There will always be at least some tensions when a rising power challenges the prevailing global power. But China<\/a> is facing off against the US at a moment when America\u2019s relative power may be weakening, and when it is committed to preventing its own strategic decline. Both sides are thus becoming increasingly paranoid about the other\u2019s intentions, and confrontation has mostly supplanted healthy competition and cooperation. Both sides are partly to blame.<\/p>\n\n\n\n Under Xi Jinping, China has become more authoritarian and moved further toward state capitalism, rather than adhering to Deng Xiaoping\u2019s concept of \u201creform and opening up.\u201d Moreover, Deng\u2019s maxim, \u201chide your strength and bide your time\u201d, has given way to military assertiveness.<\/p>\n\n\n\n With China pursuing an increasingly aggressive foreign policy, territorial disputes between it and several Asian neighbors have worsened. China has sought to control the East and South China Seas, and it has become increasingly impatient to \u201creunify\u201d with Taiwan by any means necessary.<\/p>\n\n\n\n But Xi has accused<\/a> the US of pursuing its own aggressive strategy of \u201ccomprehensive containment, encirclement and suppression.\u201d On the other hand, many in the US fear that China may challenge US strategic hegemony in Asia \u2013 a decisive factor in the region\u2019s relative peace, prosperity and progress since the second world war.<\/p>\n\n\n\n Chinese leaders also fear the US is no longer committed to the \u201cOne China\u201d principle that has underpinned Sino-American relations for half a century. Not only has the US become less \u201cstrategically ambiguous\u201d on the question of whether it would defend Taiwan; it has also fanned Chinese fears of containment by reinforcing its Indo-Pacific alliances through the Aukus (Australia, the UK and the US) pact, the Quad (Australia, India, Japan and the US) and an Asian pivot by Nato.<\/p>\n\n\n\n A first step toward preventing a collision is recognising that some of the reigning concerns are excessive. For example, US anxiety about China\u2019s economic rise is reminiscent of its attitude towards the rise of Germany and Japan decades ago. After all, China has significant economic problems that could cut its potential growth to only 3%-4% a year, far below the 10% annual growth rate that it achieved over the past few decades. China has an ageing population and sky-high youth unemployment<\/a>; high debt levels in both the private and public sectors; falling private investment as a result of intimidation by the ruling party; and a commitment to state capitalism that hampers total factor productivity growth.<\/p>\n\n\n\n Moreover, Chinese domestic consumption has weakened, owing to deepening economic uncertainty and the lack of a broad social safety net. With deflation setting in, China now must worry about Japanification<\/a>: a long period of lost growth. Like so many emerging markets, it could ultimately end up in the \u201cmiddle-income trap,\u201d rather than reaching high-income status and becoming the world\u2019s largest economy.<\/p>\n\n\n\n While the US may have overestimated China\u2019s potential rise, it also may have underestimated its own lead in many of the industries and technologies of the future: artificial intelligence, machine learning, semiconductors, quantum computing, robotics and automation, and new energy sources such as nuclear fusion. China has invested significantly in some of these areas under its \u201cMade in China 2025\u201d programme, but its goal of achieving near-term dominance in 10 industries of the future now seems far-fetched.<\/p>\n\n\n\n American fears about China dominating Asia are also excessive. China is surrounded by almost 20 countries, many of which are strategic rivals or \u201cfrenemies\u201d \u2013 most of the few allies it does have, such as North Korea, are a drain on its resources. While its belt and road initiative<\/a> was supposed to make new friends and dependencies, it is encountering many challenges, including massive failed projects (white elephants) that are leading to debt defaults. As much as China wants to dominate the global south and its international \u201cswing states\u201d, many middle powers are resisting and countering<\/a> this ambition.<\/p>\n\n\n\n The US has rightly imposed some sanctions to keep key technologies out of the Chinese military\u2019s hands and to frustrate China\u2019s quest for dominance in AI. But it must be careful to limit its strategy to one of derisking, rather than decoupling, apart from some necessary technological decoupling and limits to direct investment in China and the US. As it determines which sectors to include in its \u201csmall yard and high fence<\/a>\u201d approach, it must avoid going too far. The trade sanctions that Donald Trump imposed on China applied to a vast range of consumer goods, and should be mostly phased out.<\/p>\n\n\n\n On Taiwan, the US and China should try to reach a new understanding to defuse today\u2019s dangerous escalation. Joe Biden should clearly reaffirm the One China principle and realign his public commitments and statements with the principle of \u201cstrategic ambiguity.\u201d The US should sell Taiwan the weapons it needs to defend itself, but not at a pace or scale that could provoke China to invade the island before its \u201cporcupine\u201d defence advances too far. The US should also state clearly that it opposes any Taiwanese move toward formal independence, and it should avoid high-level visits with the country\u2019s leaders.<\/p>\n\n\n\n China, for its part, should stop its air and naval incursions near Taiwan. It should state clearly that eventual reunification will be strictly peaceful and mutually agreed; it should take new steps to improve cross-strait relations; and it should defuse tensions with other neighbours on territorial disputes.<\/p>\n\n\n\n![\"A](\"https:\/\/i.guim.co.uk\/img\/media\/b03046be6a4ffb8a999d922df9087e5260393bfa\/0_434_8660_5199\/master\/8660.jpg?width=445&dpr=1&s=none\")
![\"Chinese](\"https:\/\/i.guim.co.uk\/img\/media\/60bba31c559f0526a867a4857be5086acd15f682\/0_200_3000_1800\/master\/3000.jpg?width=445&dpr=1&s=none\")