
By Nirmal P. Acharya
The world currently seems in chaos, but behind various conflicts, the shadow of the China-US game can be seen.
The game between China and the US is essentially a contest between the strongest industrial power and the strongest financial power.
Why does this statement make sense?
1. China’s Status as the “World Factory” and Industrial Strength:
- Scale and Completeness of the Industrial System: China has the largest and most comprehensive industrial system globally, covering almost all categories from basic raw materials to high-end manufacturing. Its manufacturing value added has long ranked first in the world, far exceeding that of the US.
- Core of the Supply Chain: China is deeply embedded in the global supply chain and is an indispensable production hub for countless products (from daily consumer goods to high-tech components), granting it enormous economic resilience and bargaining power.
- Upgrading and Transformation: China is advancing from a “manufacturing giant” to a “manufacturing power,” having achieved significant advantages or rapid catch-up in new energy (photovoltaic, wind power, electric vehicles), 5G communications, high-speed rail, artificial intelligence, and some high-end equipment manufacturing.
- Strategic Support: A strong industrial foundation is crucial for national economic security, defense security, and scientific and technological autonomy.
2. The US Status as the “Global Financial Hegemon” and Financial Strength:
- Dollar Hegemony: The US dollar is the world’s primary reserve, settlement, and transaction currency. The Federal Reserve’s monetary policies deeply influence global financial markets and capital flows, enabling the US to impact other countries through financial means (such as sanctions, exchange rate manipulation accusations, and capital controls).
- Depth of Capital Markets: The US has the largest, most mature, and liquid capital markets (stock and bond markets) globally, serving as a key financing and investment destination for multinational corporations and sovereign wealth funds.
- Financial Services: Wall Street investment banks, rating agencies, accounting firms, law firms, etc., form the core network of global financial rule-making and operations.
- Technology Finance and Innovation Financing: The US developed financial system (especially venture capital) provides strong capital support for technological innovation, a key factor in maintaining its technological lead.
- Strategic Weapon: Financial strength is a core tool for the US to implement global strategies and safeguard national security interests (e.g., financial sanctions).
3. The Core Logic of the Game:
- “Real” vs. “Virtual”: Industrial powers create tangible physical wealth and infrastructure, while financial powers control “virtual” but highly dominant resources like currency, credit, and capital flows. These represent different modes of wealth creation and power exercise.
- Mutual Dependence and Competition:
- China needs US markets, technology (in some fields), and financing channels under the dollar system.
- The US relies on cheap goods produced in China to maintain low inflation and living standards, and also needs China to purchase US Treasury bonds to finance its fiscal deficits.
- Structural Contradictions: The continuous improvement of China’s industrial strength (especially in high-end fields) and the process of RMB internationalization fundamentally challenge the US profits in high-value-added industries, dominance in the global value chain, and dollar hegemony. The US attempts to restrain China’s industrial upgrading and influence expansion through financial, technological, and regulatory means.
- Focus of Power Transition: This game is essentially the core of reshaping the global power structure. Industrial strength is the foundation of comprehensive national power, while financial strength is an amplifier of influence. Whoever can better integrate or dominate both is more likely to occupy a favorable position in the future global order.
How will the China-US game proceed accordingly?
Based on the framework of “the strongest industrial power vs. the strongest financial power,” the China-US game will exhibit a complex, long-term, and multi-faceted trend, possibly showing the following developments:
1. Long-term and Normalization of Strategic Competition:
- The structural contradictions between the two sides are difficult to reconcile, and strategic trust is severely lacking. The game will be a protracted war, and its direction will not fundamentally change due to temporary events (such as leader meetings or short-term agreements).
- Competition will become the main tone of bilateral relations, with cooperation space compressed to limited areas that align with respective strategic interests (e.g., climate change, anti-drug efforts).
2. Acceleration of “De-risking” and Supply Chain Reorganization:
- The US and Its Allies: They will spare no effort to promote supply chain “de-sinicization” or “friend-shoring,” especially in strategically important and sensitive industries (semiconductors, critical minerals, pharmaceuticals, clean energy, etc.), to reduce dependence on Chinese manufacturing and safeguard economic security and industrial advantages.
- China: It will accelerate technological self-reliance and the autonomy and control of industrial chains and supply chains, especially in “chokepoint” fields (such as high-end chips, industrial software, precision instruments). Meanwhile, it will strive to build a diversified and resilient supply chain network (e.g., deepening cooperation with ASEAN and Belt and Road countries) and promote RMB internationalization to reduce dependence on the dollar system.
3. Technological Competition as the Main Battlefield:
- The core of industrial upgrading is technological innovation. The two sides will fiercely compete in key technologies determining future economic and military advantages, such as artificial intelligence, quantum computing, biotechnology, semiconductors, advanced communications (6G), and new energy.
- The US will continue to suppress China’s technological development through technology blockades (export controls, entity lists), investment restrictions, talent flow restrictions, etc.
- China will increase R&D investment, seek to break through blockades, and strive to establish its own technical standards and ecosystems.
4. Escalation of Financial Games:
- The US: It will continue to use dollar hegemony and financial sanctions as weapons (e.g., sanctions against specific Chinese enterprises, industries, or even officials) to hit China's industrial upgrading and geopolitical goals.
- China: It will accelerate the internationalization of the RMB, expand cross-border RMB settlement, develop alternative payment systems (such as CIPS), promote the diversification of the international monetary system, and enhance the resilience and risk resistance of its own financial system (such as diversifying foreign exchange reserves).
- Competition between the two sides in financial technology and digital currencies will also become increasingly prominent.
5. Intensification of the Battle over Rules and Standards:
- Both sides attempt to shape global trade, investment, technology, and digital governance rules and standards that favor themselves.
- The US is committed to maintaining and strengthening the existing international rule system dominated by it (e.g., the reform direction of the WTO) and entice its allies to build exclusive “small circle” rules (such as the Indo-Pacific Economic Framework, IPEF).
- China actively participates in global governance reform (e.g., promoting WTO reform and participating in multilateral development banks) and promotes the development of multilateral platforms such as the Belt and Road Initiative, BRICS cooperation mechanisms, and the Shanghai Cooperation Organization, promoting its own standards and development models.
6. Projection in Geopolitics and Military Fields:
- Economic strength (industry + finance) is the foundation of geopolitical influence and military strength. Geopolitical competition between the two sides in the Asia-Pacific region (Taiwan Strait, South China Sea), the Indo-Pacific region, and even globally will continue, with intensified competition in military modernization and power projection capabilities.
- Both sides seek to expand their sphere of influence through economic diplomacy (assistance, investment, trade agreements) and military presence.
7. “Co-opetition” with “Competition Over Cooperation”:
- At the economic level, especially in non-strategic fields (such as ordinary consumer goods trade and some service industries), interdependence still exists, and cooperation may still occur.
- However, in core national interests and strategic competition fields (technology, finance, high-end manufacturing, geopolitics), competition and confrontation will prevail. Cooperation is often conditional and instrumental, serving respective competitive goals.
Conclusion:
The perspective of “the game between the strongest industrial power and the strongest financial power” profoundly reveals the core driving force and key dimensions of Sino-US strategic competition. The future trend of the game will focus on four core areas: supply chain security, technological commanding heights, financial dominance, and rule-making power. This game is a comprehensive contest of comprehensive national strength, characterized by long-term, complexity, and high risk. Its outcome will reshape the global economic landscape, technological map, and international order. How the two sides manage competition, avoid uncontrollable conflicts, especially in hotspots like the Taiwan Strait, and seek limited cooperation on global challenges like climate change, will be key issues affecting the future of the world.
Currently, China and the US are engaged in a tense game. As for other countries, according to the statement of former US Secretary of State Antony Blinken, they are either “at the table or on the menu.” If a country takes the “right” side, it stays at the table; if it takes the “wrong” side, it ends up on the menu. In fact, Nepal cannot avoid making a choice in this regard.
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