The Role of China in the World of Empires

In 1992, in his essay “The End of History”, Francis Fukuyama argued that the dissolution of the Soviet Union and the consequent end of the Cold War would mark the victory of liberal democracy, the free market, and the emergence of the United States as their main interpreter. Indeed, history seemed to be inexorably moving in this direction, with Washington leading a world increasingly leaning towards these values.

The United States sought to cooperate with other powers and, when possible, co-opt them within the global order they had already begun to build at the end of World War II; an order guaranteed not only through military and economic force but also through the use of soft power that Washington had acquired over time.

At the start of this new century, the American economy — always the largest in the world — had returned to exceed 30 percent of the global GDP (it was 25.5 percent in 1992) and, although with a heavily unbalanced trade balance, also held leadership in international trade. Even more significant was what Valéry Giscard d’Estaing called the “exorbitant privilege” of having the dollar as the world’s main reserve currency, which granted the United States many advantages. U.S. supremacy extended also to the technological and military fields, a dominance so strong that it could defeat any adversary and deter any challenge to the “American empire.”

The new century witnessed, thanks to a series of market-oriented reforms and targeted industrial policies, the rise of China as a new and important player in the international economy. A player capable of altering the seemingly consolidated balances. This was in opposition to the United States, in a kind of new Cold War also fought on international markets where new Chinese companies compete increasingly with traditional American and European multinationals.

China’s GDP today has reached 17 percent of the world GDP. It was only 3.6 percent in 2000. Even more important is the role China has assumed within international trade, thanks to the development of a solid industrial base and the competitiveness gradually acquired in almost all productive sectors. Since 2008, China has become the world’s largest exporter with a 15 percent market share, significantly surpassing the United States, whose share has dropped from 12.1 percent in 2000 to 8 percent.

In twenty-five years, Beijing has accumulated a trade surplus of 8.4 trillion dollars, slightly less than that of OPEC countries (8.9 trillion) and more than six times that of the European Union. In the same period, the United States recorded a cumulative trade deficit of nearly 21 trillion dollars.

In the three years 2022-2024 alone, despite becoming net exporters of gas and oil, the United States recorded a trade deficit of 3.7 trillion: 27.8 percent with China, 18.3 percent with the European Union, and 18.9 percent with Mexico and Canada, although with these last two countries, during his first term, U.S. President Donald Trump renegotiated the free trade agreement (NAFTA) considered particularly unfavorable.

These data explain the obsession with which Trump insisted on balancing the trade deficit already during his electoral campaign, indiscriminately attacking all partners and accusing them of all kinds of malpractice. In reality, as became clear later, behind all this was the real goal of the new American administration: to strike China, now the only and most dangerous rival of Washington.

China, and Asia more generally, became the center of American foreign policy (Return to the Asia Pacific) already during the Obama presidency, who despite introducing some tariffs, sought to find an understanding with President Xi Jinping on many issues, from cybersecurity to climate and territorial disputes in the South China Sea. Obama seemed to have understood the message Xi himself had sent to the United States during a previous meeting in 2013: “No conflict or clash, mutual respect for key interests and major affairs, cooperation beneficial to both.”

The relationship between the United States and China under the presidencies of Donald Trump and Joe Biden was of a very different nature. Although with different approaches and tones, China was no longer seen as a simple rival with whom cooperation was still possible, but rather as a dangerous adversary to be countered and weakened.

The era of cooperation was effectively over, and the era of competition between powers had begun. On one side, China, which had established itself thanks to its spectacular economic growth. On the other, Vladimir Putin’s Russia, which thanks to its vast energy resources sought, perhaps nostalgically and somewhat vainly, to recover the role and authority of the Soviet Union.

In this context, the United States’ defense strategy focused on consolidating its geostrategic advantages and leadership in economic, technological, and military fields.

In 2022, in a clear and explicit manner, the National Security Strategy identified China as “the only competitor intent on reshaping the international order and with the economic, technological, military, and diplomatic capabilities to do so.” For this reason, the rise of the Celestial Empire had to be contained. Its trade surplus, which had allowed investments in defense and the creation of a powerful army, had to be reduced; the presence of Chinese companies in critical supply chains had to be made difficult; it seemed necessary to leverage the still significant inequalities between urban and rural populations to “split” society and weaken Xi Jinping’s over-a-decade leadership.

Never before in recent years, starting with the COVID-19 pandemic, has China shown certain weaknesses and important problems to address.

First, demography. Since 2022, for the first time since 1961, the Chinese population has been declining and, above all, aging. Since the beginning of the century, the population over 65 has nearly doubled, reaching 14.7 percent of the total in 2024. This figure worries Chinese leaders but does not differ significantly from what characterizes the major world economies, where birth rates are sharply declining. During the same period, the percentage rose from 15.7 to 22 in Europe, while in the United States it reached 17.9, up 5.7 points.

To address this problem, which risks significantly impacting the labor force and economic growth in the medium to long term, China outlined a new demographic policy. It first abandoned the one-child policy introduced in the late 1970s and subsequently introduced incentives and support for families to encourage birth rates.

This epochal shift, from birth control to birth encouragement, also represents a cultural and social challenge that may not yield the expected results. Some sociologists and economists warn that despite being welcome, the measures may not be sufficient, as economic problems, uncertainties about the future, and profound changes in Chinese society continue to discourage new generations from having large families.

On the macroeconomic side, the main challenge is the low propensity to consume, which clearly limits China’s future growth. Until now, the economy has been driven strongly by investments and exports. Over the past decade, household consumption has contributed on average to just under 39 percent of GDP, a much lower percentage than the United States and European Union, which stand at 67.6 and 53 percent respectively.

If one analyzes consumption in rural areas, home to about 450 million people (the entire population of the European Union), the problem becomes even more significant. Although declining, rural inhabitants (32.3 percent in 2024, down from 57 percent in 2015) have an even lower propensity to consume, limiting their contribution to the country’s GDP to 8 percent.

If the Chinese government’s economic policy fails to stimulate private consumption and pull the country out of creeping deflation, even the goal of more moderate 5 percent growth could be at risk, especially if exports shrink due to the new American trade policy.

Another issue requiring attention and adequate public policies concerns Chinese public finances, which have significantly deteriorated in recent years. Growth below expectations has contributed to an increase in the budget deficit (7.4 percent in 2024), as well as public debt, which has reached 60.5 percent of GDP. If one also considers the liabilities of financing vehicles set up by local governments, China’s public debt would reach 124 percent. This percentage is not far from the United States’ public debt, which has also risen sharply in recent years.

The so-called “augmented public debt,” as the International Monetary Fund calls it, could pose sustainability problems in the medium term. For this reason, the IMF recommends that the Chinese government adopt adequate stabilization policies focused on reducing primary budget deficits, which face strong pressure not only from slowed growth but also from an aging population.

These problems, along with declining labor productivity and rising youth unemployment, have not diminished China’s strategic importance; in some respects, it has even increased due to the “disorder” created by the new American administration. Those who emphasize China’s weaknesses today risk underestimating the importance and role of a country that continues to advance technologically and militarily, as demonstrated by the success of recent initiatives in artificial intelligence—a field in which the United States seemed destined to dominate without rivals.

China, aware of the fragility of its relations with the United States, long feared that Washington would begin to more decisively counter its rise. Trump’s victory in the 2024 presidential elections only fueled this fear. The memory of the trade war he initiated during his first term was still vivid, and concerns were raised by the messages Trump sent during his presidential campaign. Beijing feared not only new trade wars but also criticisms of its management of minorities and dissidents, as well as Washington’s increasingly explicit support for Taiwan.

The wait was short, and campaign declarations quickly turned into actions, especially in trade, with a series of incremental tariffs that on the famous Liberation Day exceeded 50 percent.

Although Trump’s actions, despite their erratic nature, were more or less expected, what surprised everyone was Beijing’s firm and tough response, showing no intimidation from the American president’s verbal aggression. Initially, the significant retaliation on tariffs and subsequently the introduction of important export restrictions led to an escalation that risked paralyzing trade between the two countries entirely. Only an agreement between the parties could avert the serious repercussions on the global economy.

Negotiating a short-term agreement was the goal of both sides, albeit for different reasons: the United States aimed to reduce its massive trade deficit, while China sought to avoid confronting more structural issues such as widespread public subsidies to enterprises. Washington appeared more eager from the start to initiate talks and ease commercial tensions, a sign that China’s response had hit and exposed some weaknesses in the American position.

Beijing’s winning card was the export embargo on rare earths, an action that could significantly impact some key sectors of the American industry more than the U.S. export bans on China on certain microchips, airplane spare parts for commercial use, and other technologies. More generally, as many analysts have highlighted, the United States’ ability to withstand the effects of a trade war with China is lower than that of its rival. This is not only because American consumers and businesses immediately feel shortages of consumer and intermediate goods but also because China’s efforts to increase the resilience of its economic system are beginning to bear fruit.

The diversification process of China’s international trade has, in fact, reduced its dependence on supply chains from U.S. imports, and thanks to transshipment, exports have been protected from direct tariff application. Between 2018 and 2024, China’s international trade with the United States declined from 13.8% to 11.2% of the total.

In May 2025, the parties reached an initial agreement. And after the meeting between Trump and Xi in South Korea at the end of October, the United States decided to reduce certain tariffs, also announcing an agreement on rare earths.

The reciprocal concessions at the basis of the agreement appeared seemingly symmetrical and balanced, but on closer inspection, the stakes were very different, as the involved sectors were strategically unequal. On the American side, traditional industries were involved, such as automotive, consumer electronics, and parts of renewable energy sectors (wind turbines, solar panels, etc.), while on the Chinese side, the future of artificial intelligence development was at stake—a new technological frontier where competition between the two superpowers has recently intensified.

Despite notable progress in this sector, China still remains entirely dependent on specific semiconductors currently produced exclusively by American companies, and it will take years before the domestic industry can manufacture them. Beyond the important counterparty obtained, Washington also believes that the United States would still win the AI challenge and that supplying semiconductors to China would make the Chinese industry dependent on American technology.

The agreement is effectively only a truce that still needs to be transformed into something more stable and definitive - a challenging goal especially if the scope expands beyond the simple commercial sphere, where China wants to limit confrontation. In this area, Beijing is quite confident about reaching an agreement, not only because it is aware of its important negotiation levers but also because it has noted a different attitude in Trump compared to his first presidency: less ideology, more pragmatism, and avoidance of political criticism and attacks on China. Even U.S. support for Taiwan is more moderate, as shown by the symbolic refusal for the Taiwanese president to stop in New York during a trip to Central America and the imposition of new 20% tariffs.

Trump’s pragmatism leads to abandoning the power-competition model he once adhered to. Rather than competing, the United States wants to collaborate by seeking agreements that, in the recent past, would have been seen as contrary to American interests. It’s a “collusive” model similar to the one that created Europe in the last century, where strong men seek to impose a shared vision and decisions on the rest of the world.

A clear example is the Anchorage summit between Trump and Putin, with the complete rehabilitation of the latter in the eyes of the international public. Today, the United States and Russia share the same worldview, which they will likely impose on a fragmented and weak Europe and on China, which would certainly welcome a peace between Russia and Ukraine.

The relationship with China is decidedly more complicated. As mentioned, the truce must be followed by something more stable and structured. While Beijing is optimistic about reaching a trade agreement, it is far less certain about the political future of its relationship with Washington. Important factions within the Chinese administration, due to the unpredictability of the American president, believe the United States could resume political attacks on China and especially attempt to isolate it in the international relations system, something China obviously seeks to avoid.

On this last point, part of the American administration and institutions fear that simultaneous pressure on China and the European Union could instead strengthen their relationship to the detriment of U.S. interests. A relationship which, despite celebrating fifty years of diplomatic ties this year, has never truly taken off. Mutual distrust and mistakes by both sides have prevented addressing important economic issues linked to economic interdependencies between Europe and China in light of the changed geopolitical framework.

Yet, after the Belt and Road Initiative—far from a partnership with shared objectives—the EU and China were very close to signing an important agreement that would have significantly changed their relationship: the Comprehensive Agreement on Investment (CAI). The CAI aimed to provide a single and stable legal framework for investments on both sides, replacing the numerous bilateral agreements in place. Despite some doubts fueling skepticism from analysts and politicians, the CAI represented an important opportunity to tackle three major challenges connected to China’s entry and expansion into international markets: reciprocity of access, shared rules on climate, labor, and health.

The agreement was never ratified due to a “game” of sanctions and reprisals between the parties, revealing China’s primary interest in safeguarding its sovereignty against any interference—the very interference to which the EU was subjected by the United States to prevent ratification and align with its containment strategy.

Two major factors today prevent the United States from fearing a new convergence of interests between China and Europe that would revive the CAI.

The first lies in the even more unbalanced power relationship between the parties, despite the similar size of their economies and significant dependence on energy imports. Both China and Europe need to find outlets for their production, especially now that the American market may shrink significantly due to the hyper-protectionist turn of the Trump administration. In this regard, those in the U.S. who believe that it is very difficult for Brussels and Beijing to reach an understanding may be right. As demonstrated by the summit held between China and the EU, which, despite important declarations of intent, produced nothing significant and, some say, was a real failure - especially for Europe.

The second factor is China’s privileged relationship with Russia, perhaps an even more difficult obstacle to overcome since Beijing has, in fact, openly sided with Moscow in the Russo-Ukrainian war, which Europe obviously cannot accept given its support for Ukraine and international law.

It is certain that Beijing would have preferred Russia not to have invaded Ukraine, given its excellent political and commercial relations with both countries. Even during the war, despite its closeness to Moscow, China continued to trade with Ukraine, of which it is the main partner, with trade amounting to around 8 billion dollars - a figure far from the approximately 250 billion dollars of import-export with Russia.

On multiple occasions, European authorities have requested their Chinese counterparts to exert their influence to achieve a ceasefire and, ideally, a balanced and lasting peace. These appeals have yielded no results, much like the direct attempts made by the United States despite Trump’s various and boastful declarations.

On the ongoing Russia-Ukraine conflict, China appears increasingly divided and would appreciate an end to the war even if credit went to the United States and, in particular, to rival Trump.

Within China, on one side there are politicians and citizens who, not forgetting past invasions, sympathize with Ukraine and its people, admitting that Ukraine suffered a clear violation of its territorial integrity. On the other side, the prevailing official position sides with Moscow as an object of Western encirclement and containment - a treatment China perceives is also reserved for itself, especially by the United States. Among analysts, the thesis is consolidating that Xi Jinping’s closer alignment with Putin has been significantly influenced by Washington’s and Brussels’ rhetoric and actions.

The world today lives in a state of particular “disorder,” which has definitively ended the idea of global coexistence. Rather, the rule of force prevails - applied and tolerated by the United States—and perhaps hoped to be explicitly adopted by China as well. Is the underlying idea a world divided into spheres of influence of old and new powers?

If so, to paraphrase Fukuyama, it would not be “The End of History,” but history beginning anew.