How Does Beijing Read U.S. Power—and How Will It Shape China's Foreign Policy Posture?
China 2026: What to Watch
By Sungmin Cho and Philippe Le Corre
The Stakes: Navigating a Multipolar World
Since Xi Jinping’s 2018 declaration that “the world is undergoing profound changes unseen in a century,” the notion that “the East is rising and the West is declining” (东升西降) has become embedded in Chinese strategic discourse. This framing reflects a long-term vision of the relative rise of China and the gradual erosion of U.S. dominance, reinforcing a narrative in Beijing that China will eventually outpace the United States in comprehensive power. This perception of the shifting power balance is one of the key elements to understanding China’s evolving foreign policy behavior and the possibility that it may adopt an increasingly assertive approach to regional and global affairs.
Yet a parallel interpretation suggests that Xi may simply be leveraging this rhetoric to bolster the domestic legitimacy of the Chinese Communist Party (CCP), rather than projecting genuine strategic confidence. It remains uncertain whether Xi privately views a permanent decline of U.S. power as real or whether he is merely wielding the concept as a rhetorical instrument. The authors therefore proceed from the assumption that the “East rising/West declining” narrative likely holds persuasive power in some policymaking circles in Beijing. Its practical impact on China’s foreign policy, however, may prove uneven and contingent.
This question of Beijing’s perception is particularly salient in 2026, as the second Trump administration may redirect greater resources toward China, especially if it is freed from the constraints of the Russia-Ukraine war. Should Beijing remain convinced that China is rising while the United States is declining, it will likely respond aggressively to renewed U.S. and allied efforts to curb its global influence, intensifying its political outreach and economic diplomacy, especially in the Global South. Yet an emboldened China will still struggle to convince U.S. allies that it offers a peaceful alternative to U.S. leadership.
Core Dilemma: What Do Chinese Leaders Believe?
China’s leaders face significant dissonance between the rhetoric of national ascent and the reality of the country’s economic slowdown. China’s economy faces structural problems such as real estate fragility, demographic decline, and weak consumption, contradicting the triumphalist message of China rising. Although Beijing continues to achieve progress in select technological domains, these achievements coexist with mounting fiscal and economic pressures.
According to a report by the Asia Society’s Center for China Analysis, Xi Jinping personally prioritizes domestic issues such as regional development and political governance over expansive foreign policy. Economic stagnation directly contradicts Beijing’s propaganda that China is rising while the United States is declining. Xi may view U.S. decline as a long-term trend, but he also recognizes American resilience. Despite shifts in relative gross domestic product (GDP) shares, for example, the United States has consistently maintained around 26% of global GDP, challenging the notion of inevitable decline.
Externally, Beijing’s perception of U.S. decline has not generated goodwill abroad but rather concern. Even as Beijing presses its interests more bluntly, with a style often described as “wolf warrior” diplomacy, many view China’s rise with suspicion. While Beijing promotes the “China model” to developing countries as superior to liberal democracy, especially through the Belt and Road Initiative (BRI), its assertiveness has damaged China’s international image — particularly in the West. Global surveys such as those conducted by Pew Research Center show declining favorability toward China. Even in developing countries, BRI participants complain that Chinese projects disproportionately benefit Chinese firms and fail to deliver adequate benefits to local communities.
The core dilemma lies in the fact that Beijing’s self-image as a rising power rests on a shaky economic foundation, and has generated backlash. The leadership’s confidence in China’s historical trajectory — whether uniformly shared or unevenly held — coexists with growing insecurity at home and vulnerabilities abroad.
Outlook for 2026
By 2026, we predict that China will likely consolidate its regional influence in the Indo-Pacific without triggering direct conflict. Persistent frictions between the Trump administration and its allies will reinforce Beijing’s conviction that the United States is in decline, emboldening China’s quiet advancement of its strategic interests. Gray-zone tactics — such as harassment of Philippine vessels, drone flights near Taiwan, and intensified naval patrols in the South China Sea — will continue, raising the risk of miscalculation. However, Beijing will also attempt to control the escalation to avoid direct conflicts and, by doing so, prevent an excuse for U.S. intervention.
Economically, Beijing will intensify efforts to strengthen China’s domestic supply-chain resilience in order to reduce its exposure to U.S. sanctions. U.S. restrictions in advanced technologies such as semiconductors have already spurred China’s pursuit of indigenous innovation and self-reliance.
At the Trump-Xi summit that took place on October 30, 2025, in Busan, South Korea, China agreed to suspend export control measures it had placed on rare earths, crucial for the production of everything from smartphones to fighter jets. Some may see this one-year deal as a key win for Trump, but China still has the upper hand when it comes to these critical minerals. China has also agreed to buy 12 million metric tons of soybeans, although long-term implementation remains uncertain. In exchange, Beijing secured what it wanted most: the removal of certain U.S. tariffs linked to fentanyl-related products. However, other tariffs, or taxes on imported goods, will remain in place.
On the security front, Washington appears intent on deterring China’s aggression by pressing Indo-Pacific allies — namely, South Korea, Japan, and Australia — to play a greater role in counterbalancing Beijing. Washington’s proposal to reorient the U.S. Forces Korea to focus more explicitly on deterring China illustrates this trend. However, if allies align more closely with Washington to counter Beijing, China’s parallel efforts at engagement will falter, and Beijing’s response may grow more confrontational.
Nevertheless, all told, the second Trump administration’s foreign policy creates both risks and opportunities for Beijing. Chinese analysts expect increasing frictions between Washington and its traditional allies over defense spending, trade deficits, and broader burden-sharing disputes. America’s polarized politics — amplified by Trump’s leadership style — would reinforce Xi Jinping’s vision of “the East rising and the West declining.” These perceived signs of U.S. decline are likely to intensify Beijing’s efforts to present itself as a reliable partner to its Asian neighbors and to European countries.
Conditions and Contingencies
If the Russia-Ukraine war ends or pauses, Beijing will expect the United States to redirect its attention and resources to the Indo-Pacific. Increased military activity — such as more frequent U.S. naval transits through the Taiwan Strait and freedom of navigation operations in the Asia-Pacific—will likely follow. From a power transition theory perspective, Chinese leaders may interpret such actions as preventive measures characteristic of a declining power seeking to contain a rising challenger. Beijing would thus conclude that China must resist such U.S. attempts to contain its rise, beginning with rejecting U.S. interference over what Beijing considers its “internal affairs” — Taiwan.
A Russia-Ukraine ceasefire might also allow some NATO members to allocate more naval and air assets toward China. British, German, and French navies could, for example, sail more often through the Taiwan Strait and conduct more joint exercises with Asia-Pacific partners such as Japan or Australia. Under U.S. pressure, South Korea may also signal its willingness to support Washington in a Taiwan contingency. Such developments would confirm for Beijing that the West seeks to contain China, deepening its hostility toward the United States and heightening the risk of conflict in East Asia.
What to Watch
The year 2026 will be significant, with the U.S. midterm elections in November and the CCP’s 21st National Congress just a year off. It will also coincide with political milestones in People’s Liberation Army (PLA) naval and air force consolidation: The Xi leadership has been alluding to 2027 as the year when China’s forces should be ready to “compel Taiwan with military force.”
If Beijing’s perception of U.S. decline truly shapes its policy in the Indo-Pacific, early indicators should emerge across rhetoric, military posture, and hybrid tools.
Rhetorical signals. Heightened emphasis in official speeches and media on multipolarity and the inevitability of U.S. decline would suggest Beijing’s growing confidence. Already, there are claims that China has overtaken the United States in production, technological innovation, and military scope, reinforcing Xi’s long-standing narrative that Western isolation tactics cannot halt China’s rise and that the global order is shifting irreversibly toward China-led alternatives. Such narratives condition both domestic and international audiences to accept U.S. decline as fact, legitimizing more assertive Chinese actions.
Military signals. We should expect to see expanded PLA activity in contested zones — the South China Sea, the Senkaku/Diaoyu islands, and areas around Taiwan — framed as legitimate acts of sovereignty. To test U.S. resolve, China may take provocative actions, such as flying military aircraft closer to Taiwan or quarantining small islands, such as Matsu, that are administered by Taipei. Increased investment in overseas military logistics and dual-use infrastructure, particularly along the BRI, would also indicate Beijing’s intent to convert economic presence into security leverage. Joint military exercises with Russia across the Indo-Pacific region will likely continue.
Hybrid signals. Beijing’s increased reliance on Chinese private security contractors abroad would reflect the gradual militarization of the BRI — China’s shift from economic diplomacy toward security expansion that integrates security, energy logistics, and strategic basing. While China has already been implementing such measures, the perceived weakening of U.S. global influence on Trump’s watch will accelerate such efforts.
Taken together, such signals would show China moving from rhetorical confidence in U.S. decline toward operational steps to implement its ambitions in the Indo-Pacific.
Alternative Scenarios
Baseline (most likely): Quiet advancement. By 2026, China steadily consolidates influence across the Indo-Pacific without triggering direct conflict. The Trump administration’s frictions with U.S. allies and partner countries reinforce China’s belief in the decline of U.S. influence, encouraging Beijing’s quiet advancement of its interests. This would include the use of yuan-denominated transactions and, in general, the expansion of Beijing’s global ambitions and deepening of its economic and selective security ties with ASEAN states. Simultaneously, grayzone tactics, including harassment of Philippine vessels, drone flights near Taiwan, and increasing naval patrols in the South China Sea, intensify. Risk of miscalculation grows, but Beijing prefers controlled escalation.
Alternative 1: Aggressive escalation. Amid deepening Sino-Russian military cooperation, Chinese leaders conclude that the United States is too internally divided and overstretched to respond effectively. As a result of a potential domestic crisis or growing U.S. isolationism — such as withdrawal from Ukraine — American credibility weakens further, and Xi authorizes sustained military pressure around Taiwan. This could include blockade-style deployment, missile tests over Taiwan, or aggressive interception of U.S. and Japanese aircrafts. Despite the risks of confrontation, Beijing calculates that acting now will cement China’s dominance before the United States recovers. Regional instability surges as Japan and Australia accelerate rearmament, while Washington feels forced to demonstrate resolve militarily.
Alternative 2 (least likely): Strategic retrenchment. China reassesses its assumptions and concludes that the United States is not in decline. Coupled with China’s domestic fragility — high youth unemployment, an aging population, a stagnant property sector, and continuing PLA purges—Beijing could unexpectedly turn inward and return to a policy of taoguang yanghui (韬光养 晦, “hide one’s strength and bide one’s time”). In this scenario, Xi would prioritize domestic stability, tone down military assertiveness, and shift propaganda toward national resilience while quietly scaling back foreign initiatives. Beijing does not relinquish its long-term ambitions but prioritizes stability and seeks a period of consolidation.
Even under such retrenchment, one caveat remains: Analysts often assume that China will pursue a coherent, long-term strategy to displace U.S. power, but a major surprise could be the absence of such a fixed agenda. Beijing often acts opportunistically as well as strategically. A key analytical risk, therefore, lies in overestimating China’s coherence and readiness to lead. A fragmented, reactive China — powerful but inconsistent — could prove more destabilizing than a disciplined challenger.
Strategic Implications
If Xi genuinely perceives that U.S. decline is accelerating, he is likely to double down on authoritarian controls to insulate the CCP from slowing growth, demographic aging, and high youth unemployment. Economic policy will shift even further toward self-reliance in semiconductors, rare earth minerals, and energy, framed as both protection against Western “containment” and proof that China can surpass U.S. technological leadership despite controls. Nationalist messaging will intensify to emphasize “Western decline” and to justify sacrifices and sustain public commitment to long-term competition.
U.S.-China relations will harden around zero-sum competition across trade, technology, and security. The risk lies in mutual miscalculation: If Beijing overestimates U.S. weakness, or Washington overreacts to perceived Chinese aggression, flashpoints around Taiwan or the South China Sea could tip into confrontation.
Multilaterally, Beijing will seek to expand its agenda-setting influence in institutions such as the United Nations, BRICS, and the Shanghai Cooperation Organization, while simultaneously promoting new frameworks, such as China’s Global Security Initiative, to establish a post-U.S., China-led international order. However, countries in the region, such as ASEAN states, will continue hedging, seeking security assurances from the United States while leveraging Chinese economic inducements. Globally, markets will face heightened volatility as both powers weaponize interdependence in supply chains, technology standards, and financial flows.
Policy Shaping and Conclusion
China’s narrative of U.S. decline may serve as both a domestic legitimizing narrative and a strategic framework for China’s foreign policy behavior. Yet this narrative coexists uneasily with China’s own internal weaknesses and structural vulnerabilities, and the possibility that Chinese elites’ true assessment of U.S. power remains more cautious than rhetoric suggests. Beneath the triumphalist rhetoric, Beijing’s leadership may remain deeply aware of its own economic troubles and demographic pressures, and the risks of overextension.
In this fluid landscape, institutions such as the European Union, ASEAN, the African Union, APEC, and the G20 can act as stabilizers by fostering dialogue and maintaining rules-based cooperation. This underscores the importance of regional and middle powers preserving their strategic autonomy, diversifying partnerships, and avoiding overdependence on any single major power. For the United States, the task lies in adapting to a more multipolar world — rebuilding alliances, renewing multilateral engagement, and demonstrating consistency in its global commitments. Sustained cooperation with a broad range of partners will be essential to uphold stability and credibility amid intensifying U.S.-China competition and broader systemic uncertainty.