China and the United States: The Contest for Global Economic Leadership

This paper considers whether there is a “Thucydides trap” in the world economy, referring to the inherent conflict between incumbent and challenger. It assesses the impact of President Trump's alienation of traditional US allies, which threatens to splinter the “hegemonic coalition” and even push China and Europe together, and his convergence toward some Chinese norms on trade and even politics. It outlines three possible systemic scenarios: a “G0” in which the US is no longer willing to lead but China is not yet able or willing, and whether such a (likely) regime will be stable or unstable; a new “G1,” sooner or later, led by China; and a cooperative “G2” in which the US and China agree to share leadership. It traces the evolution of actual leadership initiatives of the two countries in recent years. It compares US and Chinese attitudes on key systemic issues and concludes with an appraisal of “an international economic order with Chinese characteristics,” a world in which the state plays a greater role relative to market economics, the rule of law defers increasingly to voluntary arrangements, and politics tilt toward central government control more than democracy.