Managing Sino-American interdependence | Asia link

Last month’s summit between U.S. President Donald Trump and Chinese President Xi Jinping showed that the U.S.-China relationship is moving from intense confrontation to something more stable. Both parties are committed to fostering a “constructive relationship of strategic stability”. Their disagreements have not disappeared, but everyone has realized that continued escalation is costly, dangerous and unsustainable. Competition must be governed by rules and disputes must be managed.

This judgment is based on solid strategic logic. During the Cold War, the prospect of “mutually assured destruction” prevented the United States and the Soviet Union from engaging in face-to-face military conflict. Neither side trusted the other, but both understood that there could be no real winner in an escalation of war between nuclear powers.

A similar logic applies to economic relations between the United States and China. Of course, economic interdependence is not the same thing as nuclear deterrence, and the potential costs of misjudgments do not reach the same level. But in a world where global value chains are intertwined, the United States and China have undeniably developed a relationship of “mutually assured economic pain.” If either side attempted to cripple the other through complete decoupling, extreme pressure tactics, or measures to break supply chains, it would also harm its own businesses, consumers, and financial markets.

This marks a significant change in relations between the great powers. Historically, countries that went to war had only limited economic ties. Even in the case of World War I and World War II, trade had expanded, but much of it was between different industries. It was only after World War II that trade became increasingly intra-industry, and today economic relations between the United States and China have gone further. It is both deeper and broader than previous forms of great power economic interdependence.

In the mid-2020s, the United States and China are not just buying and selling each other. Their economies are deeply anchored in the same production systems, innovation networks and financial markets. Exacerbating a bilateral conflict is exposing yourself to serious injury. This is true of war, as it is of global decoupling.

Although economic interdependence does not automatically prevent war, it increases the cost of conflict spiraling out of control. It serves as a kind of insurance policy or stabilizing force, but only when countries respect basic borders, keep communication channels open, and recognize the importance of avoiding dangerous miscalculations.

The war between Russia and Ukraine offers a sad example of how things can go wrong. Before the war, Europe and Russia were closely linked through their energy trade. But this relationship did not prevent hostilities. The problem lay in the nature of the dependency, too concentrated in a single sector, structurally asymmetrical and easily militarized once political relations deteriorated. The lesson is not that economic interdependence is an ineffective bulwark for peace, but that it must be balanced and properly managed.

In recent years, many countries have focused on risk reduction, supply chain security and strategic autonomy. These concerns are understandable. The COVID-19 pandemic, new wars, sanctions and technological restrictions have all highlighted the vulnerabilities and trade-offs that accompany globalization. But if every form of interdependence is treated as a security threat, and every economic link as a source of strategic weakness, the world risks replacing one form of danger with another. Risk reduction could degenerate into decoupling, and the pursuit of supply chain security could trigger direct confrontation between global blocs.

A more fragmented world would not be safer. The constraints that the great powers impose on each other would be weaker and the risks of conflict much greater. The objective is therefore not to end interdependence, but to make it more secure, more balanced and more governable. We must build resilience while remaining open, preserve cooperation while remaining competitive, and maintain communication despite disagreements. Risk reduction should have limits, security policies should be proportionate and strategic competition should have safeguards.

This vision aligns with the ancient Chinese concept of it is but thong (和而不同): “harmony without uniformity”. Harmony does not mean eliminating differences, but it does mean that differences do not lead to confrontation. In modern international relations, this idea can be enshrined through institutional inclusion. We need an international order capable of accommodating major powers with different systems, development paths and interests within the same global framework.

The recent US-China summit was important because it highlighted the shared realization that two nuclear powers deeply entrenched in the global economy cannot make escalation a long-term strategy. Relations between the United States and China will naturally continue to be fraught with competition and friction. But if both sides can keep competition within the rules, limit security concerns to reasonable limits, and make interdependence a stabilizer rather than a weapon, they will have created the basis for peace.

Interdependence cannot guarantee peace, but without it, peace will become more fragile. The task for the United States and China now is to make their interdependent relationship more balanced, rules-based and governable. The alternative is a much more dangerous world.

Qiyuan Xu, senior researcher at the Chinese Academy of Social Sciences, is the author of numerous books, including Reshaping the global industrial chain: China’s choices.

Copyright: Project union, 2026

Picture: “P20260514DT-3320” by The White House, United States government work