China: the 21st century’s gravity well

Partial market liberalisation was a key success of China’s Deng Xiaoping era, which preserved party control even as the Soviet system collapsed under technological stagnation. This served as the crucial catalyst for a structural reversal of the Industrial Revolution’s “Great Divergence”. This paradigm shift, led by China and mirrored across India, Indonesia, and beyond, is restoring global income and power distributions toward a centre of gravity closer to pre-1800 Eurasia.

Consequently, the arc of 21st-century political economy suggests that the era of “neoliberal globalisation” has already ended, replaced by a more mercantilist, geopolitically conditioned order defined by persistently tense Sino-US relations. China has become Asia’s inescapable gravity well. Just as a physical gravity well bends spacetime to pull nearby objects into its orbit, China’s massive economic and technological weight now dictates the trajectory of regional production. While Beijing masters a model of “imperial cohesion” and widespread industrial AI integration to manage internal pressures, the US is increasingly “America First”, leery of being heavily, expensively engaged in far-flung foreign lands. This shift has transformed global alliances into transactional service contracts and civilisational defence pacts. The result is a world drifting away from universalist governance toward consolidated, great-power spheres of influence, all of which are increasingly anchored in China’s immense productive and technological capacity.

In this new world order, which can be described as national market liberalism, China stands as the gravity well of a shifting international system:

Internationally: Beijing pursues self-reliance and “dual circulation” as the Western powers reassert control over trade, capital, and technology in the name of security, thereby prompting tariffs, sanctions and export controls by the US.
Domestically: Market capitalism persists and inequality deepens, yet the state-led model serves as the blueprint for our brave new world.
Functionally: Markets still matter, but they are increasingly fenced, steered and subordinated to geopolitics.

The pivot of integration and pressure

This shift is most visible across the interlocking roots of Asian production. China has become an irreplaceable node within a single, densely interdependent system, making full decoupling implausible absent a major war. Beijing’s Huawei-centred infrastructure stack, cloud platforms and AI champions have become the foundational layer that others now react to.

Consequently, US-centred networks are forced to recalibrate defensively. In the Gulf, Saudi Arabia and the UAE are being pressured to exit Chinese-linked platforms and distance themselves from Beijing’s technology ecosystem to remain in Washington’s favour. Similarly, East Asian states, such as Korea and Japan, while remaining embedded in American supply chains, now find their steel, shipbuilding and capital-goods ecosystems treated as strategic assets rather than purely commercial sectors. Integration is no longer neutral; it is conditional, monitored and politically priced.

Western unease and the reversal of roles

At the strategic level, this transition reflects a deeper American malaise, in contrast to the relative continuity of the Chinese model. The post-1945 consensus that once anchored US grand strategy has eroded under polarisation, leaving the “political West” — a US-led alignment system — unable to absorb China. While Asian states have long recognised that ties rest on interests rather than on romanticised values, Europe and the US are still adjusting to a world in which they are no longer the sole arbiters of global norms.

Framing this rivalry as a new Cold War misleads. Unlike the separate systems of the 20th century, today’s reality is a “forest of interlocking roots” where China’s centrality is a fact of nature. Globalisation will become patchier, with partial bifurcation in tech and finance, but it remains anchored in the productive and technological capacity of China, Korea and Japan.

Domestically, US President Donald Trump’s coalition is fracturing. His second term increasingly serves tech “broligarchs” rather than the blue-collar base that propelled his rise, with rising public fears over jobs, electricity prices and the cost of living. Tariffs have raised the cost of living and hurt many base voters while leaving Big Tech comparatively insulated. This opens space for a Democratic tilt against anti-robber-baron populism, with sharper rhetoric centred on affordability and economic grievance.

Many geopolitical observers struggle to read Trump’s foreign policy as a grand design, rather than as performative pressure, spectacle and leverage over patient institution-building. That can yield short-term gains but raises volatility and escalation risk. Unable to truly withdraw without destabilising the system that underwrites US power, Trump signals disengagement from distant conflicts while acting globally. As domestic governance stalls and midterms loom, foreign policy becomes political theatre — a source of motion, legitimacy, and distraction — driven as much by internal weakness as by external strategy.

Trump upending alliances; civilisation as strategy

The 2025 National Security Strategy (NSS) redefines “security” by prioritising demography, borders, and civilisational identity over traditional deterrence. In this framework, the primary strategic objective is preserving a perceived civilisational core, elevating migration to a top-tier “invasion” that requires civilisational defence rather than mere policy.

This logic extends to Europe, where the NSS frames the prospect of Nato allies becoming “majority non-European” as a form of civilisational erasure. This reflects a choice to privilege ethnocultural continuity over governance, projecting American domestic anxieties about Whites becoming minorities onto its Nato allies. The strategy specifically highlights the rising Muslim share of the European population as a strategic threat narrative. The most provocative implication is that the NSS gestures toward intervention in allied domestic politics. Its language about “cultivating resistance” within European societies crosses a qualitative line. Alliance relations are no longer limited to burden-sharing or coordination against Russia and China; allied political ecosystems themselves become legitimate targets of US encouragement and pressure. Ultimately, the NSS pits a civilisational conception of the West against traditional liberal democracy. By rebranding anti-immigration forces as “defenders of civilisation”, the strategy turns alliance disagreements into identity conflicts that are harder to bargain and easier for Russia to exploit.

Trump’s civilisational NSS and Taiwan

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This framework carries significant implications for East Asia, particularly Taiwan. As the NSS’s values language thins, alliance commitments become increasingly transactional. Taiwan is defended less as a democratic exemplar and more as a functional asset — valuable for its semiconductor industry and its geographic position in the First Island Chain. Alliance protection begins to resemble a service contract: support is priced, conditional and subject to renegotiation. Moral solidarity, which traditionally reduced uncertainty, is replaced by bargaining logic that increases it.

The long-run risk is that Taiwan’s strategic indispensability erodes as semiconductor reshoring accelerates in the US and Japan. The so-called “silicon shield” becomes less reliable if Taiwan’s industrial centrality is no longer unique. In that scenario, Taiwan risks becoming a “civilisational orphan”: no longer anchored by shared identity claims, yet increasingly tradeable in grand bargains.

More recently, US vice-president JD Vance has supplied a civilisational moral economy that treats border enforcement, anti-diversity, equity and inclusion (DEI) politics, and civilisational rhetoric as foundations of legitimacy — and exports those foundations into alliance management.

Taken together, the NSS points toward a re-sorting of allies. Belonging to the US-led order becomes conditional not on shared institutions but on cultural-ideological affinity. East Asian partners are treated instrumentally rather than within the family, a logic reflected in the extraction of massive investment pledges from Japan and South Korea in exchange for tariff relief. For China, this creates a narrative opportunity: civilisational framing alienates partners and reinforces Beijing’s claim that containment is identity-driven rather than rule-based.

Sphere-of-influence dynamics in a bipolar world

Despite frequent claims that the international system has become “multipolar”, global power remains asymmetrically bipolar today. Across economic scale, military reach, technological depth and agenda-setting capacity, the US and China tower over all others. The gulf separating them from secondary powers — the EU, Japan, India or Russia — is unlikely to close soon.

We live in a world defined by a bipolar core with fragmented peripheries, where all of humanity’s technological advances have yet to abolish time, distance and geography. China operates near home, with short supply lines and the ability to concentrate forces in its immediate theatre. The US must project power across oceans while managing dispersed commitments. In a prolonged contest, that geographic asymmetry structurally favours China, even if the US retains decisive advantages in certain domains.

Great-power rivalry, however, is not only about military hardware. It is also about influence in regions that appear peripheral until they suddenly are not. Geography explains why Venezuela matters disproportionately to Washington: a rival operating close to one’s homeland is inherently more threatening than distant competition. From Beijing’s perspective, US alliances and military activity in East Asia resemble Chinese influence in the Caribbean from Washington’s perspective. Encirclement is subjective, but the fear it generates is structurally produced by proximity.

Within this logic, US-China competition is global and will surface wherever resources, geography, and alignment intersect. Trump’s NSS reflects this reality. It implies a partial rebalancing away from deep exposure in the Eastern Hemisphere while intensifying focus on the Western Hemisphere. The goals are to reassert security dominance close to home and to raise Latin America’s economic productivity so it can serve as a more reliable growth and supply base, reducing dependence on distant, politically risky suppliers.

Recent US pressure on Venezuela and military activity in the Caribbean can thus be read as both economic and security policy: degrading cartel-contaminated political economies that harm US domestic security while reshaping the hemispheric order. At the same time, China’s infrastructure development, such as Peru’s deep-water Port of Chancay, signals a parallel effort to redraw trade routes and control logistics in what Washington still views as its sphere of influence.

Taken together, these moves suggest a world drifting away from universalist governance toward consolidated spheres of influence — less Wilsonian, more Monroe-style — where great powers increasingly prioritise control of their neighbourhoods, over managing the globe.

The next decade in Turchin’s structural-demographic framework

Modern China stands as the primary example of the global drift away from managerial liberalism toward a fusion of imperial cohesion and a technocratic-administrative elite. Rather than a Marxist project, China’s model of centralised rule — mirrored by India’s turn toward civilisational rhetoric — represents a global arc of “imperial” restoration.

This shift intersects with Peter Turchin’s structural-demographic theory (SDT), which asks whether social pressures are easing or intensifying. By this standard, China’s model of stability contrasts with an America entering a disintegrative phase defined by three misaligned structural blocks:

The Masses: Stagnating real wages and falling living standards fuel resentment.
The Elites: “Elite overproduction” occurs when the number of credentialed, ambitious individuals outpaces the number of available high-status positions, incentivising counter-elites to weaponise popular anger.
The State: Fiscal strain and a loss of institutional legitimacy prevent the state from restraining elite conflict or providing public goods.

Disintegration occurs when these pressures align: rising inequality and surplus elites locked in factional struggle. While China pursues imperial cohesion, the US faces a state widely seen as captured, marking a deepening domestic instability.

Trump-era policies through an SDT lens

While China and the broader Eurasian sphere consolidate under imperial cohesion, the US remains trapped in a late-stage disintegrative phase of the SDT cycle. This decline began in the 1970s as the “Great Compression” gave way to widening inequality, stagnating real wages, and skyrocketing housing and healthcare costs.

The structural pressures inside the US continue to intensify through several reinforcing trends:

Elite overproduction: Higher education expanded rapidly, creating an explosion of credentialed professionals competing for fixed elite roles. This guarantees fierce intra-elite conflict and the use of populist mobilisation as a political weapon.

Mass immiseration: Pro-capitalist policies and tax structures favour high incomes, concentrating gains at the top and deepening the sense of radicalisation among the lower-middle classes.

State erosion: Low taxation on the wealthy and a focus on culture-war spending erode institutional legitimacy, leaving the state fiscally strained and unable to respond to shocks.

The November 2025 election of Zohran Mamdani as Mayor of New York City exemplifies this “elite overproduction”. Analysts view his victory as a “political uprising” led by “priced-out professionals” — highly educated individuals who possess elite credentials but lack the wealth and power to match.

Ultimately, Trump-era policies act as an accelerator of disintegration rather than a reversal. By favouring capital over labour and failing to absorb surplus elite talent, the US structurally resembles the late Roman Republic or Ancien Régime France — periods in which economic growth coexisted with mounting, terminal internal strain.

China as contrast, not prophecy

China is often invoked — sometimes admiringly, sometimes fearfully — as an alternative model. But the lesson is not that China has solved history. Rather, it has managed structural pressures differently.

Since 1978, market opening under Deng Xiaoping did not entail the surrender of political control. The Chinese Communist Party preserved monopoly authority over coercion and appointments while using markets instrumentally to raise productivity. Private wealth was tolerated conditionally, with the understanding that political organisation against the Party remained off-limits. Under President Xi Jinping, this logic has been reinforced through regulatory discipline and swift, sure enforcement, stamping out capture by vested interests even as Beijing enables the rapid diffusion of technology and industrial capacity.

China’s contrast with the US is not moral but structural. America’s liberal-pluralist system allows economic power to translate more easily into political influence, while also producing chronic elite overproduction. China’s system suppresses open elite competition, relying heavily on performance legitimacy and growth. Each model carries long-run risks that need to be adroitly managed, with China’s technocratic slant in its leadership team arguably giving it a leg up in this regard. Neither offers a simple template for the other.

AI rivalry — clash of the titans

The US-China AI rivalry features distinct national strategies: China emphasises integrating AI across entire sectors for immediate applications (the “AI+” model) in manufacturing and robotics, aiming for ubiquitous edge intelligence.

The US focuses on frontier AI, advanced chips, and the pursuit of Artificial General Intelligence (AGI), with private-sector dominance, though both nations also develop AGI concepts. The US leads in cutting-edge models and computing power. Still, China excels in practical deployment, creating a competition between a national strategy centred on fundamental research and one focused on widespread industrial adoption, with different paths to future AI dominance.

China’s “AI+” framework leads the global shift toward AI-driven transformation, moving beyond simple augmentation to reorganise entire industries. This approach focuses on integrating AI into robotics, manufacturing, and edge computing for immediate economic impact, leveraging China’s strengths in data, energy, and talent to deploy in real-world, “embodied” applications.

In contrast, the US approach focuses on developing the most advanced frontier AI models and pursuing Artificial General Intelligence (AGI). Dominated by large tech companies, the American strategy emphasises breakthroughs in core AI capabilities and chip technology — such as Nvidia — drawing on its strengths in advanced chip design, fundamental research, and vast AI compute resources.

Investment implications

Given the priority focus of China’s AI strategy, the investable universe of stocks within its AI infrastructure would include cloud service providers, semiconductor producers, power grid and energy infrastructure, and AI metals such as copper, aluminium, and related materials. This universe further encompasses energy storage systems (ESS) and the battery value chain, optical fibre, transceivers, and photonics, as well as cooling and thermal management and the broader server, rack and datacentre hardware ecosystem.

Dr Tan Kong Yam is a founding member and chairman (China) of APS Asset Management. He is also a professor of economics at the Nanyang Technological University.