Politically, Xi has responded by centralizing power, trying to reclaim the CCP’s mandate of heaven by demonstrating to the people that he will rid the country of corruption while increasing the internal security services’ ability to head off unrest. In addition, Xi has pushed forward a muscular foreign policy to show the people that the CCP is the vessel through which China can attain its historical place in Asia. This amounts to a high-risk gambit. Xi has exposed himself to the ire of victims of his anticorruption campaign, and the US and its allies could hand him a foreign policy setback that would weaken him at home. Finally, Xi simply cannot pay for all the foreign policy ambitions he has announced. Tradeoffs will become inescapable.

The US will most likely face something akin to an economically larger version of Putin’s Russia—powerful enough to cause great instability but still highly vulnerable. The US can choose to use its enduring strategic leverage over China to make Xi more risk averse. Beyond that, a stagnant China could radicalize domestically and become less predictable on the world stage. Alongside the use of strategic leverage, the US should therefore do what it can to encourage China to return to the path of economic reform. This dual-track approach is predicated on the realization by a new American administration that stagnation is the most plausible path for China and that the sizable gap in wealth and power will endure.

Dan Blumenthal is the director of Asian Studies at the American Enterprise Institute, where he focuses on East Asian security issues and Sino-American relations.

Derek M. Scissors is a resident scholar at the American Enterprise Institute (AEI), where he studies Asian economic issues and trends. In particular, he focuses on the Chinese and Indian economies and US economic relations with China and India.

Image: Creative Commons/Flickr.