stability,” and the achievement of Xi’s great objective of “national rejuvenation.” This fundamental focus on regime security has been felt since the Party Congress in several ways.

First, the sharp about-face on Xi’s signature “zero-Covid” approach to pandemic control responded to two dynamics—increased societal dissatisfaction with draconian lockdowns and concerns of coronavirus-induced economic stagnation—that impinged directly on regime security. The about-face on zero-Covid killed two birds with one stone by removing a policy that had placed Xi “in the firing line of anti-government or anti-party movements” and creating the conditions to kick-start the Chinese economy.

Second, on the international stage, Beijing has adopted more explicit language that points the finger of blame squarely at the United States for China’s current challenges. In a discussion with Chinese commerce and industry representatives on March 3, Xi described China’s international environment as full of “uncertainties and unpredictable factors,” foremost of which is that “the Western countries led by the United States have carried out all-round containment and suppression of China.”

Third, the shift in language points toward the party’s “darker assessment of humanity’s historical trajectory” and the “hidden risks and open dangers’ posed to China’s quest for ‘national rejuvenation.”

Significantly, it has not only been the downward trajectory of U.S.-Sino relations—from U.S. efforts at high-tech “decoupling” from Chinese supply chains to the Chinese spy balloon incident that has driven this pessimistic assessment, but also Chinese perceptions of the global repercussions of the Russian invasion of Ukraine. The war in Ukraine, as an analyst from the Centre for Strategy and Security at Tsinghua University argues, has not only “accelerated and intensified” American “strategic deployment” against China, but also “binds China and Russia together.”

This helps explains Beijing’s recent flurry of Ukraine-related diplomatic activities including Foreign Minister Wang Yi’s late February tour through European capitals, the release of China’s twelve-point “road map” for a negotiated peace in Ukraine, Xi’s long-delayed phone call with Ukrainian president Volodymyr Zelensky on April 26, and the May 17 visit of China’s special representative for Eurasian affairs, Li Hui, to Kyiv.

None of these activities have achieved tangible progress toward China’s stated objective of facilitating a negotiated settlement to the conflict. However, they have served Beijing’s goal of portraying itself, in Xi’s words, as a “responsible major country” that—in a less than subtle jibe at Washington—“would not sit idly by, nor would it add oil to the fire, still less exploit the situation” for its own gains.

Despite the recent resumption of high-level contact between Beijing and Washington, including face-to-face discussions between Yi and Sullivan in Vienna on May 10–11, Beijing’s perspective remains unchanged as to who is to blame for the “downward spiral” of bilateral relations.

“The United States,” as a Xinhua commentary on the Wang-Sullivan talks stated, “claims that it is not seeking to decouple from China and has no intention of obstructing China's development” but simultaneously “squeezes” China by “imposing many rounds of chip bans on Chinese firms under the pretext of national security” and “rushing to encircle China in the Asia-Pacific by mustering such Cold-War style groupings as the AUKUS and the Quad alliances.” Ultimately, the commentary concludes, this is driven by the belief of U.S. decisionmakers that “China must be brought down in order to keep America ahead.”

The Messy World of Strategic Competition

Both Washington and Beijing, then, are firmly set on trajectories that lock in rather than ameliorate bilateral tension and competition. This poses challenges and risks for both country’s domestic and foreign policies.

In Washington, competing with China has become a partisan political sport. Amidst tense administration negotiations with Republicans to raise the $31.4 trillion debt ceiling, Secretary of State Antony Blinken, Secretary of Defense Lloyd Austin, and Secretary of Commerce Gina Raimondo all fronted the Senate Appropriations Committee to support the president’s FY2024 budget request. Each argued the case that it was vital for the United States to “out compete” China. The implication, as Democratic Chair of the Appropriations Committee Senator Patty Murray made clear, is that “China isn’t debating whether to pay its debts, or wreck its economy. China isn’t debating whether to invest in its future, or cut and cap the investments that keep it competitive.” While this may be a classic example of wedge politics to paint Republicans as hamstringing U.S. efforts to out-compete China, it remains to be seen whether it produces better policy outcomes.

Xi Jinping, meanwhile, continues to consolidate his revision of the Dengist paradigm of the post-Mao era by privileging security over the economy. This is apparent in China’s recent “counter-espionage” crackdown which has targeted a range of foreign companies and individuals for alleged “leaking” of information related to “national security or interests” to foreign governments or entities. This came even as Premier Li Qiang attempted to reassure foreign companies and investors that Beijing was committed to building a “first class business environment.” However, the fact that the “counter-espionage” crackdown has been tasked to Ministry of State Security head Chen Yixin leaves little doubt that this constitutes a top priority for China’s leader.

In the realm of foreign policy, too, the Sino-American fracture continues apace. At the G7 summit in Hiroshima, Biden succeeded in forging a common, in-principle aspiration amongst the grouping to ensure “economic resilience” through “de-risking and diversifying” as a means of resisting “economic coercion” by Beijing. Meanwhile, Xi’s hosting of the first China-Central Asia summit in Xi’an sought to achieve several objectives that can be seen as necessary to girding China further for competition with the United States: to kick-start the BRI after Covid-19 slowdown; to cement further economic and strategic partnerships with the Central Asian states; and to further embellish China’s posturing as an alternative source of global leadership.

The self-reinforcing logic of great power competition is one of the closest things to an empirical law in international politics, and the increasing divide between China and the United States should not come as a surprise. But the apparent embedding of such competition raises the stakes not only for Beijing and Washington themselves but also for other key actors in the Indo-Pacific—many of whom have deep strategic ties with the United States and economic interdependencies with China.

It is likely that at some stage both Beijing and Washington will have an incentive to establish some guardrails in the relationship: after all, a collision course is costly and difficult to sustain for any length of time. Yet those tend to entail trade-offs and compacts, which tend to have more fundamental impacts on smaller states. Under those circumstances, it is vital that all players in the messy strategic landscape plan for unexpected outcomes, and simultaneously seek to identify what the contours of Indo-Pacific strategic stability might look like.

Dr. Michael Clarke and Dr. Matthew Sussex are Senior Fellows at the Centre for Defence Research at Australian Defence College.

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