How to respond to the rise of China is one of the central questions of U.S. foreign policy in this century. Some analysts see China displacing the United States as the world’s leading power by the anniversary of Communist rule in 2049. Others predict a “Thucydides Trap” in which a rising power and an existing hegemon wind up in a disastrous war—perhaps triggered by a crisis over the fate of democratic Taiwan. Still others see China reaching a plateau as its demographic decline and low factor productivity make it fail to escape the “middle income trap.”

After Richard Nixon’s visit to China in 1972, American strategy was to engage China in hope that trade and enrichment of a middle class would lead to gradual liberalization. The policy was not totally naïve. Evidence from similar cultures, such as Korea and Taiwan, showed such a democratic transition as per capita income approached $10,000. Moreover, foreign policy did not rely solely on such hopes. Bill Clinton reaffirmed the U.S. security treaty with Japan as an insurance policy in 1996, and George W. Bush improved relations with India. There were even some signs that a degree of liberalization was occurring in China at the beginning of this century. But hopes for liberalization have faded since Xi Jinping has tightened Communist Party control over civil society as well as regions like Xinjiang and Hong Kong. Whatever modernization theory suggests about economic development encouraging liberalization in the long term, we now know that it should be measured in half-centuries and centuries rather than a few decades.

Relations with China are now at their lowest point in nearly 50 years. Some blame this situation on Donald Trump’s presidency, but he was more like a man who poured gasoline on an existing fire. It was Chinese leaders who built the fire with their actions such as mercantilist manipulation of the trading system, theft and coercive transfer of intellectual property, and militarization of artificially constructed islands in the South China Sea. The U.S. reaction has been bipartisan, but thus far with little articulation of a strategy.

Many in Washington try to fill that void by referring to a new Cold War, but historical metaphors can mislead. The United States and the Soviet Union had little commerce or social contact, but we and our allies trade heavily with China, and hundreds of thousand Chinese students attend our universities. We face a new type of challenge that is not Stalin’s communism, but “market Leninism”—a form of state capitalism based on hybrid public and private companies. We and our allies are more deeply intertwined with this Chinese economy than we ever were with the Soviet Union. It makes sense to decouple security risks by excluding companies like Huawei and ZTE from our 5G telecommunications network, but it would be very expensive to try to break all global supply chains.

Moreover, even if we could break apart economic globalization, we would remain interdependent in ecological globalization. Pandemics and climate change obey the laws of biology and physics, not politics. We cannot solve these problems alone. We must learn to distinguish power overothers from power withothers. Success on climate change or pandemics will require us to work with China at the same time, for example, that we use our Navy to defend freedom of navigation in the South China Sea or use sanctions to promote human rights. A strategy focused solely on “great power competition” or strategic competition fails to protect us from transnational threats. After all, more Americans were killed by the COVID pandemic than died in World War II or in all our wars since 1945.

Strategy must rest on careful net assessment of the China challenge. It is equally dangerous to over- or underestimate Chinese power. Underestimation breeds complacency, while overestimation creates fear—either of which can lead to miscalculation. Before the COVID crisis, China’s economy had grown to two-thirds the size of the United States’s (measured at exchange rates), but China had a slowing growth rate. Beijing is investing heavily in its military but remains behind the United States in global military power. And in the soft power of attraction, international polls show that “Xi Jinping thought” is not a best seller. In contrast, our support for democracy and human rights enhances our soft power in much of the world.

A realistic assessment of the relationship shows that the United States has major geopolitical advantages. Geographically, we are bordered by oceans and friendly neighbors, while China has territorial disputes with India, Indonesia, Japan, Malaysia, the Philippines, and Vietnam. A second U.S. advantage is energy: The shale oil and gas revolution has transformed the United States from an importer to an exporter. China, on the other hand, is highly dependent on energy imports passing through the Persian Gulf and the Indian Ocean, where the United States has naval supremacy. The United States also has a demographic advantage with a workforce that is likely to grow over the next decade, while China’s will shrink. India will soon pass China as the world’s most populous nation. And while China is investing heavily in technology, America remains at the forefront in the key technologies of biotechnology, nanotechnology, and information technology. American research universities dominate higher education while no Chinese universities rank in the top 25. At the same time, though the United States holds high cards, a misguided strategy could lead us to discard our aces of alliances and international institutions or severely restrict immigration. Given its ethnic nationalism, this kind of openness is not possible for China.

Where does this realism leave the promotion of democracy and human rights in our China policy? Clearly China is too powerful for us to impose it, as we did with Germany and Japan after four years of world war. Nor is the record very favorable regarding the imposition of democracy on smaller states.  As Ronald Reagan pithily put it in 1982, “Regimes planted by bayonets do not take root.” At the same time, democracy promotion has been part of American foreign policy since we became a great power after Woodrow Wilson entered the First World War in 1917. Democratic peace theory (which can be traced back to Immanuel Kant) became popular in Washington after the end of the Cold War by positing that democratic countries are less likely to go to war with one another. Even if true, the path may be long. At the same time, a foreign policy that espouses democracy not only expresses our values, but also enhances our soft power in much of the world.

As a powerful autocratic country, China poses a challenge to democracy. Its aid often supports other autocratic governments, and its large market size gives it leverage. China has become the leading trade partner of more countries than the United States. While it does not go to the extremes that Russia does, it uses cyber power to interfere in other countries’ elections. At the same time, the United States and its allies are not threatened by the export of communism in the same way as in the days of Stalin or Mao. There is less proselytizing than during the real Cold War. Few people today are taking to the streets or jungles in favor of “Xi Jinping thought with Chinese characteristics.” Instead, the problem we face is a hybrid system of economic and political interdependence which China can manipulate to support authoritarian governments, and influence opinion in democracies to prevent criticism of China—witness it economic punishment of democratic countries like Norway, South Korea, and Australia after they criticized China.

How then should we incorporate the issue of democracy in our strategy for responding to the China challenge? Democracy cannot be the central feature of the strategy, because as noted above there is too much else going on in the relationship. But we should make it an important component of the strategy by pursuing the following steps. First, and most important, we must shore up our practice of democracy at home. The most effective means of exporting democracy is to be the shining city on a hill that our founders proclaimed. Our influence is greatest when we are an example to emulate. Nothing destroys soft power more quickly than hypocrisy. We weaken ourselves both at home and abroad when we do not live up to our own democratic standards.

Second, we can come to the assistance of allies when they are being bullied by China, showing solidarity as well as compensatory market opening. This can include help when it comes to cyber intrusions. Technical assistance in dealing with information technology should be an important part of aid programs.

Third, we can bolster democracies by organizing them diplomatically. The Biden Administration is convening a first-ever “Summit for Democracy” that will include over 100 leaders (though that is more than the 83 countries listed as “Free” by Freedom House.) But the continuing process can reduce isolation and bolster a sense of progress and solidarity. Declarations alone are not enough. Procedures can be established for mutual assistance to democratic processes such as managing elections. Aid programs can be tailored to include such purposes.

Fourth, we should consider linking trade in some information technology products to democratic standards in the use of that technology. For example, an alliance of the willing could sign an agreement regarding standards for privacy, surveillance, and management of data and then offer market access preferences to the members who adhere to those standards. The group would remain open to others that were willing to adhere to those democratic standards. This could include an inner circle of norms for the Internet. An open-ended minilateral approach could be made compatible with the broader multilateral approach to trade.

Such an approach should not be seen as a new Cold War, but rather an exercise in preventing a race to the bottom on norms. Some analysts worry about the development of a countervailing league of autocracies that will outstrip democratic countries, but even if China grows at a more rapid rate than now expected, the combined economies of the autocracies will not equal that of the United States, Europe, Japan, and other democracies for well into this century.

In conclusion, a strategy toward China should start with realism, but that does not mean ignoring the soft power of democracy. A good strategy should aim to avoid either a hot or cold war, while cooperating when possible and competing when necessary. Our strategic objective should be to shape China’s external behavior by strengthening our alliances and international institutions, and by bolstering our economy and technological advantages at home. While China derives power from controlling access to its vast market, so do we—while also offering openness and values that greatly increase our soft power of attraction. In addition, our military power of deterrence is welcomed by the many countries that want to maintain friendly relations with China but do not want to be dominated by it. A good strategy should regard the China relationship as a cooperative rivalry, where we pay equal heed to both aspects of the term. It should include our commitment to democracy while avoiding demonization. The big question is whether our domestic politics will allow us to manage such a strategy.