This article originally appeared in the Washington Quarterly.
Bipolarity is no longer returning—it is here, and it is here to stay for the foreseeable future. News today is dominated by US-China relations, indicating a recognition of today's bipolar system, and China continues to close the gap in the economic realm. The effects of this bipolarity have substantially deepened as elites in both Washington and Beijing have become aware of the new global structure and are acting accordingly. Structure and beliefs are amplifying each other.
Because the world now has a bipolar distribution of capabilities, it will be more peaceful than expected by the consensus view.1 Bipolar structures deductively and empirically tend to be peaceful (stable); regarding great power war—it is unlikely to happen.2 That prognosis for the current period is strengthened because balancing or competition between China and the United States will occur in the economic arena to a far greater extent than in the more dangerous military realm. The term “Cold Peace” best captures the current system; it will be broadly peaceful but by no means warm. Nationalist views in both the United States and China present a potential risk to the stability forecast by bipolarity, primarily through the specter of military conflict over Taiwan. This risk, however, is much overhyped—predictability and nuclear deterrence will very likely deter an invasion and preserve the Cold Peace.
Bipolarity will, however, spur Chinese revisionism in some key economic arenas, with direct implications for both geopolitics and firms. This essay links the latest political science to market outcomes, drawing heavily on realist thought, which posits that the distribution of capabilities produces a structure that is the single greatest determinant of outcomes. The presence of nuclear weapons is also a major driver on the systemic level. It breaks from classical realism in recognizing that elite beliefs are a third, significant driver of events.
The essay will first present the evidence that the current system is bipolar. It then explains why bipolarity, nuclear weapons, and elite beliefs are the key drivers of states' policies. The piece then fleshes out implications of the model for subsections of the international order and concludes with implications for geopolitics.
The evidence shows that the geopolitical system is bipolar, albeit with a considerable degree of asymmetry because of US military dominance. Bipolarity is established by data sufficient to support the claim that two superpowers are: 1) broadly peer competitors regarding the distribution of capabilities; and 2) separated from the “pack” by a substantial gap. Bipolarity may exist even if there is a large gap between the powers on a key metric. (In 1970, for instance, during a period commonly referred to as bipolar, Soviet nominal GDP was roughly 40% of US GDP).3 In 2020, Chinese nominal defense spending was 32 percent of US defense spending, according to the Stockholm International Peace Research Institute (SIPRI), on par with 2019.4 The gap between China and the number three power, India, is huge; in 2020, India's nominal defense spending was 29 percent that of China.5
The US advantage over China in the military realm is amplified by its alliance network (China has far fewer allies), its nuclear preponderance (3,750 warheads versus roughly 350 for China, likely growing to 1,000 by 2030), and its military-technological advantage.6 In addition, the US has at least 65 overseas bases, while China has one—in Djibouti.7 US superiority is sufficient to establish strategic stability and deter China from balancing against the US on a global level in the military realm, at least for the foreseeable future. The gap is simply too big. Regarding the sub-balance in the Asia-Pacific region, the trend is toward parity, and balancing is ongoing. A focus of China's military modernization has been to balance or surpass US power in the Taiwan Strait. While China is closing the regional gap with the United States in terms of air power and missile coverage, Washington still leads when it comes to power projection capacity and the ability to conduct joint combat operations.8
Regarding economics, China is much closer to a peer competitor. Its nominal GDP was 71 percent that of the United States in 2020, according to the International Monetary Fund (IMF), up from 67 percent in 2019.9 The IMF predicts that number will rise to 74 percent in 2021, and many sources predict China will surpass the United States within two decades.10 Japan is third at 34 percent of China's GDP.11 With regard to research and development, China has drawn dramatically close to the United States. The Organisation for Economic Co-operation and Development (OECD) reports that in 2019, Chinese spending was 84 percent of the US, up from 47 percent in 2010. The third-ranked country, Japan, spends 36 percent of China's budget.12 China also leads the US on trade volume and on overall investment.13 The rapidly narrowing economic gap warrants graduation to full bipolarity. And it is in this realm that severe balancing and competition will occur.
Both countries are emerging from the pandemic with their formidable structural strengths intact. The United States possesses the strongest financial system, its currency remains dominant, it is a leader in innovation, and it has one of the most favorable demographic outlooks among leading powers. China has enormous innovative capacity, a high savings rate, and the ability to mobilize and direct resources.
Soft power—the power to influence through attraction—affects outcomes as well.14 Its impact is often less important than hard military or economic power, and it is harder to measure. However, data from the Pew Research Center show that this is the most significant locus of change over the past year —a dramatic drop in China's favorability ratings among major industrialized countries.15 Meanwhile, foreign approval ratings for President Joe Biden are massively higher than those of former president Donald Trump, suggesting a surge in US soft power.16
These structural trends are robust. That said, each country has challenges, such as political polarization in the United States, and debt and demographic issues in China. A disjuncture like the breakup of the Soviet Union is possible in either country, and this would end bipolarity. But in coming decades that is unlikely because the structural strengths of both countries are so profound. The data suggest that this is a bipolar era, if a partly asymmetric one, and that COVID-19 did nothing to change that structure and little to affect its details.17
Bipolarity and nuclear weapons combined provide strong guardrails against a great power war, a fact that is often overlooked in the context of escalating US-China tensions and hand wringing about a new Cold War. Bipolarity is less stable than the unipolar period that preceded it, but more stable than the multipolar future that many observers foresee.18 In bipolar systems, the superpowers primarily use internal balancing, such as arms buildups and bolstering economic strength, to offset each other's capabilities.19 External balancing, such as the formation of alliances, is of secondary importance because of the powers' outsized capabilities.20 This yields stability because internal balancing is more predictable, reliable, and transparent than the use of alliances.
History is replete with examples of destabilizing alliance defections under multipolarity.21 For instance, alliance jockeying in a multipolar landscape played a role in the onset of both World War I and World War II. The 1890 suspension of Germany's secret reinsurance with Russia set in motion balancing dynamics that ultimately produced war between the Triple Alliance and the Triple Entente. During the 1930s, alliance defections and buck-passing cleared the way for Nazi Germany's unchecked advances both before and after the outbreak of World War II. In other words, operationally a bipolar system is more stable than a multipolar one because the two main powers need to focus primarily on the actions of the other—and not on those of many countries, as is necessary under multipolarity.
Nuclear weapons, and the risk of escalation to the nuclear level, add a huge overlay of caution to behavior. When two superpowers possess an assured second-strike capability, each can cause the other catastrophic harm—and that induces extreme caution. Weapons deployments and competitions will continue, and advanced technologies will pose challenges to nuclear stability. War between two nuclear-armed superpowers is surely possible; but the bottom line remains that nuclear weapons make it very unlikely.22 Moreover, this caution interacts with the predictability of bipolarity to increase restraint. A nation that can see what is coming and is already very cautious is unlikely to miscalculate on decisions of war and peace.
Bipolarity also injects a binary, fragmenting impulse into international relations. Both superpowers pursue their interests, and spheres of influence result. This imparts the fragmentation dynamic into existing international relations and institutions.
Lastly, several features of the current operation of bipolarity and nuclear weapons are important. First, as it did during the Cold War, some external balancing will occur, but it is of second-order importance compared to the power of the two leading countries. Each superpower is, as expected, recruiting allies, with the US focusing on the EU, the UK, and Australia, while China focuses on emerging markets. China is balancing almost exclusively internally, in line with the expectations of bipolarity—in part because of the lack of allies. While the US is primarily using internal balancing, Biden is also trying to form a balancing coalition against China. His main successes so far have been a harder-line EU policy and, in the military realm, AUKUS. The latter, if the 8 agreed nuclear subs are built, will add to deterrence. But even in this narrow field, deterrence will primarily rest with internal balancing—flowing from the US and its large fleet, which currently stands at 68 nuclear subs.23 Second, China and Russia on some issues balance against the US, which at times marginally increases China's influence. But on military issues, where balancing is especially dangerous, it is very difficult to devise a credible scenario in which Russia decides to join China in a war against the US. Third, with focus on the US and China, scholars have laid out the structural risks of war that occurs in the context of a rising and a ruling power. Historically, this dynamic often leads to war. But the aspirations of the new power and the fears of the older one are doused by strong caution in the nuclear age.24
Elite beliefs are the third main cause of outcomes, along with bipolarity and nuclear weapons. In any bipolar era, political and military elites in one powerful country will view the other as the primary rival, a view that will cause some enmity. The intensifying US-China competition and hostility since 2016 is consistent with the strictures of a bipolar system. Rising tensions reflect systemic balancing and, as of recently, a clear recognition in both capitals that it is a two-state competition. Though counterintuitive, this recognition is stabilizing, as it removes a key risk of “emerging bipolarity”—that leaders would not fully recognize and act consistent with the current system, leading to miscalculation.25 This mutual recognition amplifies and reinforces the predictability and caution that bipolarity brings, as each side recognizes the formidable power of the other.
That said, elite behavior in both countries exceeds the strictures of what bipolarity focused on economic competition would necessarily predict. An overlay of nationalism on both sides has made strains more dangerous for now—though not necessarily for the medium term. In Beijing, “wolf warrior” diplomacy denotes the increasingly assertive, uncompromising foreign policy that China has been pursuing since at least the middle of 2019 (and with intensifying vigor since the onset of the COVID-19 pandemic). It has included a vigorous public relations campaign, with high-level diplomats touting China's role in world affairs and attacking its critics.26 This diplomacy is rooted partly in a conviction that the global strategic balance is irreversibly shifting in its favor because of US decline—a view that would be destabilizing if it leads to reckless action.
In the United States, the Biden administration is for now pursuing a stark “us versus them” Manichean framework for China policy. “Democracy versus autocracy” is a far stronger and more ideological frame than Trump chose, and one not necessarily justified by what will be a primarily economic competition. Biden could, and probably will, evolve toward a more moderate framing after initially showing resolve. US policy also includes a less publicized but more pragmatic frame of “the 3 Cs”—competition, cooperation, and confrontation. The Biden administration will likely get around to more cooperation as the press of diplomatic business sets in. And while China has lost the luster of its attractiveness for US investment, it is still a hugely lucrative market for US companies. Indeed, Biden and Xi seemed poised to add a layer of cooperation onto the relationship after their virtual summit on November 15.27
At the most macro level, bipolarity plus nuclear weapons and elite beliefs are the key drivers of international outcomes. Henceforth they will be referred to collectively as bipolarity plus.
Bipolarity plus sits on top of other norms, rules, institutions, and issue areas, commonly known in aggregate as the liberal international order (LIO). The LIO at its core is a set of norms and institutions that in the economic arena has stipulated and overseen the free movement of goods and capital, while in the political arena has stressed individual freedom over the rights of the state. During the Cold War, membership in and operation of the LIO was determined by the outcome of World War II, with the Soviet Union and its affiliated states operating outside the order. But during the period of unipolarity, the operation of the LIO became much broader, and many authoritarian countries such as China began participating in some of its norms and institutions. At present, bipolarity plus sits on top of this increasingly diffuse yet functioning LIO.
Bipolarity plus injects predictability and caution, but also a fragmenting impulse, into the seven broad issue areas within the LIO which sit below it. Deductively, predictability and caution (because it derives from nuclear weapons) primarily affect the central security issue—great power war—while fragmentation affects all of the issue areas including security, trade, finance, political development, technology, information and climate.28
Logically, the primary impact of bipolarity plus on the existing international order should be a large and binary impetus toward fragmentation, in which the United States and China pursue their own interests. The transition from unipolarity to bipolarity would entail an increasingly conflictual approach to the norms, rules, and institutions governing economic and security arenas. Also, the overlay of nationalism in both countries will further boost the fragmenting effect on the LIO. The previous system would have served the interests of the United States and its allies; under Cold Peace, the United States as former hegemon should be the relatively status quo power, and China the relatively revisionist one.29 But what kind of revisions might China seek? The policy and market-relevant issues are to determine how the fragmenting impulse of the system intersects with and affects Chinese revisionist impulses and related market outcomes.
This essay will assess current and potential revisionist behavior by China across these subsectors.30 Revisionist states seek to challenge part or all of the existing order. There are four different types of revisionist states.31 First are conservative revisionist states. This type becomes deeply embedded in international institutions; recognizing their benefits and the cost of leaving them, the state eases or drops its revisionist goals. Second are aggressive revisionist states—those that play by accepted norms and rules to seek a change of the order. Third, exit revisionist states eschew working within the existing order and go outside to build a new one (for example, the post-World War II Soviet Union). Finally, war revisionists seek to change the system via hegemonic war, as Germany did during World War II. On a macro level, as argued above, hegemonic war is not a realistic option for China because of the existence of nuclear weapons. Also, China shows little intent of seeking an exit from the aggregate order (though it may for specific subsectors), as it has not promulgated any new big-picture vision. It generally lies between conservative and aggressive status, per the analysis below, though on some issues it is an exit revisionist.
The analysis below focuses on the effects of bipolarity plus on these suborders, assuming a time frame of 3 years (the remainder of the Biden administration's first term)—that allows a further assumption that the US will broadly remain a status quo power during that period and facilitates focus on Chinese policies. Most sections also consider a 20-year horizon, depending on both the type of revisionist state that China will be and whether the United States remains a status quooriented state, as it would under a moderate or centrist administration, or if it returns to a more revisionist one, as it was during the Trump administration and may once again become if a far-left or far-right US government is elected.
Security Suborder
Bipolarity plus has a significant stabilizing effect on the prospects for great power war because of increased structural predictability and caution. These factors outweigh any potentially destabilizing impact that fragmentation and elite beliefs might have on this issue. On security issues more broadly, fragmentation could have the effect of encouraging division of countries into two opposing camps, US-led and China-led. That in turn could destabilize norms and institutions. On the issue of great power war, however, the balance of terror from nuclear weapons is a much stronger driver. Both US and Chinese leaders will be rational when it comes to the risks of war between two nuclear countries. Therefore, China is a status quo power on the issue of great power war, by far the most important security issue. China is highly revisionist on three regional territorial claims —Taiwan, the South China Sea, and the East China Sea. But as argued in this article, US-China strategic stability reduces the risk of war.
Common and dire speculation about US-China war currently populates both academic and policy articles. The focus is on Taiwan, where debate has become supercharged after China's decision to send record numbers of aircraft near Taiwan in early October 2021.32 These events amplified fervor that began when Admiral Philip Davidson testified earlier this year to the effect that China could try to invade the island as soon as 2027, the 100th anniversary of the People's Liberation Army (PLA).33 China, though, is very unlikely to try to take Taiwan by force in the foreseeable future.
Nuclear weapons are a primary reason that war is unlikely. Most current analysis insufficiently weights the dampening effect of nuclear weapons and instead focuses only on the regional military balance. But deterrence theory is of central importance. Chinese and US elites remain clear-eyed about their self-interest, and mutually assured destruction reigns given China's secure second-strike capability. Strategic stability presides over regional balancing, even if that balancing is intense.
Regarding predictability, both the United States and China need to look primarily at the military capabilities and intentions of the other under bipolarity. That makes miscalculation less likely, in large part because each political-military-intelligence establishment can focus largely on one country. That in turn reduces the risk of a surprise attack, which is central to most scenarios involving a Chinese invasion of Taiwan. The intentions of US allies do matter to some extent because the regional military balance is closer to parity than the global one—but only on the assumption that the United States decides not to, or cannot, quickly redeploy. Yet, as above, a successful surprise attack is unlikely —so the military capabilities of allies are not of central importance.
Both caution and predictability in calculations in great power war will deepen because of the ongoing realization by both US and Chinese elites that we are in a bipolar era. Both understand that the other side possesses enormous capability. Elite beliefs reinforce structure to enhance deterrence.
These insights reinforce the more common argument against invasion—that the costs to China would be too high. The US policy of strategic ambiguity, a purposeful lack of clarity about intentions regarding a cross-strait conflict, does marginally increase the chance of miscalculation. Also, risk of a US-China war probably climbs from very low in the near term to low in the medium term, as President Xi Jinping would like reunification to be part of his legacy and domestic political trends in Taiwan mitigate against peaceful reunification. Nevertheless, given systemic predictability and the balance of terror, the chance of war is low.
Trade Suborder
In the near term, China will remain a conservative revisionist in trade, though the 20-year scenario is less certain. The country is deeply embedded in the WTO and generally supports the letter of its rules and structure. The benefits of participation will limit revisionist impulses. Nevertheless, tensions within this suborder will likely worsen. Given the fragmenting impact of bipolarity plus on the international system, China will continue and deepen its policy of dual circulation, which is intended to promote selfreliance and decrease dependence on foreign-controlled supply chains. Also, the frequency of China's “gray area” policies in the trade suborder will probably increase as it seeks to protect the Chinese Communist Party (CCP) from US policy. Those policies include local government support for favored firms and “pay to play” regarding market access. Lastly, there would be profound risk to this suborder over the longer term if the United States were to severely undermine the WTO, or if a more assertive trade stance by Western powers significantly decreases benefits to China from exportled growth. Either development would likely shift China to an aggressive revisionist status.
As a conservative revisionist on trade, China will continue to broadly respect WTO decisions and at least limit subsidies and grey area practices. If it were to become an aggressive revisionist, China would—while paying lip service to the WTO—take a much more protectionist and closed approach to trade. That would likely entail raising tariffs, increasing different types of subsidies, and forcing more foreign firms to transfer technology to Chinese companies.
Finance Suborder
China has straddled conservative and aggressive status in this suborder, and bipolarity plus will continue to nudge it somewhat toward the latter. The baseline has shifted as agreement around the Washington Consensus of 40 years ago has weakened. The IMF has engaged in a rethink that involves a somewhat more nuanced view of open capital markets, but the underlying norm of open capital flows remains. China has never fully bought into the norms of this suborder, opening only parts of its market and doing so haltingly.
Bipolarity plus and its fragmenting impulse are increasing China's discomfort with the finance suborder. Episodes of the past 12 months involving Alibaba, Ant Financial, Didi, and the online education sector show growing concern about a perceived threat to the control of the CCP from foreign capital.34 China has reacted not by completely closing capital markets, but by seeking to ensure that more capital invested in China is raised in Chinese markets. IPOs mean Chinese firms are subject to foreign regulation, which is now perceived as a threat to the CCP. When consistent with these primary objectives, China hopes that its efforts to entice other forms of capital will allow it to internationalize the renminbi. That drive is unlikely to challenge the dollar any time soon, but it could over decades. In sum, recent Chinese policies have not been sweeping enough to conclude that Beijing is breaking with existing norms, but it is moving in that direction.
Political Development Suborder
China has been an aggressive revisionist in this arena, a status that will be reinforced by a structural input of fragmentation. LIO norms entail promoting the primacy of the individual, human rights, and democracy. China's political preferences focus on the primacy of economic development and social stability. Beijing, however, is not seeking exit, but instead seeks to resurrect a UN-based system that stresses state sovereignty. In the near term, bipolarity plus will affect this suborder by heightening tensions as elites on both sides dig in, which in turn will spur growing numbers of sanctions by each side against the other.
Over a 20-year period, the base case is that a widening values gap causes substantial market disruption through cycles of sanctions and countersanctions. That said, if there are successive US administrations on the far-right or far-left that pursue retrenchment from global affairs, the United States could over time lose interest in the suborder.
Technology Suborder
In this arena, both China and the United States are currently exit revisionists. The norms and rules of the technology order entail a combination of open trade and minimal restrictions on flows of information. These norms, along with industry trends driven by market forces, created technological interdependence. Xi's centralization of power and Trump's
The Washington Quarterly
