When countries find themselves tactically navigating the push and pull of larger global forces, they master the art of hedging. From India to Indonesia, Turkey to South Africa, Saudi Arabia to Brazil, nations constantly balance their economic ties with China against their security alliances, predominantly with the United States. This balancing act is becoming a daily reality as the world witnesses an evolving multipolarity and intense geopolitical competition between the U.S. and China. This diplomatic combination involves a blend of trade agreements, military alliances, and sometimes strategic ambiguity, allowing these nations to harness benefits from all sides without unwavering allegiance to any.
Simultaneously, global powers like the United States and China are not mere spectators but active players in this game of hedging. Even with their formidable global stature, they employ hedging strategies to safeguard their national and global interests while fostering stability in a world of growing unpredictability.
The U.S. strengthens its alliances across Europe and Asia while keeping the lines of communication open with rivals like Russia and China, trying to collaborate with strategic competitors in areas like climate change and counterterrorism. Meanwhile, China is expanding its economic reach through ambitious initiatives like the Belt and Road Initiative and the Three Global Initiatives, asserting its leadership in the Global South. At the same time, China continues integrating itself within existing global institutions, endorsing the current world order from which it benefits, and maintains ongoing dialogue with the United States
This strategic maneuvering demonstrates a deep understanding of the complexities inherent in a multipolar world. In this landscape, absolute allies or adversaries are rare, and a diversified, flexible approach is paramount for sustaining a stable yet influential global presence. Hedging goes beyond simple risk management; it’s about seizing and generating opportunities, which requires an astute grasp of global dynamics, precise timing, and the ability to operate effectively on multiple fronts. As the global power structure continues to shift with new challenges on the horizon, hedging remains a vital strategy in the playbook of nations, regardless of their size or power.
China’s Hedging Since the 1950s
China’s hedging strategy, marked by pragmatism and foresight, has evolved significantly over the years. Historically, China balanced its relations between the Soviet Union and the United States, a strategy that has been beneficial since the 1950s. During the China-U.S. rapprochement in the 1970s, despite its early informal alliance and ideological alignment with the Soviet, China strategically repositioned itself as a counterweight to Soviet influence. This recalibration was not merely reactive but a calculated move to assert China’s presence in the U.S.-led global order. China’s integration into the international community paved the way for its remarkable economic ascent. Hedging allowed China to maximize advantages, cultivate diplomatic space, and protect its national interests from both superpowers before the Soviet collapse.
As the global landscape shifted toward the era depicted in “The End of History and the Last Man,” China’s hedging strategies adapted, emphasizing economic gains rather than political differences when cooperating with its Western counterparts. China’s accession to the World Trade Organization (WTO) in 2001 marked a significant diversification of its economic partnerships, mitigating the risks of over-reliance on a few specific markets and harnessing broader global markets to fuel domestic growth. China continues to champion a rules-based international trade system even during the de-globalization era.
Meanwhile, China’s active contribution to established international institutions like the United Nations and its peacekeeping missions demonstrates its commitment to enhancing its influence within the prevailing global order. Beijing aims not only to participate but to reform and reshape these entities to reflect its national interests and broader vision. This strategic engagement, blending diplomacy with economic measures, showcases China’s intent to recalibrate global governance in alignment with its objectives.
Moreover, China is proactively establishing its own initiatives, forging new partnerships and creating new institutions to hedge against potential fluctuations in the current international framework. This strategy not only demonstrates China’s ambition to assert a central role in global affairs but also reflects its concern over a potential retraction of the U.S. from its traditional global leadership role, which could herald a transformative shift in the post-war international order.
The Belt and Road Initiative (BRI), for instance, exemplifies China’s comprehensive approach to mitigating risks such as those posed by former U.S. President Donald Trump’s trade war, potential sanctions coming with geopolitical conflicts, regional instability, and looming global economic uncertainties. By building infrastructure, extending financing, and fostering economic ties across continents, particularly in the Global South and among its neighboring countries, China is doing more than just securing its commercial routes. It’s strategically crafting a buffer against the U.S.-led Indo-Pacific strategy and the competitive postures of its allies, ensuring its growth and stability are not solely dependent on existing power structures.
The inception of the Global Development Initiative (GDI), the Asian Infrastructure Investment Bank (AIIB), and the New Development Bank (NDB), coupled with the expansion of groups like the BRICS and the Shanghai Cooperation Organization, signals China’s intent to hedge against the decoupling efforts of the Western markets. These initiatives also reflect China’s preemptive measures against the resurgence of the “America First” policy and the New Cold War, which might potentially lead to a power vacuum in the global order. Beijing is not only hedging against immediate geopolitical and economic challenges but also shaping a resilient and diverse framework for global engagement, reflective of its vision for a new world order.
Responding to the New Order
Over the decade following the Belt and Road Initiative’s inception in 2013, the regional order and global power structures have undergone rapid transformations. China’s hedging strategy reverberates beyond its own borders and is transforming from a mere survival tactic to a powerful means of influence, positioning the nation as a defender of the current and architect of the future world order. China is carving its own path and shaping a future where its influence and vision are integral to the global narrative.
Distinguishing hedging from other strategies, such as containment or alliance-making, is crucial, allowing for a more nuanced interpretation of regional dynamics. In response to this, hedgers in Southeast Asia need to mitigate risks tied to the continuous and deepening ideological conflicts between the United States and China, as well as the potential conflicts across the Taiwan Strait and in the Korean Peninsula. This is when the increasing significance of robust regional organizations like ASEAN cannot be overstated. These entities serve as buffers for sovereign states, diluting the risks of direct actions. Actions taken under the banner of regional organizations provide individual sovereign states with greater leeway to interpret and hedge against potential risks, offering smaller nations a shield behind larger entities and utilizing multilateral diplomatic efforts to both prevent and resolve conflicts, thereby ensuring regional stability without overexposure to associated risks.
For China, seeking common ground and fostering cooperation in areas with less contention, such as climate change and the digital economy, becomes pivotal. This approach serves to hedge against the potential for conflict arising from more significant disagreements, particularly in security matters. Managing its unrestricted cooperation with Russia is also crucial, given the divergent perspectives of the two nations on the existing international system – China as a beneficiary and Russia as a disadvantaged party. This divergence results in differing urgencies and extents of demand for reforming the current system. Domestically, China has the task of mending social rifts and preventing the polarization of internal views from skewing its foreign policy.
Amid the shifting tides of global dynamics, the recognition, respect, and defense of a cohesive set of international norms and rules stands as the strategy for all nations to hedge against the unpredictability and potential turmoil that may arise from the success or failure of China’s and the United States’ respective strategies. A steadfast commitment to upholding and protecting a shared set of international rules offers a semblance of continuity and stability amid change. This approach not merely serves to shield nations from immediate geopolitical shocks but also lays the groundwork for a more cooperative global community.
By championing a rules-based international order, nations collectively contribute to a system where dialogue prevails over discord and cooperation trumps competition. This is not just a strategy for risk mitigation, but a proactive endeavor to shape a resilient and equitable international landscape.