Khalid Masood Khan
For much of the past year, China’s handling of trade tensions with the United States has repeatedly unsettled policymakers in Washington. Each new American restriction has been met with a swift and carefully chosen response from Beijing. When the Biden administration tightened export controls on advanced semiconductors in December 2024, China quickly banned exports of key metallic elements to the United States. When the Trump administration later threatened sweeping tariffs in April 2025, Beijing responded by imposing export controls on seven rare earth minerals critical to defence and clean energy industries. In May, China halted purchases of US soybeans, one of America’s most valuable exports to the Chinese market. By October, after Washington expanded export restrictions to cover subsidiaries of Chinese firms, Beijing widened its own controls to include more rare earths and advanced processing technologies.
These moves sent a clear signal. China was willing to absorb economic pain to exert real pressure on the United States. The threat was not only to bilateral trade but to global supply chains that depend heavily on Chinese inputs. Yet Beijing’s response, while firm, was not reckless. Its retaliation remained calibrated. By keeping its measures targeted and reversible, China preserved room for negotiation. This became evident after President Donald Trump and President Xi Jinping met in South Korea in late October, following which China agreed to delay several restrictions. Calibration, however, should not be confused with weakness. Alongside visible actions, China has quietly assembled a powerful set of legal tools and non-tariff barriers. The era of strategic restraint has ended. Beijing has shown it is prepared to weaponise its dominance in global supply chains when necessary.
Domestic politics have reinforced this tougher posture. Chinese leaders remain deeply sensitive to public opinion shaped by historical memory. The backlash against the 2020 Phase One trade deal with the first Trump administration still resonates. Many Chinese commentators viewed that agreement as humiliating and one-sided, echoing the unequal treaties imposed by colonial powers in the nineteenth century. For Xi Jinping, who has pledged to end China’s “century of humiliation,” signing another deal perceived as favouring Washington would be politically damaging. Standing firm against the United States has therefore become part of consolidating his authority and reinforcing the narrative of national rejuvenation.
At the same time, China’s strategy goes beyond retaliation or nationalism. Beijing has been preparing for a prolonged contest with Washington for years. Chinese leaders see trade conflict as one front in a broader struggle that may last decades. In the short term, their focus is on securing concessions in advanced technology to accelerate domestic semiconductor development and reduce dependence on foreign suppliers. Over the medium term, China aims to strengthen its technological base, diversify export destinations, and capture more value within global supply chains. In the long run, the goal is even more ambitious: to build alternative trading and financial systems capable of limiting America’s ability to impose unilateral sanctions. Above all, Beijing seeks recognition of its core interests and strategic autonomy, including freedom of action in its regional sphere and engagement with the global economy on equal terms with other major powers.
China’s ambition is historically unusual. It seeks to rise alongside the United States without triggering direct military conflict, often described as the “Thucydides trap.” Unlike earlier revisionist powers, China does not aim to achieve dominance through conquest but through the steady accumulation of economic strength and influence. For this strategy to succeed, it must not only match the United States in some areas but surpass it in enough domains that denying China’s superpower status appears unreasonable to the rest of the world.
Assessing this competition is not straightforward. Traditional comparisons of GDP, military spending, or technological output capture only part of the picture. Power also rests on less tangible factors such as reputation, trust, and the ability to attract partners. A useful way to evaluate China’s rise is to borrow from credit analysis, which assesses borrowers using four broad criteria: capacity, capital, character, and collateral. Applied to geopolitics, this framework helps clarify both China’s strengths and its limitations.
China’s capacity rests on scale. Its vast population, resources, and industrial base allow it to mobilise labour and capital at unmatched speed. Once one of the world’s poorest countries, China is now the second-largest economy and the largest exporter of goods and services. This rise has been driven by hundreds of millions of migrant workers who powered factories, ports, and infrastructure. Today, the state hopes that its growing pool of engineers and scientists will do the same for advanced technology. China now rivals the United States in research spending, scientific publications, and patent filings, supported by millions of annual STEM graduates.
Yet capacity also brings vulnerability. China’s economy remains heavily dependent on external demand, creating trade frictions with many countries. Its industrial dominance has prompted others to reduce reliance on Chinese supply chains, weakening Beijing’s leverage. Internally, an excessive focus on industry has suppressed household consumption. Consumer spending growth has slowed sharply, and deflationary pressures have emerged. This imbalance increases the true cost of maintaining industrial overcapacity and limits the economy’s ability to sustain growth from within.
China’s capital is equally formidable. With more than three trillion dollars in foreign exchange reserves and a tightly controlled financial system, the state can deploy funds quickly and at scale. Sovereign funds and policy banks finance overseas projects, strategic acquisitions, and development loans that advance both economic and political objectives. Yet China’s financial power has limits. The renminbi remains marginal in global reserves, accounting for only a small share. Despite efforts to expand alternative payment systems and reduce reliance on the dollar, capital controls and limited market openness constrain the currency’s global role.
Character, the way a country uses its power, presents another challenge. China frames its global posture around sovereignty, non-interference, and shared development, drawing on historical grievances to justify assertiveness. This approach has generated solidarity among some states but rarely deep allegiance. Unlike Western alliances built on shared values and institutions, China’s partnerships are largely transactional. Cultural distance, regional tensions, and suspicion of the Chinese diaspora further weaken its soft power. Beijing commands respect, but often not trust or affection.
Collateral, or credibility, is China’s weakest point. Despite vast investments in diplomacy, development finance, and global initiatives, doubts about transparency and intent persist. Narratives around debt traps, industrial dumping, and dual-use infrastructure have taken hold, even where evidence is mixed. These perceptions are reinforced by opaque decision-making and blurred lines between state and commercial actors. As a result, China’s global influence often provokes caution rather than confidence.
The United States, meanwhile, faces its own erosion of strength. Domestic polarisation, retreat from multilateralism, and the aggressive use of economic tools have weakened American credibility among allies. Yet Washington retains advantages in alliances, culture, innovation ecosystems, and institutional trust that China has struggled to replicate.
The likely outcome of this rivalry is not decisive victory but prolonged competition. China has accepted that it is engaged in a long struggle for status and influence. The United States, if it wishes to preserve its position, must also adopt a long-term view, focusing less on punishment and more on restoring credibility and shaping behaviour over time. For China, success depends on sustaining growth, managing domestic constraints, and convincing the world that its rise does not threaten global stability. This contest will not turn on single events but on endurance, consistency, and the ability to convert power into lasting influence.
