One phrase is particularly associated with Mao’s diminutive successor. “It doesn’t matter if a cat is black or white,” the memorable dictum goes. “If it catches mice, it’s a good cat”. In other words: it is possible for a socialist society to have a market economy — or a capitalist society to have a planned one. What matters is which social interests are privileged. Understand Deng’s feline-themed refrain, and the thinking behind it, and you grasp how contemporary China permits private firms, and the profit motive, while warding off the worst evils of capitalism. The economic objectives of the Chinese state are determined politically by the Communist Party, rather than reflecting the sectional interests of capital. The planner state isn’t always kind — it’s generally best not to have your fertility policy designed by a missile engineer — but it has dragged China to the top table of geopolitics.

In his own inimitable fashion, Donald Trump recently offered a mirror to Deng’s famous saying. “I respect China, because it’s… a system that, in theory, shouldn’t work,” he told an audience in Miami last week. “But if you look at China, how well they do, how much they produce. I mean, they produce so many cars that they actually have competitions over who can produce the fewest cars.” If Deng’s words were immortalized as the “white cat” formula, perhaps Trump had articulated the less poetic “too many cars” theory. It certainly distills how Chinese firms, often backed by the state, capture huge market share through oversupply. A decade ago, that meant a sudden profusion of solar panels. Today, it’s electric vehicles.

Such an overt admission of the success of the Chinese system, not least by a Republican president, might be unexpected — but it shouldn’t surprise us. Deng re-calibrated the political and economic system of his own country; now, almost half a century later, it increasingly feels as if the United States will have to follow suit. The question is whether, after Trump, it can. While the People’s Republic has a system where the parties can’t change but the policies can, America seems to operate in reverse. The faces, factions and rhetoric constantly evolve — polarization is everywhere, and ever more ferocious — but the underlying economic reality remains the same.

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Even before the Iran War, it was clear that the US, and the “political West” more generally, were in relative decline. Their collective high point came at the turn of the millennium, when the OECD countries comprised 80% of nominal global GDP. Today, by contrast, that figure stands at 60%, with economic clout — and, by extension, political power — flowing east. By another measure, indeed, China is already the world’s largest economy, with India and Russia behind the US in second.

Though it might be tempting to point to recent growth across the Pacific, economic expansion in America rests entirely on debt. While it’s true American GDP grew by an extraordinary $9 trillion between 2020 and 2025, the country’s national debt ballooned even more, rising by $11 trillion over the same period. Even at the start of the year, before the assassination of Ayatollah Khamenei, the country’s jobs data, and stubborn deficit, were at odds with Trump’s rhetoric of an economic miracle. As with every Republican president since Reagan, his growth model is familiar: deficit-funded tax cuts while barking about smaller government. The Brookings Institution recently concluded that keeping tax breaks introduced by Trump would mean the country’s debt-to-GDP ratio will rise to more than 200% by the 2050s. Think Japan, just without the fast trains or social cohesion.

But it’s not just that the West is sluggish. China is increasingly competitive as both an industrial juggernaut and a global center for innovation. In the 2000s, when China was allowed to join the World Trade Organization, the assumption had been that, as America de-industrialized, it would move up the commodity chain, leaving the dirty work for poorer, less creative rivals. The avatar for such thinking was the Apple iPhone. While the handset was assembled in Asia, it was designed in California — home to the world’s largest company, and the first to reach a valuation of $1 trillion.

Today, however, China is building its own versions of the iPhone, from Xiaomi to Huawei, while remaining home to almost a third of global manufacturing. Then there is its burgeoning car industry. BYD is now the world’s leading manufacturer of electric vehicles, overtaking Tesla some years ago. Elsewhere, despite being banned from a number of Western markets, Huawei remains the global leader in 5G networks.

China also has a growing advantage in sectors like lithium-ion storage, solar cells and drones. Six of the world’s 10 leading battery producers are Chinese, while the country produces around 90% of all consumer UAVs. And the innovation gap in both fields is only set to grow. Emblematic of that is how BYD presently has more than 100,000 people working on research and development alone.

Finally, there is the country’s remarkable success with renewables. Nine out of every 10 solar panels are made in China. Given almost half of all electricity worldwide is now generated by renewables — with solar being the leading source by far — that means an exporting bonanza. Global solar capacity grew by 511 GW in 2025, and virtually all of that comes via panels made in the Middle Kingdom.

The war in Iran looks set to accelerate all this — not only emphasizing the industrial prowess of the People’s Republic, but underscoring its advantages as a so-called “planner state”, where private enterprise cooperates tightly with the state. Iran’s strategy of leveraging geography to close an economic chokepoint, and catalyzing a global energy crisis, means Beijing is set to be the conflict’s biggest winner.

In the first days of the war, one often encountered claims that attacks on both Iran and Venezuela were part of a new “Great Game”, with Washington hoping to undermine Beijing’s access to cheap fossil fuels. But besides Tehran only ever accounting for 12% of China’s supply, it was always the historic allies of America, not least in Europe and East Asia, that were most vulnerable to a blockade of the Persian Gulf. Pax Americana not only rested upon security guarantees for both regions, but in also ensuring a steady, cheap supply of energy. These assumptions are now imperiled and, with them, the credibility of the US global order.

Beijing prepared for this moment. Not only is China a net exporter of refined oil, but it also possesses a strategic reserve of 1.3 billion barrels of petroleum — enough to meet domestic demand for three months. So, as energy costs rise for competitors overseas, the Chinese state can offer price stability to domestic manufacturers. No less important, Chinese exporters stand to uniquely benefit — not only from domestic energy stability but also, for many sectors, increased demand. For the likes of BYD, CATL, which is a battery manufacturer, and LONGI, which makes solar panels, we are approaching a dream scenario. They’ve committed decades to creating the world’s most efficient renewable products, with highly optimized global supply chains. Until recently that seemed an uncertain bet. Yet in the weeks and months ahead, global demand will be unleashed.

Already, even before the deluge of orders materialized, China’s lithium-ion battery makers had seen their collective market values rise by $70 billion in the opening phase of the war. Last week, meanwhile, Indonesia’s president announced plans to increase solar capacity 10-fold over the next two years, from 11GW to 100GW. “We’ll convert all motorcycles into electric motorcycles,” he added. “All cars, all trucks, all tractors must [also] be electric”. Lee Jae Myung, the president of South Korea, has made similar noises, adding that the need to switch to renewables was so serious he couldn’t sleep.

If such rhetoric is to become reality, it means spending hundreds of billions on Chinese goods. And besides enabling an export bonanza for the country’s cleantech sector, which has benefited from decades of state support, something else highlights the acumen of China’s planner state: almost half of Congolese-mined cobalt will be in the hands of Chinese firms by the end of the decade, with around 70% of refining happening in the People’s Republic. That is important because the mineral is critical for lithium-ion batteries. While Washington waged a host of unnecessary wars in the Middle East, Beijing secured critical minerals for the backbone technology of the mid-21st century. The same is true for graphite and tantalum — the latter being a key metal for capacitors, central to stable wind and solar energy.

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When it comes to rare earth metals, meanwhile, China boasts a potential chokepoint of its own. The country has larger total deposits of rare earths than any other, a glaring concern for the United States given that its military is reputed to have reserves equivalent to no more than two months’ use. While it is true such minerals can be found outside of China, for instance in Australia, Beijing currently has a near-monopoly on refining and processing them. If it wishes for meaningful technological sovereignty, here is another industry Washington may soon need to start developing. From a military standpoint the importance of these minerals can’t be overstated. Each F-35 fighter jet, for instance, reputedly requires hundreds of kilograms of rare earth metals.

Yet as we’ve already seen, when your political consensus has long rested on the idea that industry is of secondary importance to financial services, technology firms and various forms of rentierism, that is virtually impossible to accomplish. The margin for such businesses can be large, certainly, but as enterprises they lack the scalability favored by US tech capital. If you view effective business through the prism of monopolies, as someone like Peter Thiel does, mining and processing, with its absence of network effects and high labor component, is deeply unattractive.

As NS Lyons wrote last year for UnHerd, the West’s lack of manufacturing capacity is its most glaring defensive weakness. Even now, despite years of fighting in Ukraine, Europe and the US can’t match Moscow’s ability to manufacture artillery shells. If the West is struggling to maintain parity with Russia — whose manufacturing base is nothing like as productive or wide-ranging as China’s — what hope would they have in a protracted conflict with Beijing? In 2025 China produced half a million consumer drones. The prospect of what that could mean in a war economy is staggering. The country’s shipbuilding capacity, meanwhile, is over 200 times greater than that of the United States.

China’s preparedness — a function of its aversion to market fundamentalism — together with the Iran war, now offers a historic opportunity for those advantages to be extended. Its power isn’t the result of a growing military-industrial complex, but the reflection of world-class civilian industries set to seize even more business. As these industries grow further in the months and years ahead, bolstered by Trump and Netanyahu’s war, that provides an even larger industrial base able to pivot in a time of war. The idea, therefore, that rearmament is the route to industrial renewal for Britain, as John Healey and much of the Labour party insist, is refusing to learn not only the major lessons of the last 25 years, but the last month. If a war with China ever came, the People’s Republic would defeat us for the very same reason it currently exploits demand for green technology: it makes stuff. Its defense capacity is built on its industrial base rather than the other way round.

While some have compared the unfolding events in the Persian Gulf to the Suez Crisis, the American-Israeli failure to inflict a decisive defeat on Tehran would more closely resemble the Fall of Singapore for the British Empire. It wouldn’t, in short, be the end of Pax Americana, but the beginning of the end. The erosion of its alliances; the declining confidence in its competence as a hegemon; the diminishing security returns on hosting American bases — all of these matter. But it is in starting a war which will see China’s leadership in industry and technology grow further still that reveals Washington has played its most foolish hand yet.

Quite suddenly, then, the future seems clearer. Energy stability, whether or not Europe uses more of its own limited fossil fuels, means more electrification, more batteries and more storage. In short, it means deploying more of the technologies where China is the unrivaled market leader. And with technology comes influence, with political realities then bound to shift too.

Deng’s second most famous quote concerned China on the global stage: “Hide your strength, bide your time.” With this kind of leadership — in technology, supply chains and, increasingly, moral authority — the time for hiding may now be at an end.

At the global level, Cold War II is a struggle between the incumbent superpower, the United States, and a rising challenger, China. And unless Washington adopts a less ambitious global strategy, the United States is doomed to lose Cold War II.

The reason is simple: America’s strategic objective — perpetual US military hegemony in East Asia, Europe, and the Middle East — is far too costly to achieve. In contrast, the goal shared by China and Russia — a multipolar world of great-power spheres of influence — is not only possible but probably inevitable. The Chinese dragon and the Russian bear can patiently wait until Uncle Sam exhausts himself from overextension and then goes home, just as he did when he abandoned Vietnam, Iraq, and Afghanistan. And the major beneficiary of America’s military overextension is likely to be its greatest rival — Beijing.

The sharpest figures in the Trump orbit appreciate this, and see the linkages between the various flashpoints. But the administration as a whole can’t resist the strategic hubris and haphazardness that have characterized many post-Cold War American governments — indeed, with the new Iran War, the Trumpians have displayed this tendency on overdrive. 

At last month’s Munich Security Conference, for example, America’s envoy to NATO, Matthew Whitaker, observed: “China could call Vladimir Putin and end this [Ukraine] war tomorrow and cut off his dual-purpose technologies that they’re selling.… You know, this war is being completely enabled by China.”

Whitaker was right. The People’s Republic has allowed both Russia and Iran to evade American and European sanctions by buying their oil, with the help of “shadow fleets” and transactions denominated in China’s currency, the yuan. In addition, Beijing has supplied the Islamic Republic with components used in its devastatingly effective (and remarkably cheap) Shahed drones. The Chinese are reportedly negotiating to provide Iran with antiship missiles and have likewise transferred dual-use technology, which can be used for both military and civilian purposes, to the Russian defense industry.

More: the Chinese regime has helped Iran to use its Beijing’s encrypted Beidou-3 global satellite navigation system and provided the Islamic Republic with stealth radar systems. For its part, the Kremlin has supplied Tehran with satellite intelligence showing the location of US naval ships and aircraft in the Persian Gulf. The backscratching is mutual. Iran has supplied Russia with thousands of drones used in Ukraine.

In one telling, America’s new war against Iran helps advance its position in Cold War II, by taking out the weakest of the three pillars that uphold the adversary’s Eurasian power. Yet this is a comforting after-the-fact narrative, typically offered by academics and magazine writers. They do it to console Western audiences dismayed by the war’s aimlessness and potentially devastating consequences for American prestige as the Iranian mullahs appear to hold on and even squeeze Washington. 

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In reality, China and its ally Russia benefit from Trump’s foolish diversion of American military resources to the Persian Gulf. To sustain the operation, the United States has stripped South Korea of missile defense systems and dispatched them to the Middle East and has diverted two guided-missile destroyers based in Japan to the Persian Gulf area. According to the Center for Strategic and International Studies, in a war with China over Taiwan, the United States would run out of missiles in less than a week.

The Iran war benefits the Sino-Russian entente in other ways. It has divided NATO, with President Trump denouncing America’s European allies as “cowards” and then calling on them for aid. Having stumbled into a trap, Trump has humiliated himself and the nation by begging Beijing to help in the Persian Gulf. On March 14, in a Truth Social post, Trump desperately called on China along with other countries to send “War Ships, along with the United States of America, to keep the Strait open and safe.” China declined the invitation. 

What incentive does Beijing have to rein in its proxies Russia or Iran? While watching Uncle Sam struggle in the steel traps of Ukraine and the Persian Gulf, China’s leaders can focus on capturing one global industry after another and increasing the dependence on China of other nations — including America’s own allies.

Long ago, Chinese leaders viewed American over-extension abroad as a means for diminishing US power. In a 1958 speech, Mao Zedong told his fellow Chinese Communists that US military bases in Taiwan, Lebanon, and elsewhere were “nooses”: “The nooses have been fashioned by the Americans themselves and by nobody else, and it is they themselves who have put these nooses around their own necks…. The longer the US aggressors remain in those places, the tighter the nooses round their necks will become.” Then as now, China benefits when the United States wastes its resources on wars in peripheral countries. 

The military realm is not the only area in which Washington is losing Cold War II. Whether in the form of hot wars or cold wars, modern great power struggles ultimately are wars of economic attrition. As in the two World Wars and the first Cold War, the side with superior industrial resources tends to prevail. It matters, therefore, that in the words of economist Richard Baldwin, China is “the world’s sole manufacturing superpower.”

In 2025, China manufactured more goods than the next eight largest manufacturing countries combined. In addition to being the workshop of the world, the Middle Kingdom dominates global trade. Today, only 30% of the world’s countries trade more with the United States than with China, down from 80% at the turn of the millennium.

During the first Cold War, the United States and the Soviet Union competed for global influence in part by competing to finance projects like Egypt’s Aswan Dam. In today’s Cold War II, China has far outpaced America as the world’s leading source of development finance, providing $68 billion to developing countries, compared to only $39 billion from the United States in the first two decades of the 21st century. Indeed, the United States spent a paltry $76 billion on infrastructure in other countries over the past decade or so, compared to China’s $679 billion.

With the help of unpatriotic American corporations and investors, moreover, China has made the US defense and civilian economies dependent on Chinese factories. In 2023, China was the largest supplier in critical US military supply chains — ahead of Britain, India, and Japan.

China controls 80% percent of global graphite, necessary for batteries, 62% of fluorspar used in nuclear fuel and semiconductors, and a majority of the world’s magnesium, necessary for aircraft and missiles. Raytheon, a major US defense contractor, has declared that it is so dependent on Chinese suppliers that decoupling its supply chains from China is impossible. And while the Biden and Trump administrations have sought to boost US rare earth mining and processing, the American military may be dependent on China for at least a decade.

But surely America is far ahead in tech research? Wrong. According to the Australian Strategic Policy Institute, China leads global research in 90 critical technologies, the United States in 74. In quantum computing, a frontier technology, China is ahead of the United States, according to the Information Technology and Innovation Foundation.

What, then, is America’s comparative advantage over China as a great power? China has surpassed us in manufacturing, but we Americans lead the world in militarism — in lashing out here and there without a sense of deep strategic purpose or an appreciation for the problems associated with scarcity.

Since Trump’s second term began in January 2025, the United States has bombed governments or nonstate actors in seven countries — Iran, Venezuela, Nigeria, Iraq, Syria, Yemen, and Somalia. The Trump administration has illegally engaged in the extrajudicial murder of around 100 alleged drug smugglers on the high seas in the Caribbean and Pacific, even though drug smuggling doesn’t carry the death penalty in the United States. Likewise, the United States has kidnapped the president of Venezuela and allowed Israel to assassinate most of Iran’s leadership in a Pearl Harbor-style sneak attack, before unleashing an American military campaign of massive bombing of Iran with no evident plan to counter Iran’s violent response — or even a cogent definition of victory.

In the same period, China, while quietly enabling its Russian and Iranian proxies, hasn’t bombed any countries or killed any foreign nationals. Indeed, while the United States for decades has been almost constantly killing suspected terrorists, bombing and invading multiple countries, and piling up foreign civilian corpses all over the world, China has grown rich and influential without firing a shot.

Since 1979, when it fought a brief war with Vietnam, China hasn’t fought any wars, although it has engaged in border skirmishes with India and has bullied other countries with shows of force in the South China Sea. By avoiding military quagmires and concentrating on internal development and strategic trade, China in the last three decades has become the dominant manufacturing power on earth. 

And here is the absurd result. Even though the United States gets less than 10% of its oil from the Persian Gulf, American soldiers must die or be maimed for life and American taxpayers must spend hundreds of billions of dollars to prevent Iran, whose largest customer is China, from blocking oil shipments to China by Saudi Arabia, Kuwait, Qatar, the United Arab Emirates, and Iraq — all of whose largest trading partner is also China.

Meanwhile, American taxpayers must also spend money on European bases and fund the war in Ukraine to protect the European Union, which imports one and a half times as much from China as it does from the United States, from a hypothetical invasion by Russia, whose largest trading partner is… also China. In East Asia, Washington spends a fortune to defend Japan, South Korea, and Taiwan — all of which trade more with China than with America — from a hypothetical attack by China. Why China would want to attack its trading partners is never made clear.

In short, America’s global grand strategy consists of using the US military, reliant for weapons on Chinese supply chains, to protect China’s trading partners from China or other Chinese trading partners, at the expense of American soldiers and American taxpayers.

Cold War II is also fought in the arena of legitimacy or “soft power.” Does the claim that America fights other people’s wars for them so they don’t have to defend themselves result in gratitude to the United States? According to a poll this month, citizens of Canada, Britain, Germany, and France now regard China as a more reliable partner than America. In the United States itself, according to the Chicago Council on Foreign Affairs, public opinion has shifted under Trump, away from confrontation with China to “friendly cooperation and engagement with China,” rising to 53% of respondents last year, up from 40% percent in 2024.

Why wouldn’t people in nations all over the world have a more favorable view of a repressive but unwarlike state like China, which makes first-rate consumer products and offers trade and investment opportunities, than they would of the United States, which, under any president of any party at any given time tends to be killing people in multiple foreign countries while boasting that it is the greatest country ever?

While the People’s Republic has risen to global industrial and commercial supremacy by following former Chinese leader Hu Jintao’s slogan “peaceful rise,” the arc of the United States since the 1990s can be described as “violent decline.” Post-Cold War America has repeated the strategic mistake of leaders in London in the three decades after 1945, when Britain imagined that it was still a major power because its troops were still machine-gunning natives in places like Kenya and Oman, even as it lost its manufacturing leadership to Germany, Japan, South Korea, and Taiwan; Uncle Sam is the new Colonel Blimp. 

America’s bungling militarists in both parties can’t even tell us what they imagine a US “victory” in Cold War II would look like. In the world wars, the strategic goal was stripping Germany and Japan of their foreign empires, without which they would be nothing more than medium powers. In the Cold War, the similar goal of the United States and its allies was achieved when the Soviet Union gave up its essential Eastern European empire, even before the USSR disintegrated along lines of nationality, leaving the Russian core smaller than it has been in centuries.

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But China’s power, like that of the United States, is based on its own internal population, workforce, and markets, augmented by peaceful, civilian trade and investment. Outside of Tibet and Xinjiang, China is an empire of commerce, not conquest. Absent total collapse, China is likely to be a superpower, and Russia a regional great power, for centuries or millennia, under regimes of any kind. If it survives the current American-Israeli onslaught, which is likely, Iran will likewise endure as a civilizational state, albeit as a client of Moscow and Beijing rather than a fully coequal partner in their Eurasian bloc.

China, especially, is well-poised to inherit the outcome of Cold War II. If East Asia is defined as China, Taiwan, Mongolia, North Korea, South Korea, and Japan, then China accounts for around 90% of the East Asian population. If Germany had made up 90% of the population of Europe in 1914 or 1939, it would have been the European hegemon without any need to augment its strength by conquering its neighbors. 

Even if China and Russia were to adopt multiparty liberal democracy tomorrow, national pride, expressed through free and fair elections, would prevent their new democratic leaders from accepting humiliating, permanent subordination to US military power in their own neighborhoods. The same would be true of a proud and patriotic Iranian democracy freed of the mullahs. Somehow, the Trump administration, which promotes nationalism and sovereigntism for the United States, hasn’t figured out that other nations may feel strongly about their sovereignty, too, and be willing to die for it.

Sadly, we know how today’s Cold War II will end: in the eventual abandonment by the United States of its attempt at permanent US global hegemony, and the adoption by default of the Chinese and Russian alternative, a multipolar world characterized by spheres of military influence and trade blocs based on a handful of regional great powers. One need not have any sympathy for Putin’s gangster regime or China’s Communist dictatorship to recognize that their vision of world order is likely to be achieved, while the delusory post-1989 goal of American global hegemony can never be realized.

A multipolar world order is inevitable, because American voters since the fall of the Berlin Wall have never been willing to pay the costs, in American taxes and American blood, that would be required for the United States to be “the sole superpower” in every region on Earth for generations or centuries to come. American voters thought they were getting less unnecessary foreign military intervention in 2008 with Obama, who then launched new wars of regime change in Libya and Syria, and in 2016 with Trump, who has now begun an unnecessary and disastrous third Persian Gulf War. But sooner or later, the war-weariness of the American people will bring an end to the fantasy of a global Pax Americana built on drones and bombs. Perhaps we Americans in the 2030s or 2040s will finally get the kind of patriotic statesman we did not get after the Cold War — an American de Gaulle, who will liquidate too-costly overseas commitments and focus, at long last, on nation-building at home.