How the US and China are managing a rivalry of convenience

Tensions between the United States and China are hard to miss. But scratch beneath the surface, and the narrative isn’t as binary as it seems. Despite the talk of Cold War-style hostilities, military escalation, and technology bans, both countries are quietly maintaining a complicated—almost contradictory—pattern of engagement. They’re not friends. Yet they’re not walking away from each other either.

Climate pacts, backchannel diplomacy, and occasional alignment on global economic stability point to a relationship governed less by ideology and more by necessity. What’s taking shape isn’t a thaw, but a framework—a calculated balancing act where mutual benefit occasionally takes priority over public posturing. It’s the kind of rivalry that makes space for pragmatism. There’s a name for this uneasy middle ground: a rivalry of convenience. And it’s increasingly the only option either side can afford.

Peel back the headlines about economic disentanglement, and the full picture is far less absolute. Yes, both sides are throwing up regulatory barriers. But despite tariffs and export controls, their economies remain deeply enmeshed. Supply chains have shifted, but not snapped. Chinese exports to the US have dipped—though China still ranks among America's largest trading partners. And US multinationals haven’t exactly staged a mass exodus from the Chinese market. Many are simply keeping a lower profile.

Instead of full decoupling, what we’re seeing is a more surgical approach. High-risk sectors like semiconductors and telecom are being fenced off. Consumer goods, shipping networks, and manufacturing logistics? Still humming along. This isn’t Cold War isolationism—it’s firewalling the most sensitive sectors while letting everything else flow, albeit cautiously.

Take electric vehicles. Despite massive US subsidies to ramp up local production, American carmakers continue to rely heavily on Chinese battery components. Rare earth minerals? Still overwhelmingly sourced from China. These dependencies aren’t easily replaced, which is why policymakers have been careful to avoid scorched-earth tactics.

Europe’s framing of “de-risking” has quietly reshaped the narrative. Instead of undoing interdependence, the focus is on managing it—spreading risk across more countries and creating buffers. Washington and Beijing haven’t said it out loud, but both appear to be working from the same playbook.

Cooperation may sound like a relic of a friendlier era, but in some domains, it remains non-negotiable. Climate policy is the clearest example. After a long diplomatic freeze, US and Chinese climate envoys resumed formal dialogue in 2023—not because relations warmed, but because disasters did. Record-breaking wildfires, soaring temperatures, and erratic monsoons have hammered both countries. Climate is no longer a moral cause; it’s a shared liability.

The result? Renewed data-sharing agreements, methane tracking protocols, and grudging alignment on green finance principles. They’re not hugging it out, but they are getting work done.

Even defense officials, often the last to blink in confrontations, have shown signs of tactical maturity. After a near-miss between naval forces in the Taiwan Strait, both sides reactivated crisis hotlines. They know the danger isn’t a grand war plan—it’s an accidental spark. That’s why some protocols, long frozen by mistrust, have quietly come back online.

And then there’s the financial front. Amid rising debt and jittery markets, monetary authorities on both sides have resumed discreet coordination. Neither wants a repeat of the 2015 yuan devaluation shock, nor the liquidity chaos of 2008. These quiet dialogues—rarely publicized—suggest that even while they talk about divergence, they’re working behind the scenes to avoid collapse.

For both Washington and Beijing, foreign policy isn’t just strategic—it’s performative. Leaders are under pressure to appear unyielding while navigating constraints that demand flexibility.

In the US, President Biden faces a volatile election season. Voters care about jobs, prices, and growth—not grand geopolitical abstractions. While standing up to China plays well politically, triggering a supply chain meltdown or market panic doesn’t. So the administration walks a careful line: blocking chip exports one day, signaling openness to talks the next.

China’s domestic backdrop is equally fraught. A shaky real estate sector, stubborn youth unemployment, and sluggish consumer demand have left Beijing economically vulnerable. Nationalist rhetoric dominates the airwaves, but policy signals tell a more cautious story. Beijing’s retaliation to US moves has been largely symbolic. Behind the bluster, the priority is stability.

Xi Jinping, like Biden, is navigating a dual imperative: project strength abroad, manage fragility at home. That makes overt escalation risky—and selective cooperation more palatable, even if it’s done out of sight.

So what we’re witnessing is not inconsistency. It’s choreography. Each side is managing optics while keeping backchannels open where it matters. The rivalry may dominate headlines, but compromise underpins the mechanics.

For business leaders, the message is clear: plan for turbulence, but don’t expect collapse. This is a world of dual-track engagement. The “China + 1” strategy—supplementing Chinese operations with alternatives in Vietnam, India, or Mexico—is now standard practice. But abandoning China entirely? Still unlikely.

Investors would do well to shift their focus from rhetoric to signals that actually move markets. Forget the soundbites. Instead, track moves in export controls, regulatory enforcement, and green tech incentives. The battle lines are being drawn around specific sectors—AI, chips, clean energy—not across the entire trade landscape.

For governments, a new playbook is emerging. Gone are the days when diplomacy neatly mapped onto ideological camps. We’re moving toward a patchwork of ad hoc coalitions, informal dialogues, and temporary alignments. It’s not pretty, but it’s functional.

Strategic coexistence is not a comfortable concept, especially for policymakers raised on binary frameworks. But in this multipolar, interdependent era, gray zones are here to stay.

This isn’t a Cold War reboot. It’s something more fluid—and arguably more perilous. A rivalry of convenience reflects the contradictions of global leadership in an era of shared threats. The US and China are circling each other warily, carving out areas of cooperation even as they spar over influence. It’s a dance, not a duel. Such an arrangement may look awkward. It is. But it’s also realistic. The alternative—complete disengagement—would be economically devastating and strategically reckless. So instead, both sides hedge, calibrate, and improvise.

For companies, investors, and governments, the takeaway is simple but sobering: Expect contradictions. Plan for ambiguity. And above all, learn to read between the lines. The real signals won’t always come from podiums or press releases—they’ll come from who’s still talking, and what they’re quietly working on behind closed doors.