China-US friction triggers an unexpected windfall
Rivalry between Beijing and Washington could have significant benefits for the Indo-Pacific region
The rise and fall of great powers is a recurring theme throughout the history of global politics. The contours of the China-US strategic rivalry fit neatly into this pattern.
Besides heightened military competition, Beijing and Washington are also engaged in a policy known as intense institutional balancing. They seek to project influence and constrain each other at the same time. This is likely to intensify in the years ahead.
The reasons are straightforward. Nuclear deterrence makes military confrontation less viable. Institutions instead offer states a new way to compete.
Instead of arms, they provide a platform for using rules, norms and strategic coalitions to counter rivals while avoiding escalation. They could define this great power rivalry.
Institutional balancing primarily takes two forms. Inclusive balancing integrates rivals into procedures and principles to constrain their behavior.
Exclusive balancing establishes new institutions that deliberately exclude a rival, thereby coordinating pressure and diminishing its influence.
Global order
The US support for China’s accession to the World Trade Organization in 2001 exemplifies inclusive institutional balancing. The hope was that membership in the organization would integrate China into a rule-based global order and socialize its behavior.
Conversely, the revival of the Quadrilateral Security Dialogue in 2017, which brought together the United States, Australia, India and Japan, illustrated exclusive balancing.
The group intentionally excluded China and promoted a shared vision of regional stability among like-minded democracies.
China has pursued similar strategies through the Shanghai Cooperation Organization and the BRICS grouping – platforms designed to amplify its voice and challenge the US-led liberal international order.
While this institutional competition mirrors broader strategic rivalry, it does not inevitably produce negative outcomes. If confined to these arenas, it can yield several important, and often overlooked, benefits for the Indo-Pacific.
For example, it can spur reform and innovation within existing institutions. TJ Pempel has argued that ‘Institutional Darwinism’ prevents stagnation.
The emergence of the China-led Asian Infrastructure Investment Bank challenged global development finance. Established institutions, including the Asian Development Bank and the World Bank, responded by increasing infrastructure needs in the Global South.
Competition improved their efficiency and effectiveness.
It is worth noting that critics have highlighted the negative impacts of infrastructure-related projects, particularly those led by China, including widespread corruption, human rights violations and environmental degradation.
Still, institutional rivalry between great powers has deepened regional engagement. Both the US and China, in their efforts to win influence, have increasingly turned to ASEAN and Pacific Island nations as key partners.
This has led to greater cooperation on shared challenges, including climate change, pandemic preparedness, disaster relief and economic development.
Regional affairs
In many cases, this competition creates incentives for Washington and Beijing to offer more attractive, inclusive and responsive initiatives in regional affairs.
Perhaps most critically, institutional competition drives the provision of public goods in the region. China’s Belt and Road Initiative reflects its effort to build influence by addressing the region’s infrastructure gap.
The United States, Australia and Japan launched the Blue Dot Network and the Build Back Better World initiative with G7 partners in response to Beijing’s maneuvers. Regardless of which initiative ultimately garners more support, the result for the region is clear.
Developing countries have benefited from the increased infrastructure funding, expanded economic opportunities and higher standards for transparency and sustainability.
Far from being a zero-sum game, institutional competition can assist regional development prospects and offer states more choices.
These benefits, though indirect, are tangible and substantial. They have bolstered regional stability and created a more balanced playing field.
Even a second Trump administration – despite its skepticism toward multilateralism – is unlikely to abandon institutional balancing altogether. After all, the ‘Quad 2.0’ was revived under his first term.
What is more likely is a shift towards more transactional institutional formats, focused on specific outcomes rather than broad principles. The form may change, but the function will remain, using institutions as strategic tools to compete without triggering war.
To be sure, institutional balancing is not without risks. If weaponized too aggressively, it can deepen distrust and heighten security dilemmas between Washington and Beijing, undermining effective multilateral institutions.
The United Nations Security Council was paralyzed by its permanent members during the Cold War and the United States continues to sabotage the World Trade Organization’s dispute resolution mechanism.
Institutional balancing
But the alternative – a slide into open military confrontation – would be far worse. As China-US competition accelerates, policymakers should embrace institutional balancing as a safer and more productive mode of rivalry.
It is not a panacea. But if managed carefully, it can serve as a buffer against escalation, a catalyst for regional cooperation and a source of public goods.
In a divided world, that is no small achievement.
Kai He is a Professor in the School of Government and International Relations at Griffith University in Australia. Huiyun Feng is a Professor in the School of Government and International Relations at Griffith University.
This article is based on their journal article The positive externalities of US-China institutional balancing in the Indo-Pacific (International Affairs 101, no. 1 (2025): 35–52) and their forthcoming book The Upside of US-Chinese Strategic Competition: Institutional Balancing and Order Transition in the Asia Pacific (Cambridge University Press, 2025).
This edited article is republished from East Asia Forum under a Creative Commons license. Read the original article here.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy of China Factor.