The Peril of Peaking Powers: Economic Slowdowns and Implications for China's Next Decade

When and why do rising powers expand aggressively abroad? From ancient times to the present, ascendant powers have taken up arms to enlarge their empires and reorder the world.¹ Yet such violent revisionism poses a puzzle: If a rising power is profiting from the existing order and gaining ground on its rivals, why would it disrupt that progress with a reckless fit of expansion?² Why would it not continue to amass power quietly and overtake its competitors without firing a shot? Such a country presumably could follow Chinese leader Deng Xiaoping's maxim to “hide its capabilities and bide its time.”³

Scholars have long studied the paradox of rising power aggression, yet existing answers fall short. One theory holds that rising powers become belligerent because declining powers inevitably wage cold or hot wars against them.⁴ Recent research, however, shows that declining powers more often retrench and accommodate rising powers than try to crush them.⁵ A second prominent theory holds that rising powers expand violently when they become “dissatisfied” with the existing order.⁶ Yet that explanation raises the question of why an ascendant power would become dissatisfied in the first place.⁷ Many studies skirt this issue by measuring dissatisfaction with indicators of conflict, such as whether a rising power is embroiled in a rivalry or an arms race;⁸ has formed alliances against other great powers;⁹ or espouses a different ideology, regime type, or set of preferences from the dominant state.¹⁰ This approach, however, yields a circular argument: dissatisfied states engage in conflict, and states engaged in conflict are dissatisfied.¹¹ The question thus remains: When and why do some rising powers upend the international orders that enabled their ascents?

This article highlights one factor that might compel a rising state to expand aggressively abroad: slowing economic growth. Rising powers sometimes suffer severe and sustained economic growth slowdowns. These slumps may not immediately alter the balance of power, but they raise the specter of future decline in the minds of a rising power's rulers. The fear that the country's moment in the sun is about to end, that its strategic window of opportunity is starting to close, and that its regime will not be able to deliver the goods that it has promised the people, can incite aggression and expansion that a nation more optimistic about its economic prospects might avoid. Given China's slowing growth today, this is a dynamic worth worrying about.¹²

Existing studies provide valuable insights into this topic, especially the finding that great powers often become belligerent when they fear future decline.¹³ Few works, however, explicitly examine rising power growth slowdowns.¹⁴ This oversight is problematic because “peaking powers,” meaning great powers whose economic ascents have slowed but not yet stopped, might be the most dangerous kind of country; an era of rapid growth has equipped them with the means to shake up the world, and then a severe slowdown motivates them to move aggressively.

To address this shortcoming, I analyze every case over the past 150 years in which a fast-growing great power experienced a severe and sustained economic growth slowdown. This analysis yields two main results.

First, the most common reaction to slowing growth is mercantilist expansion: the use of state power to carve out economic spheres of influence. Most of the rising powers that stagnated over the past 150 years tried to revive their fortunes by restricting foreign access to their domestic markets while investing heavily overseas to generate demand for their exports and secure critical resources. To protect their far-flung assets, they developed military power-projection forces and deployed them along key trade routes. In most cases, these attempts to forge empires fueled great power competition. In some cases, they triggered major wars.

Second, two main factors shape the extent to which a rising power resorts to mercantilist expansion during an economic slowdown: (1) the rising power's regime type, and (2) its prospects for future trade. Over the previous century and a half, the most aggressive mercantilist expanders were stagnating autocracies confronted by growing international protectionism. In contrast, peaking powers with democratic institutions, easy access to foreign markets, or both expanded less aggressively and employed a more mixed set of mercantilist and market-based strategies. In these more moderate cases, democratic institutions served as shock absorbers for aggressive urges, and good trade prospects provided opportunities to prosper through peaceful commerce rather than through conquest or the creation of exclusive economic zones.

These findings have important implications for international relations scholarship and U.S. foreign policy. For scholars, they amend classic theories of great power expansion and war.¹⁵ Academics have long studied these subjects, but many works rest on questionable assumptions: countries are either rising or declining; those on the upswing expand while those on the downswing retrench or launch preventive wars; and conflict is most likely when a rising challenger catches up to an established superpower. The results of this study, however, suggest that these assumptions do not always hold. Great powers can rise and fall simultaneously; they may build up their militaries or expand their spheres of influence even as their economies stagnate. Mercantilist expansion, not retrenchment or preventive war, is the most common response to peaking power. Most important, great power conflict can occur even when power transitions do not. Peaking powers have lashed out when they realized that they would not catch their rivals or achieve their grand ambitions—unless they took drastic action. These peaking power dynamics help explain some of the most consequential geopolitical events of the past 150 years, including the surge of U.S. imperialism in the late nineteenth century, the outbreak of World War II, and Russia's 2014 annexation of Crimea and intervention in eastern Ukraine. They therefore should be incorporated into theories of great power expansion and conflict.

This study also recasts the timing and nature of China's threat to the United States. In foreign policy circles, Sino-American competition is often characterized as a “100-year marathon,” a “long game,” or a “new Cold War” in which both sides have decades to marshal their resources and rally international coalitions.¹⁶ Yet the sharpest phase of that competition could be more like a sprint in the 2020s, because China has entered a perilous period: it has acquired the means to disrupt the existing order, but slowing growth is narrowing its window to act. As a brutal dictatorship facing rising international protectionism, China is a high-risk case for an aggressive response, and its belligerent and expansionist behavior since its growth started to slow in the 2010s could be just a preview of what is to come if its economy stagnates in the years ahead. The United States obviously needs a long-term strategy to manage its relationship with China throughout this century. But it also needs a near-term strategy to blunt a potential surge of Chinese aggression in the 2020s.

This article proceeds in three main sections. First, I discuss the relationship between rising powers' growth slowdowns and mercantilist expansion. Second, I analyze cases over the past 150 years in which a rising power experienced a severe and sustained economic slowdown. The conclusion discusses this article's contribution to international relations theory and implications for U.S. foreign policy.

This article focuses on rising powers that experience severe and sustained economic slowdowns, or what I call “peaking powers.” These are cases in which a great power's economy has grown substantially faster than the global average for many years, followed by another extended period in which its growth rates plummet. Growth slowdowns can occur for many reasons, including resource exhaustion, market saturation, demographic decline, corruption, or simple regression to the mean.¹⁷ Regardless of the exact cause, the basic problem is that a country's economic engine has run out of steam, and quick fixes, such as stimulus spending or minor economic reform, have failed to restart steady growth.

I focus on severe and sustained slowdowns, rather than short-term crises, because extended slumps are especially threatening to a great power and its leaders. If a country's growth rate dips for a few quarters, then its leaders can reasonably hope that the downturn will pass quickly or that they can jumpstart the economy with stimulus spending or minor reforms. If growth rates decline year after year, however, then tangible signs of economic malaise will accumulate (e.g., stagnant wages, shuttered factories), hope will fade, and leaders will realize that they face a fundamental choice: accept the “new normal” of sluggish growth or take decisive action to turn the tide.

Great powers are unlikely to choose the first option—doing nothing—because that would be geopolitically risky, domestically unpopular, and psychologically painful. For starters, a severe growth slowdown, if left unchecked, may cause the country to fall behind rivals economically and militarily. Great power competition is typically fierce, so significant slippage in a nation's growth rate can undermine its security.¹⁸ That may be especially true for a peaking power, because its rapid ascent has likely alarmed its rivals, and the subsequent slowing growth gives those enemies a chance to pounce. Even if rivals espouse friendly intentions, they may be unable to convince the peaking power that they will refrain from exploiting its economic woes in the future, a classic commitment problem.¹⁹ As a window of vulnerability opens for the peaking power, windows of opportunity to rekindle its rise or achieve historic aims start to close.²⁰ Faced with impending stagnation and foreign predation, a peaking power is apt to try to beat back unfavorable trends by any means necessary.²¹

Domestic political factors accentuate this temptation. During an extended economic boom, many segments of a society become accustomed to an expanding pie: businesses to swelling profits, government agencies to growing budgets, ordinary citizens to improving living standards, and all of the above to greater international power and prestige. Leaders of rising powers usually feed these ambitions, promising the citizens that they will be rewarded with national rejuvenation and historical greatness if they continue to support the regime.²² Slowing growth dashes those ambitions and tarnishes the government's legitimacy.²³ Leaders struggle to fund the patronage networks that sustain their rule or satisfy societal demands on pocketbook issues, such as job security and social services. Fearful of unrest, they become determined, even desperate, to revitalize the economy and contain political opposition.²⁴

Psychological factors further incline leaders to be proactive during a slowdown. Psychologists have shown that humans are often willing to gamble recklessly to avoid losses.²⁵ When confronted by negative trends, people tend to exaggerate the risks of inaction while overestimating their ability to turn things around with bold moves. This combustible combination—threat inflation, loss aversion, and overconfidence in one's own capabilities—is pervasive in world politics. It seems particularly applicable to the leaders of a peaking power because an era of rapid growth has inflated their egos and given them something to lose. A protracted slowdown thus threatens their power, historical legacy, and perhaps even their lives.²⁶ Retrenchment and austerity might be the rational responses to slowing growth, but rulers can become irrationally addicted to rising power and arrogant about their capacity to control events.²⁷ Rather than meekly adapting to harder economic times, they may gamble for resurrection by adopting ambitious new policies.²⁸

In theory, a peaking power could rely solely on domestic remedies to restart its rise. For example, it could invest more heavily in education, infrastructure, and research and development (R&D) to boost productivity; provide citizens with social services (e.g., healthcare and pensions) to buy loyalty and stimulate consumer spending; and modernize its military and security forces to ward off enemies. To free up resources for investment, a peaking power could cut international commitments.²⁹

In practice, however, peaking powers are unlikely to hunker down at home.³⁰ Domestic investment is expensive, could take years to boost the nation's wealth and power, and usually requires raising taxes, which could incite unrest and further drag down growth. Retrenchment, meanwhile, might not save much money: soldiers brought home from overseas still need to be paid and housed—or they can be fired, but slashing the enlisted ranks and the defense budget would reduce employment and possibly growth, too, at least in the short term. Most important, retrenchment risks reducing the country's international influence, emboldening foreign rivals, and pushing the peaking power into full-blown decline.³¹

Even if a peaking power could afford—financially, politically, and strategically—to ramp up internal investment during a severe growth slowdown, it may lack the raw materials and productive outlets needed to turn additional spending into real wealth. The country may have already depleted its natural resources. Perhaps its population of workers and consumers has started to shrink. Maybe most of the country's useful bridges, roads, and buildings have already been built. Or perhaps the nation's political institutions have been captured by corrupt rent-seekers. Protracted growth slowdowns are, almost by definition, the result of diminishing returns on investment, the exhaustion of critical inputs, or both.³² These structural problems cannot be solved simply by injecting money into the economy.

Innovation is the ideal solution for stagnation, but it is also difficult and risky. Most R&D projects fail to produce technological breakthroughs. Sustained innovation typically requires a host of intangible assets that governments cannot easily mandate into existence, such as brilliant scientists and entrepreneurs, open flows of information, secure property rights, and venturesome consumers willing to pay premiums for cutting-edge products.³³ Innovation also involves “creative destruction”—the replacement of established methods with new ones—which is inherently disruptive. Businesses may have to overhaul their operations; workers may have to upgrade their skills or find new jobs; investors may have to place bets on unproven firms and technologies; and political leaders may have to weather fierce opposition from entrenched interests. These aspects of innovation can be politically destabilizing during the best of economic times, let alone during a severe slowdown.³⁴

Given the limitations and risks of internal reform, peaking powers may instead expand abroad to reshape their geopolitical environments and rejuvenate their economies with infusions of foreign resources. By “finding new markets for old products,” a peaking power can stimulate its industries and render other countries more dependent on its goods and services—all without fundamentally altering its domestic economic model.³⁵ It can “weaponize interdependence” by taking control of international chokepoints, such as major sea lanes or communications nodes, and then browbeat countries into concessions by conditioning their access to those chokepoints.³⁶ It can attract allies by doling out aid and loans;³⁷ and if economic inducements fail, a peaking power can send out its military to kill enemies, seize territory, plunder resources, and extract tribute.³⁸

Expansion, however, is also costly and risky.³⁹ To exploit foreign markets and tap overseas resources, a great power may need to develop globe-girdling supply lines complete with ports, airfields, railways, and communications networks—plus military forces to protect them. The fiscal costs of such a buildout can be enormous. In addition, expansion may trigger blowback. Rival nations might militarize and ally against the expanding power.⁴⁰ Saboteurs of all stripes—nationalist movements, tribal insurgents, religious extremists, criminal gangs, and foreign spies—may chip away at the expansionist power's empire by destroying or stealing its overseas assets, kidnapping or killing its citizens abroad, or all of the above.⁴¹

Declining powers typically retrench to avoid these costs of expansion.⁴² Fiscally strapped and strategically overstretched, the last thing that they want are more foreign entanglements. Rising powers, on the other hand, do not need to engage in aggressive expansion. With economic and geopolitical trends already going their way, they can allow their spheres of influence to grow naturally and gradually, engaging in what scholars call “involuntary” or “automatic” expansion, rather than manually pumping money and military forces into foreign lands.⁴³ Other countries may stand aside or even welcome contact with a rising power, because they are enthralled by the profits to be made in its market, want to recruit it as an ally, or are simply scared of picking a fight with an emerging superpower.⁴⁴ Rising powers, therefore, often take a peaceful and patient approach to achieving their interests and garner influence merely by flaunting their vibrant economies.⁴⁵

Peaking powers, by contrast, have the means and the motive to expand aggressively.⁴⁶ They are more capable than declining powers, because they have just reaped bonanzas of rapid growth, yet they are more eager to expand than rising powers, because their slowing economies portend dark futures of stagnation and internal unrest. Whereas a declining power might need to retrench to stay solvent, and a rising power can afford to wait for better days ahead, a peaking power may feel it has to secure its vital interests now or miss its moment forever. Beset by slowing growth, but still armed with formidable capabilities, leaders of peaking powers may prefer to step on toes abroad rather than impose belt-tightening at home. Some may even welcome a degree of international conflict, because demonizing foreign rivals can potentially rally the nation behind the ruling regime.⁴⁷

Peaking powers may not strike out on all fronts in a mad frenzy, but they are likely to expand abroad in calculated ways that maximize benefits and minimize costs. In doing so, they have a spectrum of options from which to choose. On one end of the spectrum are various forms of liberal expansion, the most extreme of which involves opening up to free trade and investment and letting private actors take the lead in generating national wealth and power. If a peaking power can “create an empire of trade rather than one of colonies,” it can profit from foreign resources while avoiding ruinous protectionism and costly military conflicts.⁴⁸

On the other end of the spectrum are various forms of mercantilist expansion, which use the iron fist of state power to forge privileged economic zones.⁴⁹ The most extreme type of mercantilism is conquest, which is essentially vertical integration by force. Slightly less extreme is colonialism, which involves asserting control over foreign lands without fully nationalizing them. Less extreme still is imperialism, which entails colluding with oppressive foreign rulers to gain special access to their nations' markets and resources. Even less extreme, but far more common, are forms of state capitalism and strategic trade, which involve nurturing domestic industries with subsidies and trade barriers while using various foreign policy inducements (e.g., aid, loans, bribes, arms sales, technology transfers) to gain secure and cheap access to raw materials and captive consumer markets abroad.

In practice, most states use both markets and mercantilism and fall somewhere in the middle of this spectrum. Peaking powers, however, are likely to become more mercantilist as their economies slump. Whereas rising powers with flourishing economies can confidently engage in free trade, knowing that their firms will prosper on a level playing field, peaking powers with sputtering industries may need to tilt the field in their favor to avoid stagnation. Toward that end, subsidies and tariffs can help state-favored firms undercut foreign prices and capture global market share. Espionage can boost indigenous innovation. Overseas lending and investment can incentivize other countries to buy more of the peaking power's goods; and economic sanctions, gunboat diplomacy, and conquest can pry open foreign markets or deny access to competitors. These tools might be beyond the capacity of a declining power, but they are likely to be attractive to a peaking power with a favorable but finite window of strategic opportunity.

Peaking powers tend to engage in mercantilist expansion, but a tendency is not an inevitability. The extent to which a peaking power engages in mercantilist expansion depends on myriad factors, two of which are especially important.

The first factor is the peaking power's prospects for trade and investment.⁵⁰ How open are international markets? How secure are major trade routes? How competitive are the peaking power's products? If the international economy is open, and the peaking power has desirable wares to sell, it can potentially revitalize its economy by embracing free trade and investment. But if the peaking power faces fierce international protectionism, feeble foreign demand for its goods, or insecure supply lines, then it may need to use mercantilist methods to push its way into foreign markets and obtain critical resources.

The second factor is the peaking power's regime type. Autocratic peaking powers are especially prone to mercantilism, because they tend to have higher levels of state-ownership in their economies and cater to narrower and more economically nationalist political coalitions than do democracies.⁵¹ Autocrats rule primarily through patronage and coercion, both of which are expensive: cronies have to be bribed; dissidents repressed.⁵² To stay in power, therefore, autocrats must control what Vladimir Lenin called the “commanding heights” of the economy, meaning the vital industries—such as agriculture, energy, transportation, construction, mining, heavy manufacturing, and banking—that enable all the others.⁵³ These industries provide a steady stream of deployable wealth, perfect for running a patronage system.⁵⁴ They produce hard assets that hold their value even when seized through force and do not require liberal institutions, such as private property rights or a vibrant middle class, to turn a profit.⁵⁵ Autocrats usually own these industries outright or control them through proxies.⁵⁶

As a result, autocratic regimes often consist of a tight fusion of political and industrial interests in which the state invests heavily in major companies, and major companies have significant sway in the government.⁵⁷ These kleptocratic links, concentrated in industries prone to rent-seeking, incentivize autocrats to shield national firms from foreign competition and help them find new resources and markets abroad when profits dry up at home.⁵⁸ Without regular elections to hold them accountable, autocrats can concentrate the benefits of mercantilist expansion among a tight circle of elites while offloading many of the costs (e.g., higher taxes to pay for subsidies and military spending, higher prices as a result of tariffs, and military conscription) onto the powerless masses.⁵⁹

In contrast, it is dangerous for autocrats to support free trade and private enterprise, especially during an economic downturn. Liberalization would require them to reduce privileges for state-favored companies, which could disrupt the regime's patronage networks by triggering surges in bankruptcies and unemployment.⁶⁰ Democratic governments obviously are not immune to crony capitalism, but they usually represent a broader and more diversified portfolio of economic interests, some of which may favor free trade. These mixed governing coalitions can pull democratic regimes in different directions and mitigate mercantilist impulses during an economic downturn.⁶¹

Both intervening variables—trade prospects and regime type—are partially endogenous to the main independent variable (economic growth rates) and the outcome variable (how peaking powers respond to slowing growth). Theoretically, negative feedback loops among these variables could mitigate their effects. For example, a peaking power with poor trade prospects could expand abroad militarily and scare rivals into granting it trade concessions, thereby improving its trade prospects. Or a peaking power that becomes more repressive might incite a revolution that topples the regime and replaces it with a democratic government committed to free trade.

Just as likely, if not more so, however, are positive feedback loops that accentuate the initial effects of trade prospects and regime type. Great powers often meet aggression with aggression, protectionism with protectionism, and mercantilist expansion with a scramble for economic empire.⁶² Hard economic times have more often caused societies to reject democracy and free trade, and to embrace dictatorship and mercantilist expansion, than the reverse.⁶³ In short, bad things often go together: trade wars typically heighten geopolitical tensions, insecure regimes usually become more repressive, and both of these dynamics tend to drive further mercantilist expansion.

As I explain in the next section, I attempt to address these endogeneity issues by dropping overdetermined cases in which the causal effects of different variables cannot be easily disaggregated; comparing cases with different combinations of trade prospects and regime type; and process-tracing the chain of events in each case.

Peaking powers will engage in mercantilist expansion, becoming more protectionist at home and expansionist abroad than they were during their eras of rapid economic growth. Specifically, they will try to carve out privileged economic zones by protecting their domestic industries with subsidies and trade barriers while using overseas investment and other inducements to try to boost international demand for their exports and to secure access to foreign resources. This economic expansion will beget military expansion, as the peaking powers protect their overseas assets and trade routes. The degree of mercantilist expansion will vary across cases by each peaking power's trade prospects and regime type: authoritarian peaking powers with poor trade prospects will expand the most beyond their preexisting baselines of overseas activity; democratic peaking powers with favorable trade prospects will expand the least; and mixed cases—authoritarian powers with good trade prospects or democratic powers with bad trade prospects—will fall somewhere in the middle.

If this theory is correct, then scholars should be able to observe peaking powers deliberately adopting strategies of mercantilist expansion. These strategies should emerge within a few years after the great power's economic growth rates start to slide and be described extensively in primary and secondary sources, including government documents, statements by leaders, and media coverage from the time as well as historical studies written years later. In short, mercantilist campaigns should be obvious to observers both past and present.

In addition, quantitative indicators should show each peaking power becoming exponentially more protectionist and expansionist. Specifically, peaking powers will adopt higher trade barriers and increase their military spending and naval tonnage at faster rates during their economic slowdowns than during their rapid-growth eras. Peaking powers also are likely to boost their exports and overseas investments and become more frequently involved in militarized disputes. These outcomes depend partly on how other states react, however, and thus are less likely to occur than increases in military spending, which peaking powers more fully control.

For example, I expect peaking powers to attempt to increase their export volumes, but in some cases these efforts might fail and thus not yield an actual surge in exports. Therefore, I treat indicators that depend partially on the reactions of other states as secondary evidence; they provide potentially useful information, but they are not as clear-cut as indicators that directly measure peaking powers' policy changes.

This point about indicators highlights an important limitation of my theory, namely that it is monadic and therefore cannot fully explain dyadic or systemic outcomes, such as the outbreak of major wars. The theory explains peaking powers' initial reactions to slowing growth, but it cannot completely account for the subsequent outcomes of those reactions or determine the overall extent of a peaking power's overseas presence or mercantilist behavior. Rather, the theory merely predicts that peaking powers will expand in mercantile fashion above and beyond their preexisting baselines of overseas activity, which are shaped by numerous other factors, including a peaking power's geographic location, natural resource endowment, and demography. For example, a state that is surrounded by enemies and has a growing population but dwindling natural resources is probably more inclined to engage in mercantilist expansion (i.e., have a higher baseline) than a self-sufficient power that is surrounded by allies. According to my theory, both types of countries can be expected to expand their overseas presence and mercantilist policies as they transition from rapid to slow economic growth. Yet, the theory cannot fully explain why any country has a larger or smaller international footprint overall.

To assess how rising powers respond to severe and sustained economic growth slowdowns, I analyze every case from 1870 to 2018 in which a great power's per capita gross domestic product (GDP) grew at least twice as fast as the global average for at least seven years and then suffered at least a 50 percent decline in growth rates over the next seven years. I adopt these case-selection criteria from previous studies to reduce the likelihood of selection bias.⁶⁴ I use the rate of economic growth as a sampling criterion rather than as a continuous variable, because severe and sustained slowdowns are qualitatively different from minor slowdowns. I exclude wartime downturns, meaning cases in which a great power grew rapidly as it mobilized for war and then got destroyed in that war, because wartime destruction differs fundamentally from peacetime stagnation.

This exclusion leaves nine cases, which are displayed in table 1. For each case, I list the year in which the great power's average annual growth rates started to slow. Because they are based on imprecise data, these peak years are rough approximations of when the great power transitioned from rapid to slow growth.⁶⁵ I therefore use these years only to identify cases for further research, not to conduct precise quantitative tests.

I examine all the cases in detail except interwar France, Germany, and the Soviet Union, because mercantilist expansion was arguably overdetermined in those cases. Interwar Europe was a cauldron of protectionism and conflict and featured some of history's most notorious tyrants. Peaking power dynamics likely exacerbated Europe's descent into war but may not have been necessary given the era's geopolitical pressures and ruthless personalities.⁶⁶ The three interwar cases superficially fit my predictions: France, Germany, and the Soviet Union grew rapidly in the early 1920s, suffered slowdowns in the late 1920s and early 1930s, and reacted aggressively. Germany went on a genocidal rampage to seize what Adolf Hitler called “living space”;⁶⁷ the Soviet Union ditched its relatively liberal New Economic Policy for autarky and territorial expansion;⁶⁸ and France doubled down on punitive reparations, beggar-thy-neighbor trade policies, and the construction of military fortifications.⁶⁹ Given the turmoil engulfing Europe at the time, however, it is difficult to isolate the role that slowing growth played in propelling these actions. Therefore, I drop the interwar European cases from my sample.

I evaluate the remaining cases using an interrupted time series design, comparing how the great power behaved during its era of rapid growth with how it behaved during its subsequent economic slowdown. As described earlier, my framework predicts a dramatic increase in mercantilist expansion during the slowdown period and the existence of evidence directly linking the growth slowdowns to decisions for mercantilist expansion, including statements by top leaders to that effect and judgments of scholars who have studied the case in question extensively.

Because of space constraints, this article presents only the two most recent cases: twenty-first century Russia and China. The other cases are discussed at length in the online appendix. A quick summary of those cases reveals two main findings.

First, all the peaking powers launched deliberate campaigns of mercantilist expansion. When the United States' post–Civil War boom fizzled in the 1880s, Washington reacted by forging a “protectionist empire,” adopting the highest tariffs in the world, channeling investment and exports into Latin America and East Asia, seizing territory there, and building an enormous navy to secure its new empire.⁷⁰ Similarly, imperial Russia responded to the end of its rapid rise at the turn of the century by abandoning its previous policy of “peaceful penetration,” which had used trade and investment to extend Russian influence in the Far East, in favor of militarily occupying parts of Korea and Manchuria to secure markets, raw materials, and warm-water ports. In the 1920s, a rising imperial Japan suffered a series of economic crises culminating in the Great Depression, to which it responded by becoming a serial conqueror and forging an “East Asia Co-Prosperity Sphere,” a euphemism for a brutal Japanese empire. In the 1970s, Japan again had a rapid rise come to an end. This time Japan avoided military aggression, but nevertheless adopted a “mercantile realist” strategy of industrial policies and non-tariff barriers to help Japanese firms snap up global market share and dominate high-technology industries and international supply chains.⁷¹ Japan also expanded its air and naval power-projection capabilities—procuring advanced military aircraft, ships, and submarines—and began patrolling sea lanes up to 1,000 miles from its territory, though this militarization was driven partly by Japan's fears of Soviet expansion and by U.S. demands to contribute more to the U.S.-Japan alliance.⁷²

Each of these mercantilist campaigns is reflected in standard quantitative datasets. All the peaking powers exponentially increased their military spending,⁷³ naval tonnage,⁷⁴ and exports or overseas investment,⁷⁵ and they became involved in more militarized disputes during the decade after their growth rates peaked compared with the decade before.⁷⁶ In addition, all but one of the peaking powers raised tariffs to historically high rates.⁷⁷ The only exception was 1970s Japan, which was compelled by the United States and enabled by a liberalizing global economy to reduce its tariffs and revalue its currency.

The second main finding from the historical cases is that each peaking power's reaction to slowing growth was shaped by its regime type and trade prospects. Democratic institutions and political polarization tempered U.S. mercantilist expansion in the late nineteenth century: Republicans promoted mercantilist expansion, whereas Democrats opposed it and reduced tariffs and naval construction whenever they held power. The United States also had decent trade prospects. Although European powers raised tariffs on many U.S. goods in the 1880s, the United States was able to negotiate a series of bilateral exemptions because its huge market made it an attractive trade partner. Consequently, the surge of U.S. expansion in the 1880s and 1890s was primarily a “commercial invasion,” albeit one backed by the periodic use of gunboat diplomacy.⁷⁸

Imperial Russia, by contrast, reacted to slowing growth with an actual invasion of Manchuria. Autocratic institutions gave Russia the means to mobilize a major military operation—the government, military, and major industrial companies were controlled by the czar and a handful of senior officials—while poor trade prospects and slowing growth provided the motives. Russia's stagnating industries were ten to fifty times less productive than those of other great powers at the time, and its investments in the Far East were becoming increasingly vulnerable to turmoil in China. Russian leaders therefore feared that they could not revive their economy through free trade and, instead, were driven by a sense of “reactive desperation” into imperialism and conquest.⁷⁹

The contrast between the two Japanese cases further illustrates the importance of regime type and trade prospects. In the 1920s, imperial Japan had a parliament, but the military reported directly to the emperor, the official head of state. With little governmental oversight and a fiefdom of assets in Manchuria, the military was prepared to hijack Japanese policymaking during the economic downturn in the 1920s, especially once international protectionism skyrocketed with the onset of the Great Depression in 1929. Military officers blamed Japan's economic woes on liberal internationalist civilian policymakers, assassinated officials deemed insufficiently committed to autarky and conquest, and eventually invaded Manchuria unilaterally in 1931.

In the 1970s, by contrast, Japan was a consolidated democracy, and its slowdown occurred amid the heyday of Cold War détente, the opening of China to Western commerce, and the start of “hyperglobalization,” an era in which global tariffs fell by more than half from 1970 to 1980.⁸⁰ As a technological leader with attractive products to sell, Japan was able to prosper with open international markets while outsourcing its security policy to the United States. That arrangement, in turn, gave the United States leverage to pressure Japan into additional tariff reductions. Given these circumstances, plus the memory of World War II, Japan not surprisingly avoided aggressive mercantilist expansion in the 1970s.

Russia's economy shrank during the 1990s, but from 1999 to 2008 it grew 8 percent annually and more than doubled in size.⁸¹ Living standards rose for the first time in decades, and wages jumped 400 percent from 2004 to 2008 alone.⁸² The main driver of this prosperity was a seven-fold rise in world oil and natural gas prices from January 1999 to June 2008.⁸³ Because Russia was the world's largest natural gas producer and second-largest oil producer at the time, few if any countries benefited more than it from the rise in prices—or suffered more when prices plummeted by 70 percent during the 2008 global financial crisis and by an additional 15 percent from 2008 to 2020.⁸⁴ The Russian economy shrank by 8 percent in 2009 and grew only 1.6 percent annually on average during the 2010s.⁸⁵

The domestic popularity of Russian leader Vladimir Putin tracked the trajectory of Russia's economy. When growth rates were high from 2000 to 2008, Putin's job approval rating approached 90 percent; but from 2008 to 2013, it declined to 61 percent, the lowest level since his first months in power.⁸⁶ In September 2011, Putin announced that he would seek a third term as president, a decision he expected Russian citizens to welcome.⁸⁷ But tough economic times had hardened the public's mood.⁸⁸ In November 2011, Putin was publicly booed at a martial arts match in front of 20,000 people. In parliamentary elections a few weeks later, Putin's party, United Russia, lost a quarter of its seats—a shocking result in a rigged authoritarian system—and hundreds of thousands of Russians began flooding the streets to protest Putin's planned return to the presidency.⁸⁹ These demonstrations were the largest in Russia since the Soviet Union collapsed in 1991, and they occurred as the Arab Spring was toppling autocratic regimes across the Middle East.⁹⁰

As a kleptocratic dictatorship, the Kremlin was primed to respond aggressively to these threats.⁹¹ The Russian state is run by Putin and a small band of oligarchs who collectively own the commanding heights of the economy.⁹² Sustaining this “pyramid of patronage” was relatively easy during the high-growth years, when Russian tycoons reaped bumper profits and the Kremlin's coffers were flush, but this system came under severe pressure during the economic downturn.⁹³ In response, the Russian government cracked down on dissent, stoked anti-Western nationalism, and transferred assets from political opponents to Putin's cronies at state-favored firms.⁹⁴ By some estimates, the state-owned share of Russia's economy doubled from 35 percent in 2005 to 70 percent in 2015.⁹⁵

As he seized assets domestically, Putin also looked abroad for new sources of revenue.⁹⁶ Russia expanded more aggressively into the Arctic after the late 2000s to secure natural resources, sending tens of thousands of troops there and conducting regular military patrols and exercises.⁹⁷ The Kremlin also began pressuring neighboring countries to join a Russian-dominated customs union, the Eurasian Economic Union, that essentially would have turned them into economic vassals of Moscow.⁹⁸ Putin hoped that this economic bloc would stimulate Russian industries and establish, as he put it in an article in late 2011, “a powerful supranational association, capable of becoming one of the poles of the modern world.”⁹⁹ To underscore his ambitions, Putin increased Russia's defense spending by 7 percent in 2011 and 15 percent in 2012. By 2013, Russia's defense budget was more than 50 percent larger than it had been in 2007.¹⁰⁰

In 2012, however, the European Union (EU) threatened Russia's trade prospects by offering a “deep and comprehensive free trade agreement” to Ukraine, the most populous former Soviet state and main producer of Russia's military hardware.¹⁰¹ The agreement would have granted Ukraine extensive access to European markets in exchange for Kyiv cutting ties to Russia's military and adopting EU regulatory standards, which would have barred many Russian products from the Ukrainian market.¹⁰² The agreement also called for integrating Ukraine into the EU's common security and defense policy, a move that Putin viewed as a Trojan horse for NATO membership.¹⁰³

Ironically, Russia's entry into the World Trade Organization (WTO) in 2012 exacerbated its negative trade prospects. With the exception of commodities and military hardware, few Russian industries could compete on international markets without the aid of state subsidies. For that reason, the Russian Ministry of Economic Development estimated that Russia would lose $13 billion from 2012 to 2014 alone as foreign competitors displaced domestic producers in the wake of Russia's WTO entry.¹⁰⁴ Meanwhile, the U.S. Congress tied its approval of normal trade relations with Russia to passage of the Magnitsky Act, which authorized the United States to freeze the assets of foreign human rights offenders, including senior Russian leaders.¹⁰⁵ Thus, Russia's initiation into the WTO raised tensions with the West and fueled Putin's determination to consolidate a Russian-led regional trade bloc.¹⁰⁶

Toward that end, Russia began aggressively pressuring Ukraine to reject the EU's trade deal. Russia both promised Ukraine a 30 percent reduction in gas prices, lower tariffs, and $15 billion for joining the Eurasian Economic Union and threatened steep tariffs on Ukrainian goods for signing with the EU. In November 2013, Moscow had seemingly achieved its objectives when Ukrainian President Victor Yanukovych rejected the EU deal. That decision, however, sparked protests in Kyiv that forced Yanukovych to flee to Russia. The next day, the Ukrainian parliament voted to replace his government with one that enthusiastically backed the EU deal. The change in regime reoriented Ukraine away from Russia and toward the West. It also galvanized Putin's domestic political opponents. Alexey Navalny, a Putin rival who had won nearly a third of the vote in Moscow's mayoral election in 2013, celebrated the Ukrainian coup as a “popular uprising” against “corrupt authorities” and suggested that it could serve as a model for political change in Russia.¹⁰⁷

The Kremlin feared that Ukraine was about to split in half, that the EU would swallow the western portion of the country, that Russia would lose its gas deals with Ukraine and its naval base in Crimea, and that the resulting chaos might spark domestic unrest within Russia.¹⁰⁸ To prevent those outcomes, in 2014 Russia annexed Crimea and supported pro-Russia separatists in Donetsk and Luhansk, together known as the Donbass region of southeastern Ukraine.

Since 1978, the economy in China has grown faster, for longer, than in any country ever. Propelled by a demographic dividend and easy access to Western markets and capital, Beijing rode a wave of hyperglobalization from the 1980s to the 2010s to become the world's workshop and its second-largest economy.

During this high-growth period, China's leaders maintained ambitious objectives, including reabsorbing Taiwan, controlling swathes of the East China Sea and the South China Sea, “blunting” the global spread of democracy, and breaking the chain of U.S. alliances in East Asia.¹⁰⁹ With some glaring exceptions, however, China's approach to pursuing these interests was relatively peaceful.¹¹⁰ Confident in a growing economy, and wary of U.S.-led encirclement, Chinese leaders mainly relied on the lure of their nation's vast market to extract concessions from other countries.¹¹¹ From the 1990s to the mid-2000s, China settled border disputes with seven neighbors;¹¹² joined major international organizations, including the WTO;¹¹³ and shelved plans to build aircraft carriers and other military power-projection platforms.¹¹⁴ Western firms reported that China's business climate was becoming friendlier;¹¹⁵ and rigorous research suggested that China was, on the whole, behaving as a “status quo power.”¹¹⁶ In short, China carried out a “peaceful rise” strategy during its high-growth years.¹¹⁷

In the late 2000s, however, China's rapid growth and geopolitical moderation started to end. In March 2007, Premier Wen Jiabao warned that China's investment- and export-dependent economy had become “unsteady, unbalanced, uncoordinated, and unsustainable.”¹¹⁸ A year later, the 2008 global financial crisis caused world trade to plummet by 15 percent in a single quarter.¹¹⁹ Over the following year, Chinese export growth collapsed, twenty million workers lost their jobs, and labor strikes and protests proliferated around the country.¹²⁰

Fearing a recession and internal unrest, China's leaders launched what became the largest credit expansion in history; from 2008 to 2018, Chinese firms and local governments took out an astounding $29 trillion in new credit.¹²¹ This enormous injection of funds kept China's growth rates artificially high for a few years after 2008 but exacerbated a longer-term slowdown. Awash in easy money, local governments and state-owned enterprises spent trillions of dollars on loss-making projects, including the construction of more than fifty “ghost cities.”¹²² The spending binge also provoked China's trade partners, many of which were unwilling to absorb a glut of Chinese exports as they struggled to stabilize their own economies. China faced nearly eight hundred new trade barriers in 2009 alone and thousands more during the 2010s.¹²³ Meanwhile, a dozen of China's major trading partners, which collectively constituted 40 percent of the global economy, were negotiating what eventually became the Trans-Pacific Partnership. Not only did this trade bloc exclude China, but it was designed “to make sure the United States—and not countries like China—is the one writing this century's rules for the world's economy,” as U.S. President Barack Obama later declared.¹²⁴

As these economic headwinds gathered speed, internal Chinese government reports began painting pessimistic pictures of an economy beset by slowing growth, foreign protectionism, soaring debt, diminishing returns, and looming demographic and environmental crises.¹²⁵ “Facing these challenges,” one review of Chinese sources concludes, “Chinese officials and state-affiliated researchers were concerned and gloomy.”¹²⁶ China's hope for a return to steady growth and expanding market access, another study concludes, quickly “gave way to concerns about economic and political stability” and “a consensus that industrial overproduction remained a serious problem that could hobble China's future economic growth.”¹²⁷

Yet China's leaders also perceived a tantalizing opportunity.¹²⁸ The great recession had thrown the international balance of power into flux by hobbling the U.S. economy and polarizing politics across the democratic world. Hyperglobalization had stalled, but the eroding liberal order was creating space for a more China-centric system—and thanks to decades of rapid growth, China had more tools to forge such a system than at any point in its modern history. Consequently, as Thomas Christensen explains, China's leaders were imbued with “a strange mix of confidence on the international stage and insecurity at home.”¹²⁹ They could reshape the international system in their favor, but only by adopting a more assertive grand strategy.

The first sign of this new strategy emerged in July 2009, when president Hu Jintao declared at the Chinese Communist Party's (CCP) 11th Ambassadorial Conference that China “must more actively promote the resolution of international and regional hot-spots related to China's core interests … make more offensive moves, and actively guide the situation to develop in a favorable direction.”¹³⁰ Premier Wen elaborated on the economic prong of this strategy in his 2010 Government Work Report. “Trade protectionism is clearly reasserting itself,” he warned, and China's economy was beset by “considerable excess capacity” and “insufficient internal impetus driving economic growth.”¹³¹ In response, the government needed to assert “macro-control” over the economy and pursue two objectives: (1) “transform the pattern of economic development” by “fostering emerging industries of strategic importance”; and (2) “steadily develop foreign trade … by opening new markets.”¹³²

China's authoritarian system facilitated this combination of statist industrial policy and overseas market expansion. The CCP owns almost all of China's land; roughly two-thirds of its assets; the four largest banks in the world; and major firms in critical sectors, including energy, transportation, heavy industry, and telecommunications.¹³³ In addition, CCP members hold the top positions in 95 percent of the country's largest private firms.¹³⁴ China's leaders, therefore, were highly capable of controlling economic policy—and heavily incentivized to find ways to maintain solid growth without giving up that control.¹³⁵ These facts were underscored in November 2013, when the World Bank worked with the CCP to develop 336 reform proposals designed to liberalize China's growth model by allowing markets to “play a decisive role in allocating national resources.”¹³⁶ Less than 10 percent of those reforms were ever implemented.¹³⁷ Instead, the CCP doubled down on mercantilist expansion in an attempt to patch its economic problems while maintaining its authoritarian grip on power.¹³⁸ The CCP reasserted tight control over the economy—assets owned by the state more than doubled from 2008 to 2012—and then used that control to launch the most extravagant campaign of industrial policies and overseas investments the world has ever seen.¹³⁹

“After 2010,” Barry Naughton shows in a detailed study, “China was committed to a full panoply of industrial policies” and would go on to spend more than twice as much on technological development as any other nation during the 2010s, both in absolute terms and as a share of its economy.¹⁴⁰ Whereas past policies focused on catching up to technological leaders in existing industries, China's new policy called for leapfrogging the rest of the world in emerging technologies, such as artificial intelligence and synthetic biology.¹⁴¹ Naughton attributes this ambitious approach to China's growth slowdown: “This new Chinese government effort expanded just as the Chinese economy was slowing. To be sure, the new policy package was a response to the slowdown, not the cause of it.”¹⁴²

Slowing growth also drove Chinese economic expansion overseas. After the 2008 financial crisis, Chinese strategists assessed that their traditional export markets in the United States, Europe, and Japan had become “saturated” and plagued by “financial crises and trade frictions.”¹⁴³ To boost exports, and thereby maintain government revenues, CCP strategists proposed a “Marshall Plan” to “proactively create external demand” for Chinese goods in emerging markets.¹⁴⁴ Accordingly, the Hu administration began engaging in “infrastructure diplomacy” during the final two years of its reign, extending billions of dollars in loans to dozens of developing countries from 2010 to 2012.¹⁴⁵ After assuming power, President Xi Jinping rebranded this campaign in 2013 as the Belt and Road Initiative (BRI) and greatly expanded its scope and scale to curb China's industrial overcapacity, which Xi described as “the root cause” of China's economic woes that would “trigger an economic crisis” if not resolved.¹⁴⁶

Chinese leaders also believed that expanding into new markets would enhance their leverage over trade partners and, ultimately, reorient the global economy on terms more favorable to Beijing. Behind closed doors at the 18th National Congress held in November 2012, Xi told delegates that the CCP's previous policies of reform and opening had allowed the United States and other rich nations to “hijack” China's economy.¹⁴⁷ Western firms exploited China's cheap labor and plowed the savings into innovation, thereby reinforcing their technological lead. To avoid becoming a cog in Western supply chains, Xi and other top officials reasoned, China needed to cultivate indigenous innovation and new markets where it would be the dominant dispenser of capital and technology.¹⁴⁸

Driven by these imperatives, China massively expanded its economic presence abroad. From 2010 to 2017, China doled out over $1 trillion in loans to more than one hundred countries, a sum greater than the sovereign lending of the twenty-two Paris Club governments combined.¹⁴⁹ The main goal of this lending was to create privileged economic zones where Chinese firms could dump excess capacity in poor countries while maintaining non-tariff barriers on rich countries.¹⁵⁰ Beijing typically targeted areas that were packed with resources or potential consumers, or that had ports near China's main trade routes. Then it extended a panoply of credit, goods, services, and technologies to partner governments, many of which ended up taking Chinese loans to employ Chinese workers to build infrastructure and install Chinese telecommunication and “smart city” systems. These “coordinated credit spaces” not only drummed up business for Chinese firms but also drew partners into China's ecosystem of products and services.¹⁵¹ “The goal is not simply profit maximization,” Stephen Kaplan explains, but “market maximization.”¹⁵² To facilitate this process, the central government paired Chinese provinces with countries that seemed ideally suited to alleviate their specific overcapacity problems.¹⁵³ Provincial governments then directed local companies to relocate production capacity to those countries.

The impetus for this expansion was slowing growth at home and declining trade prospects abroad. As Min Ye concludes from her review of Chinese sources, “GDP growth rates had continued to slide, corporate performance was in trouble, and industrial overcapacities were widespread…. These economic pressure points provoked a sense of urgency—the state had to respond and respond quickly…. It was against this background of crises and state paralysis that the BRI was launched.”¹⁵⁴ Zenobia Chan reaches a similar conclusion based on hundreds of elite interviews, Chinese government documents, and quantitative data on China's overseas project contracts:

Economic expansion quickly spurred calls within China's leadership for military expansion to protect the country's increasingly far-flung assets.¹⁵⁶ From 2014 to 2016, the number of Chinese legal laborers abroad doubled from one to two million; tens of thousands of Chinese firms registered overseas; and China became the leading trade partner of many of the world's countries and the largest importer of food, energy, and other vital commodities.¹⁵⁷ Roughly 20 percent of China's overseas workers and investments were deployed in countries classified by the World Bank as highly unstable, and dozens of Chinese citizens were killed or kidnapped abroad during the 2010s.¹⁵⁸ Consequently, China's leaders developed a keen interest in overseas security.¹⁵⁹ “Wherever Chinese interests go, our security boundary must also go,” one prominent strategist wrote in 2014.¹⁶⁰

China's military had been gradually increasing its noncombat operations abroad since 2004. In 2006, it began using law enforcement ships to enforce China's territorial claims in the South China Sea.¹⁶¹ As the BRI was developed in the early 2010s, however, Chinese analysts began calling for the development of “strategic strongpoints”—a vast overseas port and base network concentrated around global chokepoints.¹⁶² The 2013 edition of China's Military Strategy tasked the People's Liberation Army for the first time with safeguarding China's overseas interests, and the 2015 version of that document declared that protecting overseas interests had become as important as defending China itself.¹⁶³

This new emphasis on “open seas protection” contributed to a massive expansion of Chinese power-projection forces.¹⁶⁴ From 2014 to 2018, China launched more large warships than were in the British, Indian, Spanish, Taiwanese, and German fleets combined.¹⁶⁵ Whereas China launched ten destroyers in twenty years from 1990 to 2010, it launched twenty-four destroyers in just eight years from 2010 to 2018. Prior to 2009, China had shelved plans to build aircraft carriers, but in the 2010s it launched two carriers and prepared to build at least two more in the 2020s.¹⁶⁶ China also built and militarized seven artificial islands in the South China Sea, negotiated its first official overseas base in Djibouti, and purchased or leased dozens of ports near the world's most heavily trafficked maritime chokepoints—and made many of those ports capable of hosting large warships.¹⁶⁷ Beginning in 2012, China began creating “strategic projection support ship fleets,” which are essentially armadas of car ferries, container and bulk carriers, tankers and other large vessels capable of ferrying military equipment and vehicles to distant locations.¹⁶⁸ Armed with a growing array of power-projection platforms, China significantly increased its overseas military activity and use of coercion after the late 2000s—especially sanctions, ramming of ships, and aerial intercepts—to assert its maritime claims.¹⁶⁹

Many studies document these and other instances of Chinese aggressiveness since the late 2000s. Less often noted is that China's surge of mercantilist expansion occurred amid the nation's most protracted economic slowdown of the post-Mao era.

Every peaking power over the past 150 years expanded its economic and military presence abroad as its economy slowed. Many of these cases are well known—the late-nineteenth-century United States, imperial Russia, imperial Japan, Putin's Russia, and contemporary China—but even postwar Japan, a country not usually thought of as expansionist, significantly increased its overseas footprint as its era of rapid growth came to an end. In short, expansion has been the dominant response to peaking power. The main question has been how that expansion took place, an outcome that depended heavily on each peaking power's trade prospects and regime type. The autocracies with poor trade prospects (imperial Russia, imperial Japan, and Putin's Russia) resorted to military coercion and conquest, the most aggressive forms of mercantilism. China today may be headed in a similar direction, although its growth slowdown is ongoing. By contrast, the two democracies with good trade prospects, the United States and postwar Japan, employed a more moderate and market-based set of responses to slowing growth.

There are two main implications of these findings. First, they amend classic theories of great power expansion and conflict. An enormous literature focuses on power transitions between rising and declining states and debates whether the former or latter are more likely to upend the international system. In contrast, I have suggested in this article that rising and declining states are often peaceful—the former because they can be, the latter because they must be—whereas peaking powers tend to be the prime drivers of geopolitical conflict. Many of the cases that scholars have classified as rising or declining powers that turned aggressive were instead peaking powers suffering severe economic slowdowns. These peaking powers did not immediately launch preventive wars, as some theories predict. Instead, they engaged in mercantilist expansion to try to rekindle their rise. In most cases, that expansion fueled security competition with rival nations and culminated in violent conflict. But the chain of events leading to that climax was often more complex and contingent than the theories of preventive and diversionary war would predict. Future research should focus on understanding those causal chains and the peaking power dynamics that catalyzed them.

Second, much of the debate on U.S. policy toward China concentrates on the perils of an ascendant and confident China. Yet the United States actually faces a more volatile threat: an ambitious and anxious China suffering a prolonged economic slowdown. China's economic growth rates are sliding and could fall further in the coming years as debt, demographic decline, environmental degradation, and other headwinds take their toll.¹⁷⁰ Economic stagnation would render China a less fearsome long-term rival to the United States, but possibly a more explosive near-term threat. Whereas a fast-growing China could afford to expand slowly and back down in crises—safe in the knowledge that its wealth, power, and status were rising and that the legitimacy of the CCP was secure—an economically sluggish China could be more desperate for economic outlets and primed to react violently to slights and setbacks.

Indeed, it is hard to see how the CCP could do otherwise. The regime has already dialed up nationalist propaganda, pledged to make China whole again by taking back territories lost in previous eras, loaned hundreds of billions of dollars of Chinese taxpayers' money to foreign governments that will struggle to repay those debts, and adopted a national security strategy that calls for preventive action against threats to CCP security. Xi Jinping has attached his legitimacy to many of these initiatives, and powerful interest groups—including state-owned industrial firms and the armed forces—favor China's current strategy, because it channels money into their budgets.¹⁷¹ Historically, great powers have struggled to escape foreign entanglements, especially when those entanglements benefited political elites.¹⁷² China appears to be no exception to this pattern.¹⁷³

The challenge for U.S. foreign policy is to contain China's mercantilist expansion without causing the CCP to lash out. Achieving that aim, in turn, requires U.S. policymakers to simultaneously deter Chinese aggression, allay China's insecurities, and insulate the United States from blowback should deterrence and assurance fail—no small task given the inherent tension among these objectives. If mishandled, U.S. policy could end up choking China economically and provoking it with tough talk over Taiwan and other issues while failing to deter Beijing militarily. History suggests that would be a recipe for disaster.

Two principles could help strike a better balance.¹⁷⁴ First, the United States should focus on competing in the few areas that could upend the balance of power. The two most pressing dangers are Beijing's efforts to conquer Taiwan and to monopolize and weaponize what the CCP calls economic “chokepoints,” meaning goods and services that other countries cannot live without, such as telecommunications networks, computer chips, medical supplies, and rare earths. The United States does not need to confront China everywhere at once; enacting across-the-board trade sanctions, covert action programs to destabilize the CCP, or a U.S. version of the BRI, for example, would be financially ruinous and strategically destabilizing. Nor should U.S. policymakers engage in symbolic gestures, such as upgrading Taiwan's diplomatic status, that provoke Beijing without enhancing U.S. or allied capabilities. Instead, the United States should focus on blunting Chinese military and economic aggression while reacting calmly to, or even encouraging, initiatives that channel Chinese resources in less threatening directions. For example, if Beijing fritters away money on loss-making projects along the BRI or builds aircraft carriers that will not be combat-ready for decades, so much the better.

Second, competition with a peaking power is a race against the clock. Securing U.S. interests requires “strategic MacGyverism,” using tools and partners available now rather than waiting for cutting-edge assets that may not materialize for many years.¹⁷⁵ The fact that China faces a challenging long-term trajectory will not be much consolation if Beijing nonetheless thrashes the United States in a war over Taiwan or achieves dominance over economic chokepoints this decade. To blunt these near-term threats, the United States will need to embrace second-best solutions, adapt old capabilities for new purposes, and assemble imperfect coalitions on the fly. Militarily, that means immediately procuring and deploying missile launchers and armed drones near Taiwan, even if doing so drains funds for longer-term investments in more advanced weapons systems. Economically, the United States needs to marshal a patchwork of “mini-lateral” coalitions to develop alternatives to Chinese products and to enforce targeted export and investment controls in critical sectors, as the United States and several of its allies recently did in the advanced semiconductor industry.

Perhaps in the 2030s, Chinese power will mellow, and a Sino-American diplomatic breakthrough will become possible. Now, however, is a moment of maximum danger, because a peaking China has both the means and the motive to upend key aspects of the international system, including the territorial status quo in East Asia, the openness of the global economy, and the dominance of democratic governments and norms. As China's epic rise comes to an end, and Xi's “China Dream” slips away, the United States must handle the CCP's mercantilist expansion with a sophisticated blend of deterrence, reassurance, and damage-limitation. Compared with waging a hegemonic struggle with a rising superpower, managing China's economic slowdown may seem like an uninspiring mission. But it would be wiser and ultimately more effective.

This study was supported by grants from the National Bureau of Asian Research and the Wilson Center. Previous versions were presented at the Belfer Center for Science and International Affairs at Harvard Kennedy School, the Dickey Center for International Understanding at Dartmouth College, and the annual meeting of the American Political Science Association. For helpful comments, the author thanks the participants at those venues, the anonymous reviewers, and Dale Copeland, Jonathan Markowitz, Lucas Myers, Kori Schake, and especially Hal Brands, who helped develop some of the ideas in a series of collaborative projects. For excellent research assistance, the author thanks Evan Abramsky, Sophie Ann Bryant, Emily Carr, Connor Fiddler, Daniel Fu, Victoria Liu, and Linda Zhang. An online appendix is available at https://doi.org/10.7910/DVN/PDYVY2.