Managed Rivalry in View: US-China Policy

Attendees: Dustin J Ross, Bliss Perry Date: December 2, 2025 Type: Research

Summary

Historical arc from optimism to strategic competition
- 1995-2008: Belief China would embrace existing international order
- WTO accession 2001 represented peak optimism
- 2008 Beijing Olympics era: Taiwan workforce (5%) moved to mainland
- Obama years: Gradual darkening but still engagement-focused
Trump 1.0 pivot: Redefined China as strategic competitor
- Focus shifted to trade issues, Phase One deal
- “If we don’t change China, China will change us” rhetoric
- COVID pandemic and Xinjiang genocide declaration ended cooperation
Biden continuation: “Invest, Align, Compete” strategy
- Maintained Trump’s confrontational policies but more methodical
- Pelosi Taiwan visit, balloon incident derailed engagement attempts
- Expanded economic sanctions, export controls, entity listings

Managed rivalry framework emerging between superpowers
- Both sides have identified existential pain points to navigate around
- Neither can take ground against other’s core interests without consequences
Positive indicators for 2026 stability
- Trump visit to China scheduled for April 2026
- Xi Jinping US visit planned
- G20 (US hosting) and APEC (China hosting) create natural engagement opportunities
- Cabinet-level meetings throughout year in both countries
Sine curve pattern: Crisis → communication cutoff → leader meeting → temporary improvement → new sanctions → repeat

Two-tier economy structure
- 400M people in advanced sectors (EVs, manufacturing, infrastructure)
- Remainder struggling with informal work, property sector collapse
Structural problems persist from 20 years ago
- Investment over consumption model unchanged
- Export-led growth creating global overcapacity concerns
- Youth unemployment crisis, “involution” in oversupplied sectors
Growth projection: ~5% but facing headwinds
- No financial crisis expected but significant challenges ahead
- Property hangover and consumer confidence issues ongoing

China’s current Taiwan strategy: Choose timing and manner
- Wants to avoid forced response to provocative actions
- Hopes Trump will help maintain status quo, rein in President Lai
- 2027 not seen as invasion deadline despite PLA anniversary
Military concerns: Major purge of 9 senior officials indicates leadership worried about military readiness
Trump approach differs from Biden on Taiwan policy
- May declare opposition to independence (precedent: Bush 2003)
- Chinese expect Trump to uphold One China policy vs Biden “hollowing out”

Both sides racing toward strategic decoupling (not economic)
- US developing “Manhattan Project” to escape rare earths dependence
- China reducing reliance on US technology imports (chips, biotech, jet engines)
Key risk factors for escalation
- South China Sea accidents/miscalculations
- Economic policy overreach (September 29th export controls example)
- 2028 election year pressures (US, Taiwan, Philippines elections)
End state goals fundamentally different but not incompatible
- China: Recognition, regional dominance, technology access, market access
- US: Protect advanced technology, avoid supply chain vulnerability, shape Beijing’s choices, maintain Taiwan status quo