Xi lashout independently causes global conflict.

Populist pressures might tempt the party leadership to encourage diversionary nationalism. The logic of this concern is straightforward: the Communist Party might seek to distract a restless domestic population with adventurism abroad.19 The Xi administration wants to appear tough in its defense of foreign encroachments against China’s interests. This need stems from a long-running narrative about how a weak Qing dynasty was unable to defend China in the face of European imperial expansion, epitomized by the Opium Wars and the subsequent treaties imposed on China in the nineteenth century. The party is particularly sensitive to perceptions of weakness because much of its claim to legitimacy—manifested in Xi’s Chinese Dream campaign today—stems from the party’s claims of leading the restoration of Chinese greatness. For example, the May Fourth Movement, a popular protest in 1919 that helped catalyze the CPC, called into question the legitimacy of the Republic of China government running the country at that time because the regime was seen as not having effectively defended China’s territorial and sovereignty interests at the Versailles Peace Conference.

Diversionary nationalist frictions would likely occur if the Chinese leadership portrayed a foreign adversary as having made the first move, thus forcing Xi to stand up for China’s interests. An example is the 2012 attempt by the nationalist governor of Tokyo, Shintaro Ishihara, to buy the Senkaku/Diaoyu Islands from a private owner.20 Although the Japanese central government sought to avert a crisis by stepping in to purchase the islands—having them bought and administered by Ishihara’s Tokyo metropolitan government would have dragged Japan into a confrontation with China—China saw this move as part of a deliberate orchestration by Japan to nationalize the islands. Xi seemingly had no choice but to defend China’s claims against an attempt by Japan to consolidate its position on the dispute.21 This issue touched off a period of heated tensions between China and Japan, lasting more than two years.22 Such dynamics are not limited to Japan. Other possible areas of conflict include, but are not necessarily limited to, Taiwan, India, and the South China Sea (especially with the Philippines and Vietnam).

The Chinese government will use such tactics if it believes that the costs are relatively low. Ideally, China would like to appear tough while avoiding material repercussions or a serious diplomatic breakdown. Standing up against foreign encroachment—without facing much blowback—could provide Xi’s administration with a tempting source of noneconomic legitimacy. However, over the next few years, Xi will probably not be actively looking to get embroiled abroad. Cushioning the fallout from slower growth while managing a structural economic transition will be difficult enough. Courting potential international crises that distract the central leadership would make this task even more daunting.

Even if the top leadership did not wish to provoke conflict, a smaller budgetary allotment for security could cause military interests in China to deliberately instigate trouble to justify their claims over increasingly scarce resources. For example, an air force interested in ensuring its funding for a midair tanker program might find the existence of far-flung territorial disputes to be useful in making its case. Such a case would be made even stronger by a pattern of recent frictions that highlights the necessity of greater air power projection. Budgetary pressures may be partly behind a recent People’s Liberation Army reorganization and headcount reduction. A slowing economy might cause a further deceleration in China’s military spending, thus increasing such pressures as budgetary belts tighten.

Challenges to Xi’s Leadership

Xi Jinping’s efforts to address economic challenges could fail, unleashing consequences that extend well beyond China’s economic health. For example, an economic collapse could give rise to a Vladimir Putin–like redemption figure in China. Xi’s approach of centralizing authority over a diverse, complex, and massive social, political, and economic system is a recipe for brittleness. Rather than designing a resilient, decentralized governance structure that can gracefully cope with localized failures at particular nodes in a network, a highly centralized architecture risks catastrophic, system-level failure. Although centralized authority offers the tantalizing chimera of stronger control from the center, it also puts all the responsibility squarely on Xi’s shoulders.

With China’s ascension to great power status, the consequences of internecine domestic political battles are increasingly playing out on the world stage. The international significance of China’s domestic politics is a new paradigm for the Chinese leadership, and one can expect an adjustment period during which the outcome of what had previously been relatively insulated domestic political frictions will likely generate unintended international repercussions. Such dynamics will influence Chinese foreign policy and security behavior. Domestic arguments over ideology, bureaucratic power struggles, and strategic direction could all have ripple effects abroad. Many of China’s party heavyweights still employ a narrow and exclusively domestic political calculus. Such behavior increases the possibility of international implications that are not fully anticipated, raising the risks of strategic miscalculation on the world stage. For example, the factional power struggles that animated the Cultural Revolution were largely driven by domestic concerns, yet manifested themselves in Chinese foreign policy for more than a decade. During this period, China was not the world’s second largest economy and, for much of this time, did not even have formal representation at the United Nations. If today’s globally interconnected China became engulfed in similar domestic chaos, the effects would be felt worldwide.23

Weakened Fetters of Economic Interdependence

If China successfully transitioned away from its export-driven growth model toward a consumption-driven economic engine over the next four or five years, it could no longer feel as constrained by economic interdependence. To the extent that such constraints are loosened, the U.S.-China relationship will be more prone to conflict and friction.24

While China has never been the archetypal liberal economic power bent on benign integration with the global economy, its export-driven growth model produced a strong strategic preference for stability. Although past behavior is not necessarily indicative of future strategic calculus, China’s “economic circuit breaker” logic seems to have held its most aggressive nationalism below the threshold of war since 1979. A China that is both comparatively strong and less dependent on the global economy would be a novel development in modern geopolitics.

As China changes the composition of its international economic linkages, global integration could place fewer constraints on it. Whereas China has been highly reliant on the import of raw materials and semifinished goods for reexport, a consumption-driven China could have a different international trade profile. China could still rely on imported goods, but their centrality to the country’s overall economic growth would be altered. Imports of luxury goods, consumer products, international brands, and services may not exert a significant constraining influence, since loss of access to such items may not be seen as strategically vital. If these flows were interrupted or jeopardized, the result would be more akin to an inconvenience than a strategic setback for China’s rise. That said, China is likely to continue to highly depend on imported oil even if the economic end to which that energy resource is directed shifts away from industrial and export production toward domestic consumption.