[Opinion] The Dynamics of the Second Cold War: Patterns of US-China Competition

Securing Transnational Control in Infrastructure, Digital, Production, and Finance
Is the Key Challenge

The competition between the U.S. and China is a process in world history when viewed as a challenge to the international order led by the U.S. after World War II. The main challenger has simply shifted from Russia (the former Soviet Union) to China. The first Cold War, or the postwar Cold War, was a zero-sum game centered on nation-states with clearly defined territories. The U.S. implemented a containment strategy to block Russian expansion.

However, such a perspective has limitations in today's highly interconnected world. While Russia was isolated from the free world, China has grown within the free world camp. Actors from both the U.S. and China operate in the same space, and their economies are interdependent. It is difficult for the U.S. to fully contain China. Likewise, China finds it hard to break free from U.S. influence and build a closed, self-centered bloc.

With global financial integration, the transnationalization of manufacturing, international division of labor, and advances in technology and productivity, the world economy has gradually evolved into a highly structured global network beyond any single country. Therefore, rather than zero-sum competition to control regions, the U.S. and China seek to dominate central positions in networks to project power. They aim to gain superiority in controlling flows of capital, goods, labor, knowledge, data, and technical standards. The U.S. and China compete to occupy central positions in four interrelated transnational networks. Securing control over nodes in these networks is how each binds people, resources, and space within their spheres of influence.

First is the competition surrounding infrastructure networks. China launched the Belt and Road Initiative in 2013 to realize the Chinese Dream. In response, the Donald Trump administration established the Development Finance Corporation (DFC) in 2018 to provide financial support for infrastructure projects. The Joe Biden administration declared the Build Back Better World (B3W) initiative at the 2021 G7 summit, and in 2022, the Group of Seven (G7) agreed to promote the Partnership for Global Infrastructure and Investment (PGII). However, how effective these efforts will be remains uncertain.

Second is competition over digital networks and cyberspace. Chinese tech giants Baidu, Tencent, Alibaba, and JD.com dominate the domestic digital economy and have expanded overseas, becoming competitors to U.S. companies. During the Trump administration, the U.S. shifted its policy to restrict Chinese companies' overseas expansion and block the use of Chinese products in other countries. Moreover, both the U.S. and China increasingly seek to strategically leverage their giant platform companies due to their central positions.

Third is competition in global production networks. In the past, companies decided production locations seeking to maximize profits by finding places with lax regulations. Now, both countries aim to relocate production bases to places where their own companies can expand international influence while excluding rivals. Processes such as decoupling of key value chains, reshoring, and friendshoring are underway.

Fourth is competition in financial networks. The U.S. holds a firm central position in the global financial network. The U.S. dollar sits at the apex of the global monetary and financial system. In contrast, China's position is weak. China seeks to reduce dollar dependence through internationalizing the yuan and to enhance its status in financial networks. However, China's attempts still face significant limitations.

Regarding this U.S.-China competition, the loyalty of third countries is partial and variable because network connections can be relatively easily reconfigured. The course of the second Cold War will be determined by the outcomes of this network dominance competition.

Kim Dong-gi, author of 'The Power of Geopolitics'

This content was produced with the assistance of AI translation services.