Xi Jinping. Picture: REUTERS
Xi Jinping. Picture: REUTERS

Last October, China’s President Xi Jinping delivered the most consequential speech since Mikhail Gorbachev stepped before cameras to formally dissolve the Soviet Union.

Addressing the Communist Party’s 19th Party Congress, Xi made it clear that China was ready to claim its share of global leadership.

As he begins his second five-year term, Xi has consolidated enough power at home to redefine China’s external environment and set new rules within it. His timing is perfect; China is stepping forward as a politically embattled and distracted US president is scaling back US commitment to traditional allies and alliances. The US has created a vacuum and China stands ready to fill it.

For decades, western leaders have assumed that a new Chinese middle class would force China’s leaders to liberalise the country’s politics. Instead, western democracy now appears under siege as citizens, angry over the toll that globalisation has taken on their lives and livelihoods, demand change while states fail to deliver.

Democracy is threatened by a weakening of public confidence in US political parties, the reliability of information and inviolability of the voting process.

China is scaling up its ambitions as Europe focuses on European problems and trade becomes a dirty word in US politics

In contrast, China’s leaders have delivered steady advances in the country’s prosperity and a rising sense of China’s importance for the world. Old problems such as repression, censorship, corruption and pollution remain, but measurable progress in many areas of life give China’s people a confidence in their leaders that many people in the US and Europe no longer have.

China is now setting international standards with less resistance than before. For trade and investment, China is the only country with a global strategy. With its vast Belt-Road project and its willingness to invest — without political precondition — in developing countries in every region, China is scaling up its ambitions even as Europe focuses on European problems and trade becomes a dirty word in US politics.

Governments across Asia, Latin America, Africa and the Middle East are now more likely to align with, and imitate, China’s explicitly transactional approach to foreign policy.

There is also a global battle for technological dominance. In particular, the US and China are leading the charge on investment in artificial intelligence. For the US, leadership in this area comes from the private sector. In China, it comes from the state, which directs the most powerful companies and institutions in ways that serve state interests.

As with its trade and investment strategies, other governments, especially those most fearful of social unrest, will find this development model attractive. China’s economic clout will align tech sectors in smaller nations with Chinese firms and the technical standards they would like to set.

China’s appeal is not ideological. The only political value Beijing exports is the principle of noninterference in other countries’ affairs. Yet, that is attractive for governments used to western demands for political and economic reform in exchange for financial help. With the advent of Trump’s "America first" foreign policy and the many distractions for Europe’s leaders, there is no counter to China’s nonvalues-driven approach to commerce and diplomacy.

There are obvious limits to China’s international appeal. It will be decades before China can exert the sort of military power that the US can. China remains a regional power and the military spending gap continues to widen in favour of the US. But conventional military power is less important for global influence today than it has ever been, given the threats to national security posed by the potential weaponisation of economic influence and the unclear balance of power in cyberspace.

In 2018 and beyond, the global business environment will have to adapt to new rules, standards and practices advanced by China, not just within its borders but in other countries where its firms are increasing their presence and China’s government is expanding its influence.

Expect Japan, India, Australia and South Korea to work together more often to limit China’s regional power, creating risks of friction and even conflict. Depending on the state of US-China relations, the Trump administration might become more active in the region.

It is possible that Xi’s grand ambitions will leave him vulnerable to rivals in the party, particularly if China suffers embarrassing setbacks at home or abroad.

For the US and Europe, the Chinese system holds little appeal. For most everyone else, it offers a plausible alternative.

With Xi ready and willing to supply that alternative, this is the world’s biggest geopolitical risk in 2018.

Bremmer is the president of Eurasia Group and author of Superpower: Three Choices for America’s Role in the World.

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