Examining Policies to Counter China
Testimony from China Strategy Initiative and Asia Program
Testimony from China Strategy Initiative and Asia Program

Examining Policies to Counter China

In testimony to the U.S. House Financial Services Committee, Rush Doshi analyzes China’s global ambitions, assesses the success of the PRC’s strategy so far, and suggests policies Washington should pursue to counter Beijing’s attempt to displace U.S.-led world order.

The Future of U.S.-China Policy

The Future of U.S.-China Policy
February 25, 2025
Testimony
Testimony by CFR fellows and experts before Congress.

Four questions framed Dr. Rush Doshi’s remarks to the U.S. House Committee on Financial Services:

  1. What are Beijing’s ambitions?
  2. What is Beijing’s strategy to achieve its ambitions?
  3. Is the strategy working?
  4. What should Washington do?

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The PRC has a grand strategy to displace U.S.-led order: to “catch up and surpass” the U.S. technologically; to reduce dependence on others while increasing their dependence on China economically; and to acquire the capability to defeat U.S. forces militarily. Beijing believes the next industrial revolution is upon us—AI, quantum, smart manufacturing, biotechnology—and aims to win it.

China’s strategy includes three parts: (1) acquire technology by buying foreign companies, forcing firms to transfer it in exchange for market access, or steal it; (2) protect Beijing’s companies through tariffs, non-tariff barriers, and exchange rate manipulation; and (3) use subsidies, tax breaks, R&D support, cheap credit, state investment and other tools of industrial policy to undercut rivals of China's companies. Conservative estimates value PRC intellectual property theft at more than $1 trillion. This $400-billion-per-year strategy allows PRC companies to stay solvent longer than competitors that don’t enjoy state backing.

And the strategy is working. Since China has joined the WTO, the U.S. share of global manufacturing fell by roughly half while China’s share quintupled from 6% to 30%. Beijing can leverage this incredible manufacturing dominance to gain military advantage and innovate. China is at the leading edge in robotics, AI, and quantum computing. It leads the U.S. in high-impact scientific papers and patents. And it accounts for half of all industrial robot installations worldwide, 60% of global EV production, 75% of global battery production, and 90% of solar panel, rare earth, and antibiotic production. In the military domain, the PRC has two hundred times more shipbuilding capacity than the US and is leading in new technologies like hypersonics. As Beijing’s economy slows and its population ages, it is pouring money into industry and exports to fund growth and to reduce reliance on its dwindling supply of cheap labor.

To counter the PRC, the United States needs to work with others. The U.S., combined with its partners and allies, has three-times China’s GDP, half of all global manufacturing, more than twice China’s likely military spending, twice China’s patents and top-cited publications, and massive market power. Together, we can weather the “second China shock,” reindustrialize, and lead in technology. The U.S. also needs new institutions, such a federal industrial investment bank that can make long-term loans, take equity in strategic industries, coordinate with private capital, and fund reshoring from China to the U.S. or allied countries. Washington also needs to change private sector incentives and consider tax policies to encourage shareholders to hold equity positions for longer. The U.S. would also benefit from sustained or increased levels of basic science research funding. Finally, the U.S. needs to play defense. To maintain its technological lead, Washington requires stronger export controls, research protection, and regulation of inbound and outbound investment.

The U.S. has never faced an adversary as formidable technologically as China; but it has everything necessary to succeed. Washington just has to make the right choices.

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At the Shangri-La dialogue in Singapore last week, U.S. Secretary of Defense Pete Hegseth said that the United States would be expanding its defense partnership with India. His statement was in line with U.S. policy over the last two decades, which, irrespective of the party in power, has sought to cultivate India as a serious defense partner. The U.S.-India defense partnership has come a long way. Beginning in 2001, the United States and India moved from little defense cooperation or coordination to significant gestures that would lay the foundation of the robust defense partnership that exists today—such as India offering access to its facilities after 9/11 to help the United States launch operations in Afghanistan or the 123 Agreement in 2005 that paved the way for civil nuclear cooperation between the two countries. In the United States, there is bipartisan agreement that a strong defense partnership with India is vital for its Indo-Pacific strategy and containing China. In India, too, there is broad political support for its strategic partnership with the United States given its immense wariness about its fractious border relationship with China. Consequently, the U.S.-India bilateral relationship has heavily emphasized security, with even trade tilting toward defense goods. Despite the massive changes to the relationship in the last few years, and both countries’ desire to develop ever-closer defense ties, differences between the United States and India remain. A significant part of this has to do with the differing norms that underpin the defense interests of each country. The following Council on Foreign Relations (CFR) memos by defense experts in three countries are part of a larger CFR project assessing India’s approach to the international order in different areas, and illustrate India’s positions on important defense issues—military operationalization, cooperation in space, and export controls—and how they differ with respect to the United States and its allies. Sameer Lalwani (Washington, DC) argues that the two countries differ in their thinking about deterrence, and that this is evident in three categories crucial to defense: capability, geography, and interoperability. When it comes to increasing material capabilities, for example, India prioritizes domestic economic development, including developing indigenous capabilities (i.e., its domestic defense-industrial sector). With regard to geography, for example, the United States and its Western allies think of crises, such as Ukraine, in terms of global domino effects; India, in contrast, thinks regionally, and confines itself to the effects on its neighborhood and borders (and, as the recent crisis with Pakistan shows, India continues to face threats on its border, widening the geographic divergence with the United States). And India’s commitment to strategic autonomy means the two countries remain far apart on the kind of interoperability required by modern military operations. Yet there is also reason for optimism about the relationship as those differences are largely surmountable. Dimitrios Stroikos (London) argues that India’s space policy has shifted from prioritizing socioeconomic development to pursuing both national security and prestige. While it is party to all five UN space treaties that govern outer space and converges with the United States on many issues in the civil, commercial, and military domains of space, India is careful with regard to some norms. It favors, for example, bilateral initiatives over multilateral, and the inclusion of Global South countries in institutions that it believes to be dominated by the West. Konark Bhandari (New Delhi) argues that India’s stance on export controls is evolving. It has signed three of the four major international export control regimes, but it has to consistently contend with the cost of complying, particularly as the United States is increasingly and unilaterally imposing export control measures both inside and outside of those regimes. When it comes to export controls, India prefers trade agreements with select nations, prizes its strategic autonomy (which includes relations with Russia and China through institutions such as the Shanghai Cooperation Organization and the BRICS), and prioritizes its domestic development. Furthermore, given President Donald Trump’s focus on bilateral trade, the two countries’ differences will need to be worked out if future tech cooperation is to be realized.