The trajectory of U.S.–China technological competition under a second Trump administration is likely to be defined by asymmetry in strategy: a more volatile, leader-driven U.S. approach confronting an increasingly institutionalized and systematized Chinese framework. While Washington may escalate tariffs, expand export controls, and weaponize financial and technological chokepoints in episodic and politically responsive ways, Beijing is preparing for precisely this form of unpredictability by embedding competition into a durable legal and regulatory architecture. The result is not simply intensifying rivalry, but a shift toward more structured, rules-mediated competition on the Chinese side—particularly in critical domains such as artificial intelligence (AI) and emerging technologies.

At the center of this shift is the transformation of China’s economic statecraft from reactive and ad-hoc practices into a formalized, rule-based system designed to advance technological self-reliance and achieve “high-quality development” while managing external pressure. This transformation matters for the future of tech competition because it enables Beijing to systematically mobilize domestic economic instruments—law, regulation, administrative control, and market access—as tools of geopolitical strategy. Over the past decade, China has developed an increasingly integrated system of economic statecraft toolkits that coordinates trade, investment, and regulatory instruments to serve national security and development objectives. At the strategic core of China’s economic statecraft is sovereignty, to strengthen comprehensive national security, achieve strategic autonomy, reduce external dependence, and make China an indispensable node in global value chains. In effect, China is not only competing in technology sectors such as AI; it is redesigning the institutional terrain on which that competition takes place.

The ideological foundation for this approach is the concept of comprehensive national security, first introduced in 2014, codified in the 2015 National Security Law, and further elaborated in the 2025 National Security White Paper.[1] The National Security Law provides the overarching justification for any state intervention in the market deemed necessary to safeguard national interests.[2] It requires Chinese citizens, civil organizations, and firms to support government measures to strengthen national security, which is defined expansively across political, economic, technological, financial, cultural, biological, and ideological domains.  

The overarching macro strategy that organizes and increasingly synchronizes China’s various economic statecraft toolkits in service of comprehensive national security is “Dual Circulation.” This strategy prioritizes building a resilient domestic market while leveraging China’s role as a global manufacturing and supply chain hub to exert influence in global markets. Beijing does not formally describe “Dual Circulation” as an operational doctrine of economic statecraft; rather, it frames the strategy as a development paradigm to achieve high-quality growth. Nevertheless, its implementation carries clear strategic implications. As Chinese President Xi Jinping emphasized in his remarks on the 15th Five-Year Plan, implementing Dual Circulation is China’s response to the threats posed by rising protectionism and hegemonic power politics.[3] By reducing structural dependence on foreign technology, finance, and demand, Beijing seeks both to insulate itself from external pressure and to enhance its leverage within asymmetric interdependence.

What distinguishes China’s approach in this next phase of competition is not simply the accumulation of policy tools, but their integration into an increasingly coherent legal-institutional framework. Under such a framework, Beijing has assembled a toolkit that blends defensive and offensive capabilities. On the defensive side, Chinese authorities have prioritized supply chain security, technological indigenization, data governance, and financial risk mitigation, all of which are designed to build a domestic fortress against foreign coercion. On the offensive side, Beijing has developed statutory authorities that enable retaliatory or deterrent actions against foreign measures or actors deemed to undermine China’s national security. National laws provide formal legal bases for countermeasures, whereas ministerial-level and agency-level regulations and guidelines expand discretionary enforcement capacity. Importantly, formalization has not eliminated political discretion. Instead, it has institutionalized flexible enforcement within a codified legal framework.

This is where the domestic origins of China’s economic statecraft become directly relevant to the future of U.S.-China competition, especially in the technology domain. Because these tools are embedded in domestic law and regulatory practice, they can be deployed not only against foreign governments but also through market mechanisms that shape corporate behavior. The Chinese market itself becomes a dual-use instrument: access can be expanded to reward firms and countries that align with China’s technological ecosystem, or it can be restricted to impose costs on those that comply with U.S. measures. In AI and advanced technologies—where scale, data, and ecosystem integration are critical—this capacity to condition market access is a powerful lever.

Taken together, these developments reflect a more strategically aligned and legally institutionalized approach to national security governance, even if bureaucratic fragmentation and selective enforcement persist in practice. China’s economic statecraft is politically coherent in strategic intent and legally codified in authorities, yet functionally distributed across implementing agencies and operationally discretionary in application. Implementation blends state authority, regulatory mechanisms, market incentives, and corporate actors; economic statecraft is not exercised solely by government agencies but is mediated through firms and market structures embedded within a national security framework. Moreover, many of the instruments deployed within this system are inherently dual-use: measures designed to enhance domestic resilience, such as export controls, supply-chain security policies, and data governance regulations, can simultaneously wield external leverage (see Table 1). The result is not a seamlessly synchronized system, but an evolving statecraft toolkit that integrates resilience-building with coercive optionality. In effect, Beijing is institutionalizing a framework in which economic security and geopolitical leverage are mutually reinforcing rather than conceptually distinct.

Table 1 Selected National Laws Authorizing the Implementation of Economic Statecraft

Law	Primary Implementing Agencies	Defensive Role	Offensive Role	Dual-Use
Export Control Law (2020)	MOFCOM, Customs, NDRC	Protects critical technologies, dual-use goods, and sensitive supply chains	Restricts foreign access to Chinese technologies and materials	By controlling flows, it simultaneously insulates the domestic economy and creates leverage over foreign firms
Anti-Foreign Sanctions Law (2021)	MOFCOM, MFA	Shields domestic entities from foreign sanctions	Authorizes retaliation (asset freezes, transaction bans, visa restrictions)	Provides both protection and coercive signaling; enhances deterrence
Anti-Espionage Law (2014/2023)	Ministry of State Security, Public Security Bureau	Secures sensitive data, intellectual property, and commercial secrets	Enables punitive measures against foreign actors perceived as spying	Strengthens regulatory control over firms while deterring foreign intelligence collection
Data Security Law (2017/2025)	CAC, MIIT, local authorities	Protects classified and important data; controls cross-border transfers	Imposes restrictions on foreign access to Chinese data	Firms handling data become intermediaries; digital assets serve both protective and leverage functions
Cybersecurity Law (2017/2025)	CAC, MIIT	Secures critical information infrastructure	Imposes compliance obligations that can restrict foreign tech market participation	Cyber and digital regulation acts defensively and as a tool of coercion over global tech companies.
Foreign Relations Law (2023)	MFA, MOFCOM	Provides legal justification for state protection of sovereignty	Formalizes the basis for economic countermeasures against foreign policies	Integrates economic, security, and foreign policy domains
Foreign Trade Law (1994/2004/ 2025)	MOFCOM, Customs, SAMR	Protects domestic markets, ensures trade flows align with national priorities, protects domestic trade in services and cross-border digital flows, and safeguards national security	Grants authorities power to restrict exports or imports for strategic leverage, penalize circumvention of sanctions, and enable restrictions or controls on foreign service providers and platforms.	Expands trade to reinforce domestic resilience and create leverage over foreign actors; incorporates market and firm compliance into economic statecraft
Anti-Monopoly Law (2008/2022)	SAMR	Prevents abuse of market dominance by foreign or domestic actors; protects domestic competition	Can penalize foreign firms or joint ventures for restrictive or predatory practices	Supports domestic champions while creating leverage over foreign competitors
Anti-Unfair Competition Law (1993/2017/2019/2025)	SAMR	Protects domestic enterprises from deceptive or predatory practices	Penalizes foreign firms engaging in unfair trade practices in China	Reinforces domestic market resilience while signaling consequences for foreign actors

A defining feature of China’s economic statecraft is its hybrid implementation logic, in which market forces and state authority are deliberately intertwined. Rather than relying solely on bureaucratic mandates, Beijing leverages firms and commercial networks to implement strategic priorities, using legal frameworks and regulatory signals to shape corporate behavior and operationalize its strategy. Incentives, compliance requirements, and selective market pressures operate alongside formal laws and administrative rules, enabling policies to propagate through supply chains, investment flows, and cross-border movement of goods, services, data, and people. This hybrid approach allows the state to extend its reach without monopolizing execution or micromanaging: market actors internalize strategic objectives, while state institutions retain ultimate oversight and discretion. By weaving together market adjustments, corporate compliance, and formal state authority, China creates a system in which economic activity itself becomes an instrument of national strategy.

In the development of cutting-edge technologies such as AI, this hybrid model enables rapid scaling: private firms drive innovation and deployment, while the state shapes direction, sets constraints, and intervenes when strategic priorities are at stake. For example, AI amplifies the significance of this institutionalization of a hybrid approach. AI is not only a sector but a general-purpose technology that permeates economic and military domains. Its development depends on inputs—data, compute, talent, and capital—that are all subject to state influence in China’s system. By embedding control over these inputs within a national security framework, Beijing can coordinate long-term investment, protect domestic champions, and respond flexibly to external constraints. Moreover, AI enhances the effectiveness of economic statecraft itself: improved data analytics, monitoring, and enforcement capabilities can make regulatory tools more precise and scalable.

China’s hybrid approach to economic statecraft is made possible by the central role of the state in economic development. The state’s historical capacity to shape investment, set industrial priorities, and oversee corporate behavior allows it to combine market incentives with legal and regulatory authority. Firms, both state-owned and private, operate within this state-orchestrated framework, internalizing strategic objectives while responding to legal obligations and policy signals. By integrating market forces into a state-calibrated system, Beijing can diffuse policy implementation across economic actors without relinquishing strategic control, enabling the government to coordinate domestic resilience, influence foreign actors, and project leverage globally.  

At the operational level, China’s economic statecraft is executed through a network of agencies that translate strategic objectives into actionable policies. Among these, some institutions are particularly important because they sit at the crossroads of state authority and market activity, integrating regulatory oversight with commercial influence. These agencies do not act in isolation; rather, they coordinate legal, regulatory, and market instruments, ensuring that corporate behavior, trade flows, and investment patterns align with national priorities. By functioning at this interface, they exemplify the hybrid design of China’s system, where the state leverages market mechanisms to achieve strategic goals while retaining the discretion to intervene when necessary. Two of the most prominent agencies in this regard are the Ministry of Commerce (MOFCOM) and the State Administration for Market Regulation (SAMR), which play complementary roles in implementing economic statecraft across domestic and global markets.

MOFCOM has become a central pillar of China’s economic statecraft, primarily through its authority over trade, foreign investment, and market access. It administers instruments such as export controls, trade restrictions, and foreign investment approvals, and is the principal agency responsible for enforcing the Foreign Trade Law and the Export Control Law. MOFCOM can impose sanctions or countermeasures on foreign entities deemed to threaten China’s national security or economic interests, aligning trade and investment flows with broader strategic objectives. Beyond legal enforcement, MOFCOM also coordinates with other ministries to shape market expectations, provide guidance to firms, and ensure compliance, effectively channeling both state authority and market behavior toward national priorities. By combining legal, regulatory, and market-facing tools, MOFCOM operationalizes economic statecraft in ways that influence global trade patterns while safeguarding domestic economic resilience.

SAMR complements MOFCOM by leveraging China’s competition and corporate regulatory frameworks to advance strategic objectives. It is responsible for enforcing the Anti-Monopoly Law and Anti-Unfair Competition Law, allowing it to monitor, investigate, and punish domestic and foreign firms that engage in practices contrary to the state-defined national interests. SAMR can intervene in mergers, acquisitions, pricing strategies, and business practices that threaten domestic competition or the strategic positioning of Chinese firms in global markets. Its enforcement authority makes it a key instrument for indirect coercion, shaping corporate behavior and creating leverage over foreign actors without relying solely on trade or financial restrictions. In practice, SAMR’s role reflects the hybrid nature of China’s economic statecraft: it integrates legal authority, regulatory oversight, and market-mediated compliance to support both domestic resilience and international leverage.

Beyond its hybrid design, China’s economic statecraft framework is inherently dynamic, continuously adjusting to shifting domestic priorities and international conditions. Laws, regulations, and enforcement practices are more frequently updated, expanded, or reinterpreted to address new vulnerabilities, geopolitical pressures, and technological developments. Pilot programs, selective enforcement, and inter-agency coordination allow policies to be tested, refined, and scaled rather than applied rigidly. Corporate compliance and market behavior are also monitored and guided, enabling authorities to recalibrate their interventions as trade flows, investment patterns, and foreign responses evolve.

Despite its growing sophistication and continuous adjustment, China’s implementation of economic statecraft is far from flawless. Implementation capacity remains uneven, as enforcement varies across agencies, sectors, and local jurisdictions, and some measures rely heavily on voluntary compliance by private firms that may pursue their own commercial interests. Bureaucratic fragmentation and competing mandates can create inconsistencies or delays. At the same time, dual-use instruments sometimes generate conflicting objectives—protecting domestic firms while signaling coercive leverage abroad can be difficult to calibrate. The system also faces external constraints: foreign countermeasures, multilateral trade rules, and global interdependence can blunt the effectiveness of coercive actions. Legal and regulatory frameworks, though comprehensive, often contain ambiguities that leave enforcement discretion high but predictability low. Collectively, these imperfections demonstrate that China’s economic statecraft, while strategically ambitious and constantly evolving, still faces practical, institutional, and geopolitical limitations in execution.

Under a second Trump administration, where U.S. policymaking and implementation is unconventional and relies less on institutions but nonetheless can produce rapid escalation—expanded export controls, broader technology decoupling, and pressure on allies—the interaction between the two systems is likely to produce a more segmented and contested global technology landscape. The United States will continue to dominate key upstream technologies, particularly at the frontier of semiconductor design and advanced AI models, but its approach may remain reactive and coalition-dependent. China, by contrast, is positioning itself to compete through system-level resilience and institutional adaptability, even if it lags at the cutting edge in certain domains.

The likely outcome is not convergence but managed divergence. China’s institutionalized approach allows it to absorb shocks, reallocate resources, and sustain long-term competition, while gradually reducing points of vulnerability. At the same time, its reliance on discretionary enforcement and hybrid implementation introduces inefficiencies and uncertainties that may constrain innovation. For the United States, episodic escalation may achieve tactical advantages but risks reinforcing China’s drive toward self-reliance and system-building.

Over the longer term, the most important implication extends beyond any single administration. By formalizing the integration of economic governance and national security, China is constructing a durable model of techno-economic competition that is less sensitive to political cycles and more capable of sustained strategic alignment. If successful, this model could reshape not only bilateral competition but also the broader global technology order, offering other countries an alternative framework in which markets, states, and security are more tightly fused.

In this sense, the future of U.S.-China tech competition will not be determined solely by breakthroughs in AI or advances in specific technologies. Instead, it will hinge on the interaction between two fundamentally different systems: one that increasingly institutionalizes competition through law and market design, and another that retains greater flexibility but also greater volatility. The balance between these approaches will shape not just who leads in AI, but also how technological power is organized and exercised in the international system.

The views expressed are solely the author’s and do not reflect those of Perry World House, the University of Pennsylvania, or Carnegie Corporation of New York.

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[1] Full text of the white paper “China’s National Security in a New Era” (新时代的中国国家安全) is available on the official website of the State Council Information Office, May 12, 2025, http://www.scio.gov.cn/zfbps/zfbps_2279/202505/t20250512_894771.html

[2] Full text of the National Security Law is available at https://www.nsed.gov.hk/assets/pdf/book_2.pdf

[3] Full text of Xi’s speech draft, entitled “Remarks on ‘Suggestions of the CPC Central Committee on Formulating the 15th Five-Year Plan for National Economic and Social Development’” (关于《中共中央关于制定国民经济和社会发展第十五个五年规划的建议》的说明) is available on Qiushi, https://www.qstheory.cn/20251031/cadea786d2614daa946f1ecf066a2d3c/c.html