U.S.-China competition, including economic competition, has come to define U.S. foreign policy since 2017. The two economies are the first- and second-largest national economies in the world, and they are deeply intertwined in all aspects of international exchange. This report, the first of a four-part series, includes economic and institutional analyses of U.S.-China economic competition.

U.S.-China Economic Competition

Gains and Risks in a Complex Economic and Geopolitical Relationship

Nadia Almasalkhi, Aaron B. Frank, C. Ben Gibson, Timothy R. Heath, Khrystyna Holynska, King Mallory, Steven W. Popper, Alexandra Stark, Tobias Sytsma, Noosha Uddin, et al.

Edited by Howard J. Shatz, Daniel Egel

ResearchPublished Jun 23, 2025

U.S.-China competition, including economic competition, has come to define U.S. foreign policy since 2017. The two economies are the first- and second-largest national economies in the world and are deeply intertwined. Changes to the relationship, however necessary, could be costly. The United States thus faces a challenge ensuring that its economy meets the nation's needs under conditions of coupled, strategic competition.

To respond to this challenge, RAND researchers conducted economic and institutional analyses of U.S.-China competition, engaged in a participatory foresight exercise to understand the long-term path for ensuring U.S. economic health, and created two economic competition games exploring the dynamics of multiple countries trying to ensure their economic health while interacting with each other and the private sector.

This report, the first of a four-part series, includes the economic and institutional analyses of U.S.-China economic competition. Individual chapters cover the Chinese concept of economic security; a stock-taking of China-related measures by the United States; an analysis measuring how intertwined supply chains are and options for disentangling them; a theoretical account of the effectiveness of cooperative versus restrictive modes of engaging with China and Chinese officials; and examinations of specific aspects of U.S.-China competition, including return migration of Chinese nationals from the United States to China, energy and environmental security, how Chinese privately owned enterprises might differ from Western private enterprises and implications for policy, and potential ways by which to update the rules of international trade to adapt to China's unique system of economic management.

Key Findings

Conceptual differences challenge effective policymaking

  • China's concept of economic security is broader than that of the United States, overlaps with other aspects of national security, and has become central to the legitimacy of the Chinese Communist Party.
  • Although superficially resembling Western private companies, Chinese private companies are more tightly bound to government policy and have greater access to government resources.
  • These conceptual differences mean that trying to change the Chinese economy will be difficult and that Chinese private companies may need to be treated differently from Western firms.

Understanding of U.S. policy approaches to competition is incomplete

  • Most coercive economic measures have shown limited success in meeting their strategic objectives and have affected the U.S. and allied economies as well.
  • Cooperative measures have not transformed the relationship but have achieved more circumscribed goals and may also have had positive externalities with few costs.

The U.S. and Chinese economies are integrated in complex ways such that decoupling comes with great costs

  • The global economy has become increasingly interconnected since the mid-1990s, largely because of an increasing reliance on China as a supplier of inputs for many countries.
  • Return migration of Chinese students to China could benefit the United States by strengthening productivity-enhancing economic ties, but it can also raise a security concern over intellectual property transfer or theft.
  • The U.S. and Chinese economies are intertwined through energy, and both countries seek energy security and environmental security.

Multilateral approaches to meeting the China challenge can mitigate risks and enhance benefits

  • Investments in technology with allies, lowering trade costs with allies, and developing alternative goods can be an efficient way to de-integrate from China and assure the security of production networks in the long run.
  • Revising global trade rules to charge tariffs that take account of explicit and implicit subsidies, using a competitive neutrality framework, could help revive rules-based international trade.

Recommendations

  • U.S. policy could be directed at retaining highly skilled Chinese immigrants while tailoring the security response to focus on research security and research integrity cases with clear connections to national security or economic espionage.
  • The United States would benefit by building critical mineral processing capabilities at home and in friendly countries and supporting the expansion of the domestic nuclear industry for commercial use but continuing to cooperate with China in energy issues in selected areas of mutual benefit.
  • One possible improvement to the global trade order is to institute a standalone multilateral competitive neutrality framework.
  • Because China follows different rules, the terms of its participation in the global system should be adjusted to take account of those differences.
  • Governments should set broad, enforceable principles that can guide private sector actions and let the private sector determine the best specific courses of action.
  • Because separating from China will be costly, a central policy challenge will be determining how to allocate those costs — either to government through subsidies and tax changes, or to the private sector through laws and regulations.
  • Improvements in domestic policy can help the United States better assure the health of its economy over the long term.

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Almasalkhi, Nadia, Aaron B. Frank, C. Ben Gibson, Timothy R. Heath, Khrystyna Holynska, King Mallory, Steven W. Popper, Alexandra Stark, Tobias Sytsma, Noosha Uddin, and Jessie WangShatz, Howard J. and Daniel Egel, eds., U.S.-China Economic Competition: Gains and Risks in a Complex Economic and Geopolitical Relationship. Santa Monica, CA: RAND Corporation, 2025. https://www.rand.org/pubs/research_reports/RRA1947-1.html.
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This research was sponsored by the Defense Advanced Research Projects Agency and conducted within the Acquisition and Technology Policy Program of the RAND National Security Research Division (NSRD).

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