The End of China's Rise and the Future of World Order

Strategic Digest

Bottom Line Up Front

China's four-decade economic rise has ended and is now reversing. This creates a "peaking power" dynamic historically associated with increased domestic repression and external aggression. The 2020s represent a period of maximum danger, but if current trends hold, a rebalancing of power may enable a new US-China accommodation within 10-20 years.

The Core Thesis

Contrary to conventional wisdom about an "Asian century" revolving around a forever-rising China, the 2020s mark the end of China's epic rise—and the beginning of its reversal. This shift is transforming international order from post-Cold War globalization to intense security competition among rival blocs.

Key Reframe: China's rise was the exceptional event—a product of fleeting tailwinds now becoming headwinds. Expecting indefinite Chinese ascent was the analytical error, not predicting its end.

Evidence of Economic Reversal

Quantitative Indicators

Using official Chinese government data (which likely exaggerates growth), China's economy is shrinking relative to the United States. Independent estimates based on observable data—such as nighttime electricity usage visible from space—suggest China's economy is at least 20% smaller than official figures claim.

Productivity: Negative growth for over a decade (excluding 2021 COVID reopening), meaning China is becoming less efficient over time.
Capital Output Ratios: Skyrocketing in recent years—China spends more and more to produce less and less.
Debt: Exploded from developing-country averages to exceeding US levels, with no end in sight.

Qualitative Indicators

Public opinion surveys show unprecedented numbers of Chinese citizens saying their lives are worsening. The "lying flat" movement reflects youth unable to find jobs matching their education. Capital flight accelerates as wealthy families move children and assets abroad.

The Four Tailwinds That Became Headwinds

1. Security Environment

Then: From 1971 onward, US partnership provided security guarantees and market access during hyperglobalization (world trade surged 6x from 1970s to early 2000s).

Now: "All-around encirclement" by expanded US military bases. Trade and tech war with US, EU, and Japan creating thousands of new barriers annually.

2. Governance Quality

Then: Post-Mao reforms rewarded economic performance over party loyalty; Cultural Revolution's destruction of bureaucracy inadvertently freed peasants from rigid state planning.

Now: Xi Jinping consistently sacrifices economic efficiency for political power—zero-COVID lockdowns, crushing Hong Kong, anti-corruption drives that freeze experimentation, censoring negative economic data.

3. Demographics

Then: 10-15 workers per retiree (2-3x global average)—the greatest demographic dividend in history, explaining ~25% of China's rapid growth.

Now: Baby boom generation retiring onto one-child generation. Over next 10 years: lose 70+ million workers, gain 130+ million seniors. Worker-to-retiree ratio collapses to 2:1 by late 2030s.

4. Natural Resources

Then: Near self-sufficiency in water, food, and energy made growth cheap.

Now: Half of rivers gone. 60% of groundwater unfit for human contact. Half of farmland polluted or desertified. China now world's top importer of both energy and food. GDP production costs 3x higher than in 2000s.

Global Contagion: The "China Hangover"

Countries that tied their fortunes to China's rise now face a triple threat as it reverses.

The Triple Win That Was

During China's boom: huge export market, bottomless loans for infrastructure (1 in 3 African projects built by China over 20 years), and experienced Chinese construction companies. The Economist created a "Sino Dependency Index" showing major economies with 10%+ of fortunes tied to China trade.

The Triple Threat Now

Reduced Imports: South Korea exports to China down 20%; Germany down 9%. Commodity producers feeling the pinch. Every 1% decline in China's growth reduces trading partners' growth by similar amounts.

Loan Demands: China wants cash at home, not abroad. No debt relief—demanding repayment with interest. Venezuela, Laos, Zambia, Pakistan pushed into debt distress.

Export Flooding: Subsidized manufacturing (EVs, solar panels) flooding global markets, crowding out domestic producers. Trade deficits with China surging.

Strategic Implications

China's international favorability has halved since the 2000s. Anti-China sentiment matches post-Tiananmen levels. Countries increasingly see China as threat rather than partner—a dramatic reversal from the era when nations competed for Beijing's favor.

The Peaking Power Dynamic

China exhibits classic "peaking power" behavior: a once-rising nation facing slowing growth and geopolitical pushback. Historical pattern: such powers don't mellow—they crack down at home and expand abroad.

Historical Parallels

US (1880s-90s): Post-Civil War boom ends with worst depressions to date. Response: brutal labor repression + exports to Latin America/Asia + giant navy + overseas territorial annexation.

Russia (1900s): Economic boom fizzles. Response: 70% of country under martial law + 200,000 troops seizing Manchurian/Korean resources until Japan expelled them.

Russia (2008-present): Commodity prices crash after 8% growth era. Putin's popularity falls. Response: jailing dissidents + anti-Western propaganda + pressuring former Soviet states → Ukraine war.

China's Three-Pronged Response

1. Domestic Repression (Fascism): Worship of central leader (Xi as "third pillar" after Mao and Deng); hyper-nationalism focused on "revenge" against hostile foreign forces; brutal ethnic minority repression (Uyghurs as "cancer"); Orwellian surveillance state; military worship and civil-military fusion erasing civilian/military boundaries.

2. Economic Leverage Strategy: Prioritizing control of global "choke points" (medical PPE, rare earths, critical chips, South China Sea) over growth. Increased willingness to impose sanctions (e.g., trade war against Australia for COVID investigation).

3. Massive Military Buildup: Largest peacetime buildup since Nazi Germany. Official budget: $230B; actual (per US intelligence and think tanks): nearly 3x that. Nuclear arsenal doubling. Full-scale replicas of Taiwan/US military bases for practice attacks. South China Sea operations intensifying—water cannons, lasers, boarding with knives against Philippine ships. India border skirmishes killing dozens.

Alliance Building with Revisionist Powers

China pursues "external balancing"—unable to match adversaries alone, it cultivates partners to share the burden: sustaining Putin's Ukraine war with critical components; reaffirming North Korea alliance; massive investment and weapons sales to Iran. These partnerships stretch Western forces across Eurasia while providing military technology (Russian submarine quieting, aircraft stealth, early warning systems).

The Path Forward

Why Resolution Is Difficult

Over 200 years, 27 great power rivalries ended not through negotiation but through major shifts in power balance—usually via war, occasionally (Soviet case) through peaceful exhaustion. The "credible commitment problem": concessions big enough to reassure opponents also create exploitable strategic advantages.

Core Zero-Sum Dynamics: Taiwan governed from Taipei or Beijing, not both. South China Sea as Chinese territorial waters or international waters. Russia ground down or propped up.

Potential Resolution Scenario

In 10-20 years, if economic trends hold, China may be unable to sustain current military investment and expansion. Post-Xi leadership (he's 71) facing declining power ratios may rebargain. The precedent: Germany, Japan, France, UK trading regional dominance ambitions for economic access and security guarantees within Western networks.

Strategic Outlook

Near-term (the "terrible 20s"): Maximum danger period. Cold war doesn't have to go hot, but risk elevated.

Medium-term: Most likely scenario is China "running out of gas" economically. Alternative: US internal collapse shifts balance toward China.

Upside: Cold war "space race" dynamic could accelerate AI and climate technology innovation.

Long-term: Cautious optimism for accommodation once power rebalancing forces major concessions from one side.