America Needs an Economic Containment Strategy against China

M any experts now predict that China is on track to become the world’s largest economy and most powerful nation. The United States, however, still has one sure path to beat Beijing’s bid for supremacy: America must win the economic competition with China.

Washington needs a new grand strategy that can counter Beijing’s quest for power by preserving American economic dominance. This requires building U.S. financial, technological, and industrial strength while orchestrating economic containment of the People’s Republic of China.

For decades, U.S. strategy toward China has been based on the belief that economic engagement would lead to a healthy U.S.–China relationship. But Washington must now understand that Beijing’s continued economic growth is no longer in America’s best interest. Nor is it in the best interest of the world — as long as the Communist Party of China remains in power.

If America’s pro-growth policies and private- and public-sector innovation can increase the gross domestic product to $30 trillion from $21 trillion over the next decade, we can expand the U.S. share of worldwide GDP — and develop a winning global strategy. But the key is simultaneously leading a robust economic containment strategy against China.

The Communist Party’s quest for dominance is built on the premise that China is destined to become the leading economy. Industrial strategies such as Made in China 2025 make clear that Beijing plans to dominate the most important 21st-century sectors and technologies from aerospace to artificial intelligence. Chinese programs such as Civil-Military Fusion mandate that its industrial and technological capabilities be converted into military power.

But these prongs of China’s economic offensive can still be blunted. Beijing knows that its ascendency depends on continued economic engagement with the United States and other leading industrial democracies. It relies on access to the world’s democracies as export markets, sources of capital, and harvesting grounds for cutting-edge technology that China is unable to produce.

A robust economic containment strategy that reduces China’s access to technology, capital, export markets, and the intellectual property of leading U.S. and multinational companies could make the decisive difference in this long-term competition. Time, however, is running out because this is the decade in which China could surpass America economically. The United States must act now.

Washington has begun to put substantial economic pressure on Beijing. Beyond the heavy U.S. tariffs on hundreds of billions of dollars of Chinese goods, the Commerce Department is specifically targeting Beijing’s technology and telecommunications companies. It has, for example, launched a high-profile campaign against Huawei to slow the spread of its 5G networks around the globe.

The Treasury Department, meanwhile, is leading substantial efforts to block Chinese investment in the United States when national security is at risk. In June, the Defense Department identified 20 companies, in sectors from shipping to aerospace to rail, as backed by the Chinese military. The Pentagon’s list includes Chinese corporations that are joint-ventured with major American companies and backed by major American investment houses; it should therefore serve as an early warning to CEOs about the hidden risks of doing business with China’s state-backed industrial giants.

U.S. containment efforts, however, must be far more aggressive. Washington needs a comprehensive plan to degrade China’s state-owned and state-backed enterprises and banks and to sanction officials and employees of Chinese firms involved in Beijing’s military-industrial complex, strategic industries, and state-sponsored human-rights abuses. An economic containment program must particularly focus on companies that benefit from stolen intellectual property. The United States should also be blocking and countering China’s state-owned companies as they expand into global markets. Initiating moves like this in our competition with China, Washington can begin to turn the tide in America’s favor.

In addition, economic containment cannot be effective without the cooperation of U.S. allies and partners worldwide. Together, the world’s democracies make up over two-thirds of global GDP, a potential trading community greater than any in human history. Containing China need not mean the end of prosperity and growth for the world’s free nations.

Many of the world’s democracies are already U.S. military allies, but coordination on such economic policies as export controls, trade barriers, and aggressive sanctioning of China’s state-backed companies must be an international effort — and a new tenet of international security.

Most U.S. allies and partners are already rethinking their economic relations with China. Britain, for instance recently pledged to ban Huawei from its telecommunications infrastructure, and India banned 59 Chinese apps (including TikTok and WeChat) after military clashes in the Himalayas. Greater economic coordination among the world’s democracies can do much to stem China’s growing global power.

As long as the Communist Party controls China, we should not think of the country’s economic ascendancy as a “miracle” for the benefit of all. Should this ascendancy continue, the Communist Party’s expanding power could bring about a nightmare of authoritarian rule that the world would have little chance of defeating.

Beijing is still economically and militarily weaker than the United States — even as it advances its surveillance system and concentration camps, continues its military build-up and regional harassment, launches global cyberattacks, and orchestrates intellectual property theft. If China succeeds in becoming the world’s largest economy, America will have less and less ability to restrain or counter China, or we could lose that capacity entirely.

But the Communist Party’s ascendancy need not continue. The free world can prosper without China. Indeed, we must.