AMERICA & CHINA - MOST CRUCIAL GLOBAL STRATEGIC RELATIONSHIP

Global Affairs Session 36 14 May 2026

US AND CHINA: COMPETING AND COOPERATING

Eight decades of rivalry, engagement and uneasy partnership

The United States and China are the world's two largest economies, and their relationship has swung from Cold War hostility to cautious engagement to today's strategic rivalry. From the 1949 revolution to Nixon's opening, from Deng Xiaoping's reforms to the 2026 technology contest, the two powers have moved from enemies to trade partners to competitors — and are now searching for a way to compete and cooperate at the same time.

Overview History: 1945–2025 Political differences Early decades: 1949–1980s China's rise US–China in 2026

Two titans, one entangled relationship

The top two world economies are competing and also cooperating. The United States leads on nominal GDP, with a projected $30–32.4 trillion against China's $20–20.8 trillion, but on a purchasing-power-parity basis China's economy is already larger — estimated around $44.3 trillion compared with the US at $32.4 trillion. That gap between the two ways of measuring size is a fair summary of the relationship itself: depending on how you look at it, either country can claim to be ahead.

History of US and China: 1945 to 2025

The US-China relationship from 1945 till the 1990s was very rough and unpredictable. It was only after 2000 that the two became large trade partners.

• 1945–1949: Civil war and Cold War alignment. After World War II, China's civil war ended with the Communist Party founding the People's Republic of China in 1949, while the Nationalists moved to Taiwan; the US backed Taiwan and did not recognize Beijing for decades.
• 1950s–1960s: Hostility and containment. The Korean War, Taiwan Strait crises, and anti-communist US policy made China and the US strategic enemies.
• 1970s: Opening and normalization. Nixon's 1972 China visit and the Shanghai Communiqué began rapprochement; full diplomatic relations came on 1 January 1979.
• 1980s–2000s: Engagement with tension. The US encouraged trade, investment, and scientific cooperation with China, but Tiananmen in 1989, Taiwan, human rights, and security issues kept tensions alive.
• 2010s–2025: Strategic rivalry. China became a global economic, technological, and military power; the US increasingly treated it as a strategic competitor in trade, semiconductors, AI, Taiwan, and Indo-Pacific security.

Political differences between China and the US: Overview

In the US, capital controls politics. In China, capital is subservient to politics. That is "socialism with Chinese characteristics".

• Political system. The US is a constitutional democracy with competitive elections; China is a one-party state led by the Chinese Communist Party.
• Power structure. US power is divided among executive, legislature, judiciary, states, media, and civil society; China emphasizes centralized party leadership.
• Rights and freedoms. The US gives high formal importance to free speech, independent media, elections, and civil liberties; China prioritizes social stability, party authority, and state-led order.
• Economic philosophy. The US favours market capitalism with regulation; China uses state-guided capitalism, industrial policy, and strategic control over key sectors.
• Worldview. The US often presents itself as defending a liberal international order; China argues for sovereignty, non-interference, development rights, and a more multipolar world.

US and China in the 1949 to 1980s period

A common thread joining the two nations was their fear of the Soviet Union. Post 1972, a thaw changed things a lot.

• 1949–1971: No formal relations. The US recognized the Republic of China government in Taiwan rather than the PRC in Beijing.
• Taiwan was central from the beginning. US support for Taiwan and Chinese claims over Taiwan created a long-running flashpoint, including crises in the 1950s.
• Nixon's 1972 visit changed the direction. The US and China began moving from hostility to pragmatic engagement, partly because both were concerned about the Soviet Union.
• 1979 was the turning point. The US recognized the PRC, established diplomatic relations with Beijing, and continued unofficial relations with Taiwan through the Taiwan Relations Act.
• 1980s saw cooperation, not alliance. China and the US cooperated on trade, science, technology, and Soviet containment, but remained politically and ideologically different.

China's rise from the 1980s and US reactions

The miraculous rise of China from the 1980s onwards changed the world of trade, finance and commerce. And finally, global geopolitics itself.

• China's economic reforms transformed it. From the Deng Xiaoping era, China shifted toward market-oriented reforms, export manufacturing, foreign investment, and global trade integration.
• The US initially welcomed China's rise. Washington largely believed trade and engagement would make China richer, more stable, and possibly more politically open.
• After China became stronger, US concerns grew. The US began worrying about trade deficits, intellectual property, industrial policy, military modernization, cyber issues, and influence in Asia.
• Technology became the central battlefield. AI, semiconductors, critical minerals, biotech, and advanced manufacturing are now core arenas of US-China competition.
• The US response shifted from engagement to competition. Tariffs, export controls, investment screening, alliance-building, and supply-chain diversification became major tools of US policy.

China and the US in 2026

A massive reset is happening in the relationship now, and with the Iran War debacle, America is substantially weakened geopolitically.

• The relationship is competitive but still managed. In May 2026, Trump and Xi held talks in Beijing aimed at stabilizing ties, with language around "constructive" and "strategically stable" relations.
• Taiwan remains the biggest danger point. Xi warned that mishandling Taiwan could lead to serious conflict, showing that Taiwan remains the most sensitive issue in the relationship.
• Technology competition continues. AI chips, export controls, Nvidia sales, China's domestic chip push, and US technology restrictions remain major friction points.
• Trade is tense but negotiation continues. Tariffs, energy purchases, agricultural trade, and market access are still being discussed, but no simple reset is visible.
• The likely 2026 pattern: rivalry plus selective cooperation. The US and China will compete in AI, semiconductors, security, Taiwan, and global influence, while still trying to cooperate where their interests overlap, such as trade stability, energy, and crisis management.

Value addition

Glossary and related terms

Shanghai Communiqué

The 1972 joint statement issued during Nixon's China visit that began the normalization of US-China relations.

Taiwan Relations Act

A 1979 US law that governs unofficial relations with Taiwan after Washington switched diplomatic recognition to Beijing.

One China policy

The US position of acknowledging Beijing's stance that there is one China, while maintaining unofficial ties with Taiwan.

Rapprochement

The re-establishment of cordial relations between states that were previously hostile to one another.

Nominal GDP

The value of a country's economic output measured in current market prices, without adjusting for cost-of-living differences.

Purchasing power parity (PPP)

A method of comparing economic output that adjusts for differences in local prices, often used to compare living standards across countries.

Reform and opening-up

Deng Xiaoping's programme, launched in the late 1970s, that introduced market-oriented reforms and foreign investment into China's economy.

Decoupling

The deliberate reduction of economic and technological interdependence between two countries, often for security reasons.

Export controls

Government restrictions on the sale or transfer of sensitive technology, such as advanced semiconductors, to specified countries.

Supply-chain diversification

The strategy of sourcing components and manufacturing from multiple countries to reduce dependence on any single supplier.

Investment screening

Government review of foreign investment into domestic companies or assets, often applied to protect strategic industries.

Strategic competitor

A term used to describe a rival power whose economic, military, or technological rise is seen as challenging one's own long-term interests.

Multipolar world

An international order with several major centres of power, rather than being dominated by one or two states.

Value addition

Conceptual references

• Cold War containment theory and its application to early US-China relations.
• The Shanghai Communiqué and the framework of diplomatic normalization.
• Nominal GDP versus purchasing power parity as competing measures of economic size.
• Deng Xiaoping's reform-and-opening-up policy and China's economic transformation.
• Analysis of decoupling, export controls and supply-chain diversification in technology competition.
• The Taiwan Relations Act and the One China policy as instruments of strategic ambiguity.