Signal Brief: The Pacific Problem

The U.S.–China relationship is the defining strategic rivalry of the 21st century. China’s explosive economic rise, paired with rapid military modernization and global ambitions, has transformed it into a true peer competitor.

But the outcome wasn't inevitable.

From Deng to Dominance

In 1978, Deng Xiaoping launched sweeping market-oriented policies that catapulted the country into decades of rapid growth. China’s GDP grew at nearly 10% annually, lifting 800 million people out of poverty and making it the world’s second-largest economy and first by purchasing power.

Leadership Shifts:

Over the past four decades, China’s posture toward the world has evolved through three markedly different leadership eras, each signaling a shift in how Beijing balances power, ambition, and engagement:

• Deng Xiaoping (1978-1989): “Hide your strength, bide your time.”
• Jiang Zemin & Hu Jintao (1989-2012): Focus on globalization and peaceful development.
• Xi Jinping (2012-Present): Broke with restraint. Under his rule, China tied economic strength to military power and launched an aggressive foreign policy vision of “national rejuvenation.”

The Strategy: Build Wealth, Wield Power

Strategic Capitalism

China didn’t just get rich. It created a system where the state controls capital and directs it toward national power.

• State-Owned Enterprises (SOEs): Legal entities created and owned by the Chinese government dominate defense, energy, and telecom companies
• Targeted industrial policy: Continues to direct large amounts of resources into AI, quantum computing, biotech, and semiconductors.
• WTO leverage: China became the world’s top trading nation — and began shaping supply chains to its advantage.

Belt and Road Initiative:

Seeks to link Asia, Europe, Africa via a “Silk Road Economic Belt” (land corridors of railroads, highways, pipelines) and a “21st Century Maritime Silk Road” (port networks in the Indian Ocean, Mediterranean, etc.).

• China uses state-backed loans to build ports, pipelines, roads, and fiber, often locking in economic dependencies.
• Example: When Sri Lanka couldn’t repay its debt, it ceded control of Hambantota Port to China on a 99-year lease.

Tech Ambitions: Made in China 2025

Announced in 2015, this industrial master plan aims to leapfrog China into global leadership in advanced manufacturing. The government set targets to raise domestic content of core components to 70% by 2025 and dominate 10 high-tech industries, including:

• Quantum computing: Systems like Jiuzhang 3.0 are world-leading.
• AI/LLMs: Startups like DeepSeek are producing frontier models on par with OpenAI, at lower cost.
• Semiconductors: Despite U.S. export controls, Chinese domestic fabs, massive subsidies, and strategic acquisitions continue to drive innovation.

Military Modernization: Built to Win, Fast

For much of the 20th century, the PLA was a massive but outdated land force. That era is over. Today’s PLA is a rapidly modernizing, multi-domain force with clear objectives:

• By 2027: Have the capability to seize Taiwan by force.
• By 2035: Fully modernize the armed forces.
• By 2049: Build a true “world-class” military 

Capability Highlights:

• Navy: Now the world’s largest by hull count, with increasing blue-water range.
• Missiles: The DF-21D “carrier killer” and hypersonic glide vehicles are designed to deny U.S. power projection.
• Airpower: The J-20 stealth fighter, electronic warfare platforms, and refueling assets are optimized for regional dominance.
• Nuclear arsenal: Expanding rapidly, with new missile silos and SSBNs.
• Cyber & Space: Systems designed to jam, blind, or destroy U.S. satellites in the first days of a conflict.

This is a military built to deny access, control escalation windows, and win quickly before U.S. reinforcements arrive.

Beyond the Indo-Pacific

This isn’t just about Taiwan. China’s reach is global:

• Africa: China is the continent’s top trading partner and a leading investor.
• South America: Now the #1 trade partner for many countries.
• Middle East: China imports ~70% of its oil, primarily from Saudi Arabia, Russia, and Iran and signed a 25-year energy deal with Tehran.
• Global Military Presence: China opened its first overseas base in Djibouti (2017), with more likely to follow.

Why China Isn’t Just a Competitor — It’s a Strategic Risk

China’s rise is dangerous because of how it’s using their success. Beijing increasingly rejects international rules when they don’t serve its interests, from militarizing the South China Sea to dismantling Hong Kong’s political autonomy.

It punishes dissent abroad, retaliating against countries like Australia and Lithuania for challenging its narratives. Meanwhile, its military is being built not for deterrence, but for preemption with systems designed to disable U.S. forces before they can respond.

And through surveillance tech, AI tools, and state-backed media, China is exporting a model of authoritarian control that challenges democratic norms on a global scale.

The Challenge Ahead

It’s easy to frame China as a looming threat. But the deeper reality is that this is a systemic competition.  It will be won or lost by the resilience and vision of our domestic systems.

To compete, the U.S. must:

• Invest in STEM, infrastructure, and resilient supply chains.
• Support an agile, forward-looking defense tech base.
• Strengthen alliances and clarify deterrence postures.
• Prove the strength of democratic governance through actual performance, not slogans.

At the same time, we can’t assume China’s rise is linear. Slowing growth, aging demographics, and internal pressures could drive Beijing toward riskier behavior. Quiet preparation for instability is just as important as preparation for war.

The Bottom Line

This rivalry will shape the 2030s.

China’s ascent challenges the liberal international order, but it does not have to lead to war.  Through a strategy of competitive coexistence, investing in strength, building alliances, deterring aggression, and keeping diplomatic doors open, the U.S. and its allies can navigate this era with purpose and resolve.

What’s needed now is clarity and steadiness. Avoid panic. Reject complacency. Focus on actually building not just marketing.