There’s a new argument making the rounds in foreign policy circles, and it comes with a local connection. Dartmouth government professor Stephen Brooks and his coauthor, Ben Vagle, a Dartmouth graduate now at Stanford, have just published a remarkable essay in Foreign Affairs. They argue that America still has the upper hand over China, even though most people think otherwise.
That reasoning is understandable. Earlier this year, when the Trump administration threatened new tariffs on Chinese goods, Beijing struck back by restricting exports of rare earth minerals, the unfamiliar but essential materials used in everything from smartphones to fighter jets. China controls the overwhelming majority of the world’s supply. The threat worked. Washington backed off.
It’s the kind of moment that makes China look relentless. But Brooks and Vagle, who in their book “Command of Commerce” make the same case at greater length, say that episode is the exception, not the rule. For China to truly hold economic leverage over another country, they argue, three things have to be true. China needs to control the overwhelming share of some resource or product, there needs to be no good substitutes available and China needs to be able to inflict real pain without hurting itself too badly. Rare earths meet all three conditions. Almost nothing else does.
However, the authors say, these advantages tend to fade once a country actually uses them. Why? When China restricted rare earth exports, it woke everyone up, and companies and governments started scrambling for alternative sources. That takes time, but it’s achievable. The lesson, Brooks and Vagle argue, isn’t to panic. It’s to get ahead of the next chokepoint before China finds it, whether that’s in medicines, batteries or drone parts.
That’s one side of the story. But it’s worth understanding what’s happening inside China, too, because the two stories fit together.
China is, without question, an industrial powerhouse. It manufactures the overwhelming majority of the world’s solar panels, dominates production of electric vehicle batteries and processes most of the world’s rare earths, according to research from the Center for Strategic and International Studies. That’s real strength, and it isn’t going away soon.
But underneath that manufacturing muscle, China’s domestic economy is struggling. Its real estate market, once a massive engine of national wealth, is in shambles, wiping out savings for millions of families. Young people are struggling to find jobs, and prices are falling rather than rising, which sounds nice until you realize it usually means people have stopped spending. Local governments borrowed enormous sums to build infrastructure nobody needed, and now can’t pay it back; banks keep extending new loans just to keep old debts from collapsing, which starves everyday businesses of credit.
Logan Wright, a China analyst at the Rhodium Group, argues that Western observers keep misjudging China because they focus on what its leaders say they want to do, rather than on the shaky financial foundation underneath. He believes China’s debt troubles directly limit how much money Beijing can throw around the world through programs like its Belt and Road infrastructure lending.
But here’s the strange twist. Even though Chinese leaders don’t care for consumers’ pockets, Chinese factories keep producing far more than the country’s own citizens can buy. Hence, all that surplus, solar panels, EVs and cheap manufactured goods gets shipped overseas, often at prices that undercut everyone else. That’s exactly what gives China its outsized influence over global trade. Strangely, China’s domestic weakness is what fuels its international reach.
So, what is China? Is China a titan or a house of cards? Ironically, the honest answer is both, and that’s precisely why it’s worth reading Wright and Brooks and Vagle side by side. Wright shows why China’s power has real limits. Brooks and Vagle show that America’s power has been underestimated.
But there’s a catch worth noting. Xi Jinping doesn’t run for reelection, doesn’t answer to a free press, and can order banks to keep bad debt on life support indefinitely. China can absorb a decade of pain that would sink an elected government. The American strategy Brooks and Vagle describe, persistent, coordinated, built on trust with allies, is exactly the kind of long game democracies struggle to sustain, especially when an administration is busy tariffing and alienating the very allies it needs. If Beijing looks unbothered, this may be the real reason.
I was curious how Brooks squares that with the moment we’re in, so I sent him an email query. If the strategy depends on Washington working steadily with allies, I asked, who’s going to bell the cat, given that this administration seems to have traded diplomacy for tariffs and threats?
Brooks was candid. He wouldn’t guess where the administration is heading, he said, but the point is that it’s in America’s own “selfish” interest to work seriously and consistently with allies to constrain China’s trade practices. Trump isn’t wrong that China’s economic policies are hurting the U.S., he added. Where the president errs, in Brooks’s view, is in believing America can fix the problem alone.
And that explains Xi Jinping’s composure, the fabled Cheshire Cat smile, serene, inscrutable, mischievous. He doesn’t need to make a move to unsettle you. He just needs to keep smiling while democracies argue whether to use the advantages they already have.
Narain Batra is a study leader at the Osher Institute at Dartmouth College. He lives in the Upper Valley.