US AI leadership is critical to preserving international stability, even if China doesn’t end up cooperating on AI standards

Similar regulations are needed for technologies that have broader security implications and that have become flash points in Washington's competition with Beijing. These include many technologies that could transform the global economy over the next decade: semiconductors, artificial intelligence, quantum computing, advanced manufacturing technologies, and 3D printing. For now, these technologies are dominated by a small group of advanced industrial countries--and China. Most high-end semiconductors, for example, are made in Japan, the Netherlands, South Korea, Taiwan, and the United States. Among Western countries, artificial intelligence research is centered in the United States, with France, Germany, Japan, South Korea, and the United Kingdom also having important research centers. These countries also control much of the computing power needed to effectively train advanced AI systems. China and the United States currently have the lead in quantum computing, with Australia, Canada, Japan, South Korea, and the EU also in the game. To harness the convergence of interests among these countries, the United States should form a new critical technologies club that would both support the development of these products and regulate their export to China. The United States has long promoted and participated in multilateral export-control regimes, going back to efforts after World War II to limit exports of dual-use goods--products that have potential military as well as civilian applications--to Soviet bloc countries. But a club devoted to regulating advanced technologies could expand these kinds of controls to other areas to ensure that the West remains ahead of China not only in the military domain but also in crucial areas of economic innovation. DOLLARS, NOT DEBTS A better approach to containing China and its influence in the world cannot be based on sectoral trade deals and export controls alone. To bring developing countries closer into alignment with the West, the United States also needs to find more ways to provide economic and infrastructure support to its partners. New forms of international financing will be especially important, not only for driving the clean energy transition and promoting sustainable development but also for offering countries a more attractive alternative to partnering with China. Starting in 2019 and 2020, as the Trump administration highlighted the risks of China's global lending policies, many governments and analysts began giving more scrutiny to the Belt and Road Initiative, China's vast infrastructure financing program. Beijing's opaque lending practices and "debt trap" diplomacy have often left borrowing countries in thrall to China. Nonetheless, the Chinese government has been able to use the Belt and Road Initiative to promote its geopolitical interests because the program has often served legitimate financing needs. Those needs will be even greater in the coming clean energy transition. A high-level expert report prepared for the UN's 2022 climate conference, COP27, found that developing countries need at least $1 trillion a year to finance the costs of adapting to climate change; a 2023 un report found that these countries face a $4 trillion financing gap to meet sustainable development goals. The reality is that if the United States and its allies do not meet these needs, China will. Over the past year, Washington has responded to the financing problem by pushing the World Bank, the International Monetary Fund, and other multilateral institutions to expand their lending capabilities and create new tools to address climate change. But Washington must appropriate enough funds--a step only the U.S. Congress can take--to ensure that the World Bank and IMF reforms are successful, and it needs to overhaul its bilateral investment and development tools. To better compete with Beijing, Washington should make more creative use of the U.S. Development Finance Corporation and the Export-Import Bank, which promote U.S. private sector investment in the developing world. For example, the government could direct these programs to offer concessional lending--loans offered on more favorable terms than prevailing market rates--so they can close deals more quickly in foreign countries. Washington can also provide more capital to partners and allies by expanding the use of sovereign loan guarantees. By offering a U.S. government backstop to entities that loan money to a foreign government, sovereign loan guarantees unlock additional financial resources for emerging or fragile economies. In recent decades, however, the United States has used them sparingly: since the 1990s, it has offered them to only seven countries, with the most recent guarantee--to Ukraine--issued in 2022. But because global interest rates have risen over the past year and are poised to stay high, sovereign loan guarantees offer an attractive way to provide direct financing to partner governments. Finally, the United States needs to prepare for an emerging global financial order in which the dollar remains dominant but Washington's ability to leverage that dominance is waning. Much of the focus of U.S. economic policymakers has rightly been on the positive side of the international agenda--how capital can be deployed to meet global needs and opportunities. But successive administrations have grown increasingly effective at weaponizing U.S. control of the global financial system, whether by disrupting trade with Iran and North Korea in response to their nuclear programs or by using sanctions to put intense financial pressure on Russia following its invasion of Ukraine in 2022. In recent years, China, Russia, and a number of developing countries have identified Washington's weaponization of the dollar as a threat and worked to establish alternative reserve currencies. From a macroeconomic perspective, these efforts have largely failed, but the goal of these rivals is not actually to supplant the dollar as the dominant unit of exchange. Instead, they have a narrower and more achievable objective: developing a non-dollar-denominated payments network that would allow them to continue basic trade and financial activities should they lose access to the dollar. What these countries seek, in other words, is not a new dominant currency, but a viable one that could be used for their trade as needed. Measured against that goal, these efforts show some signs of success. Already, Russia's experience following the 2022 sanctions shows that a country with sufficient financial clout can maintain both internal stability and international financial ties with China, India, and other countries across the developing world, even when most of its major banks have been kicked off Western financial networks. Beijing is creating an alternative payment system for its energy imports and global exports in case it becomes the target of Western sanctions. Over the long term, the United States is unlikely to prevent the emergence of these rival networks. But it can actively reinforce the dollar's position in global trade and finance and slow the rise of alternatives. In 2022, for example, the United States was able to curtail Russia's attempt to expand its cross-border Mir electronic payment system to Turkey and other countries by warning of sanctions against non-Russian banks that connected to it. These threats have not stopped Russian trade, but they have ensured that more of it remains potentially subject to US. sanctions. A SHARPER EDGE As Washington embarks on what could be years of geopolitical competition with Beijing, Americans have reasons to be optimistic. This is not because the United States is likely to "win" the competition the way it won the Cold War with the dramatic collapse of the Berlin Wall, at least on any time horizon relevant to U.S. policymakers. Indeed, the next decade seems likely to offer neither victory nor defeat since the odds of China fundamentally changing its geopolitical course, at least while its current government remains in power, are minimal. Yet the United States is well positioned to maintain its edge in leading economic domains. China's mishandling of the COVID-19 pandemic and erratic crackdown on its business sector have sapped Chinese economic confidence and encouraged talented technologists and entrepreneurs to relocate abroad. Although Xi's government will undoubtedly tap the wealth created by the hard work of the Chinese people, and China will continue to use its economic strength to make alliances abroad, many analysts now suggest that China's growth will be substantially slower in the years to come than it has been over the past three decades. Closed societies also tend to be less conducive to innovation, and in view of Beijing's efforts to insulate itself from the outside world, China may find its pace of technological advances slowing as well. U.S. companies, meanwhile, have opened a lead in AI, and American universities continue to attract talented students from around the globe, a vital source of innovation that U.S. policymakers should do more to encourage. And smart domestic investments and macroeconomic policies have given the United States the strongest post-COVID economic recovery of any major developed nation. To position itself for success in the long term, however, the United States will need to develop a more effective economic strategy toward its close allies and other partners across the globe. New and better economic tools and more targeted international trade and finance policies can prevent Beijing from displacing the U.S.-led international order and help Washington adapt to geopolitical rivalry in a multi-aligned world. Even if they cannot force Beijing to change, U.S. policymakers can ensure that Washington maintains its economic and technological advantage and draws a larger share of the world its way. In doing so, they can further the interests of the United States and those of its partners, regardless of the choices China makes.