Governance Is the New Geoeconomics
The next global leader will be the system that governs best, not the one that grows fastest.
Lael Brainard is right that America’s China strategy is self-defeating, but the deeper failure isn’t economic incoherence. It’s administrative naïveté. Washington still treats governance as management while Beijing treats it as warfare. Tariffs, deficits, and industrial incentives dominate American debates as if the contest were still about trade volumes. Beijing is playing a different game entirely: it is competing over whose governing logic becomes the operating system of the global economy.
China’s advantage comes from the seamless fusion of bureaucracy, ideology, and strategy into a single instrument of statecraft. What the Chinese Communist Party builds through industrial policy is more than production capacity, it’s governance capacity: an algorithmic model of control that coordinates finance, technology, and narrative toward a single strategic objective—perceived inevitability.
The United States, by contrast, still confuses institutional resilience with strategic competence. We mistake “checks and balances” for “ends and means,” and treat foresight as branding rather than operational doctrine. Each administration rewrites the same slogans—protect innovation, restore alliances, defend the dollar—without noticing that Beijing has relocated the competition into the realm of systems design. The result is a self-inflicted asymmetry: America operates through policy. China operates through systems.
Readers familiar with Weaponized Governance will recognize the through-line: China’s transformation of bureaucracy into strategic machinery. This piece follows that evolution into the geoeconomic domain, where governance itself becomes the decisive infrastructure of power.
If the liberal world order wants to survive, it must learn to govern strategically, to wield openness as a form of coordination rather than a posture of complacency. The next phase of competition will be determined by whichever system can integrate economic, cognitive, and institutional power fastest without losing legitimacy. Governance, not growth, is the new geoeconomics. And democracies still hold the advantage, but only if they recognize that transparency and decentralization are not vulnerabilities to manage, but architectures to weaponize.
China’s Economic Statecraft Is Governance Statecraft
Western analysts often describe China’s industrial policy as a collection of sectoral goals—EVs, semiconductors, AI, green tech—but this misses the structural transformation underway. China upgrades industries while exporting administrative logic.
The evolution from export manufacturing to digital infrastructure to algorithmic governance represents a coherent progression. Each phase builds capacity not just to produce goods, but to shape how other countries plan, regulate, and execute economic decisions.
Made in China 2025 shaped supply chains and synchronized foreign production networks with Chinese planning rhythms. The Belt and Road Initiative facilitates infrastructure diplomacy, but its deeper function is administrative integration: embedding Chinese financing terms, project management processes, arbitration mechanisms, and performance metrics directly into partner states. The Digital Silk Road completes the circuitry: exporting the governance protocols that underlie data flows, digital payments, surveillance architectures, and online civic interaction.
These programs operate like global operating systems. They facilitate economic transactions and reshape how governments govern.
Chinese development banks provide capital and impart templates for loan supervision, environmental reviews, procurement rules, and dispute resolution. Chinese tech firms export hardware and export platforms whose underlying governance architectures—data harvesting rules, algorithmic filters, content moderation—embed Chinese administrative preferences into foreign civic space.
The real export is process. Compliance mechanisms, surveillance architectures, planning methodologies, and procedural dependencies are all systems that persist long after a port is finished or a fiber-optic cable is laid. Beijing isn’t exporting products; it’s exporting procedures.
This marks a major shift in economic statecraft. Traditional economic power manipulated markets, prices, and access. China manipulates the administrative nervous system that interprets markets, enforces rules, and defines access itself. Once a country adopts Chinese procedures, it adopts Chinese logic. Influence then operates through procedural integration rather than coercive threat.
The Administrative Asymmetry
America approaches bureaucracy through a lens of constraint, and China approaches it as battlespace. That divergence in administrative philosophy compounds into strategic asymmetry.
American governance architecture is optimized for legitimacy:
deliberation over speed
transparency over coordination
accountability over centralization
These qualities strengthen democratic adaptation and innovation, and they slow sustained cross-agency execution across long timeframes.
Chinese governance architecture, by contrast, is optimized for execution:
centralized planning enables synchronized action across economic, technological, and diplomatic domains simultaneously.
The same administrative organs that manage domestic industrial coordination also manage international development deals, technology standards, and strategic messaging. China’s bureaucratic machinery acts like a unified operating system.
When Beijing announces carbon neutrality by 2060 or semiconductor self-sufficiency by 2030, governments and companies interpret these signals as credible commitments backed by comprehensive machinery. When Washington announces similar ambitions, they are interpreted as political aspirations subject to elections, budget ceilings, and congressional dysfunction.
China governs strategy. America strategizes governance.
This inversion explains why American industrial policy often underperforms despite massive fiscal commitments. The CHIPS Act and the Inflation Reduction Act represent significant investments, but they rely on bureaucratic structures built for oversight rather than strategic coordination. China deploys administrative power as a form of compulsion; America deploys it as a form of compliance.
Brainard’s critique lands here: America lacks a theory of statecraft linking economic policy to administrative capability to political legitimacy. The United States can set goals, but struggles to sustain implementation. Its administrative architecture is stuck in the industrial era while the competition has become a systems-era contest.
Governance as Infrastructure
Economic power now flows through administrative networks rather than markets alone. The twenty-first century Bretton Woods won’t be monetary—it will be regulatory and digital.
Governance infrastructure creates strategic advantage through cumulative effects. Data governance rules define who participates in digital trade and under what constraints. AI regulatory regimes determine which innovations scale globally and which remain restricted. Green supply chain standards dictate which manufacturers qualify for climate financing. Arbitration courts associated with BRI embed Chinese legal norms into regional commercial disputes.
These mechanisms generate lock-in. Once a country adopts Chinese development finance procedures, its ministries must operate according to Chinese environmental, procurement, and reporting standards. Once a country adopts Chinese telecom protocols, its industrial ecosystem must align with Chinese technical specifications.
Administrative integration shapes economic behavior through procedural gravity, not coercive pressure. Beijing doesn’t need to force compliance; it designs systems that make Chinese rules the easiest path to implementation. He who writes the forms writes the future.
Sri Lanka’s adoption of Chinese development finance for Colombo Port City required restructuring its Environmental Impact Assessment procedures to match Chinese standards, adopting Chinese arbitration mechanisms for commercial disputes, and synchronizing its urban planning approval processes with Beijing’s project timelines. Two years later, these same procedures were applied to domestic infrastructure projects. The port was built, but Sri Lanka’s planning bureaucracy now operates according to Chinese administrative logic.
China controls not only what gets built, but how everything is planned, approved, financed, and governed. This is influence that operates below the threshold of traditional geopolitics and outlasts any political cycle.
America’s Missed Operating System
The United States is fighting a systems war with industrial-age tools. Its strategic reflexes—sanctions, subsidies, and alliances—were designed for transactional contests, not structural ones. They act on flows rather than the frameworks that shape flows.
Sanctions impose costs on specific actors or transactions, but they operate inside governance systems that Washington does not control. When the US sanctions Chinese technology firms, those firms simply build alternative supply chains, payment channels, and compliance architectures. Tactically successful, strategically self-defeating: each sanction accelerates the construction of parallel governance.
Subsidies attempt to redirect market behavior through price signals. But they operate through fragmented bureaucratic structures that cannot coordinate across agencies, time horizons, or strategic objectives. CHIPS and IRA pump cash into strategic sectors but do not create the administrative machinery needed to sustain long-term industrial positioning.
Alliances pool capabilities but rarely integrate governance. NATO standardizes defense logistics, and it still lacks integration in development finance, infrastructure standards, and data governance. The Quad coordinates diplomacy, not planning rhythms. The result is tactical alignment without administrative integration: coalitions that synchronize messages but not systems.
The United States still governs as if power rests in policy levers. China governs as if power rests in operating systems. Washington can no longer afford to separate economic policy from governance architecture. It needs a system capable of:
sustaining strategy across electoral cycles
coordinating implementation across federal, state, and private sectors
adjusting course based on real-world feedback
preserving democratic legitimacy while executing long-term initiatives
America gains advantage by governing through adaptive systems rather than fixed planning cycles.
The New Geoeconomics of Legitimacy
In the 20th century, capital determined influence. In the 21st century, legitimacy does.
Legitimacy determines whose system countries trust to manage their development, their data, their infrastructure, and ultimately their prosperity. Beijing demonstrates coordination legitimacy through synchronized execution—when China commits to carbon neutrality, its bureaucratic machinery aligns industrial policy, diplomatic messaging, and development finance simultaneously. This coherence signals to partner countries that Chinese governance can deliver integrated solutions.
Democracies generate coordination legitimacy through adaptive responsiveness—the capacity to adjust course based on feedback while maintaining strategic direction. But this advantage only translates into influence when democracies can demonstrate that adaptive coordination produces better outcomes than synchronized control. The challenge isn’t to preach democratic values, but to make them perform at systems scale.
Authoritarians monetize control. Democracies monetize trust.
But trust matters only when it produces outcomes that other nations want to emulate: economic growth, innovative capacity, social stability, environmental progress. The future geoeconomic order will be shaped by which governance model can demonstrate that it solves real problems—climate adaptation, resource scarcity, demographic stress, technological disruption—better than its competitors. The test is practical, not ideological.
The Democratic Counter-System
The counterstrategy isn’t decoupling, it’s redesign. Democracies need a governance architecture that treats openness not as a vulnerability but as a source of coordinated power.
A democratic counter-system would operate through distributed, adaptive coordination rather than centralized direction. Its strength would come from integrating capabilities without consolidating control.
Adaptive public–private planning would align long-term strategic goals with market dynamism. Not industrial policy that mimics China, but collaborative planning structures that allow government to steer innovation while letting firms experiment, fail, and pivot faster than any state planner.
Open-source regulatory frameworks would allow democratic nations to co-develop standards for data, AI, green tech, and supply chain verification that are interoperable yet adaptable. Instead of imposing closed rulebooks, democracies would define flexible standards that evolve with technology and allow local customization, a governance model that’s modular, not monolithic.
Consider AI governance as a test case. Rather than each democracy developing isolated AI safety frameworks that fragment the market and cede advantage to China’s unified approach, the US, EU, UK, Japan, and Australia could co-develop modular AI governance protocols—shared safety standards, interoperable audit mechanisms, and common principles for algorithmic transparency—while allowing each jurisdiction to customize implementation based on local values and legal traditions. This creates network effects that make democratic AI governance more attractive than Chinese alternatives. The appeal comes from superior coordination rather than exclusion.
Distributed foresight networks would integrate analysis across universities, think tanks, national labs, and private R&D institutions. China centralizes foresight. Democracies can federate it.
Civic data trusts would provide a democratic alternative to Chinese data governance by allowing individuals to maintain control over personal data while enabling governments to access aggregated information for planning, crisis response, and AI training. Privacy would become a competitive advantage rather than a constraint.
These institutions represent democratic adaptations of governance capacity: decentralized, transparent, and resilient.
The objective is to build systems of openness that outperform systems of control.
The Systems War
The twenty-first century contest is not about GDP or trade volumes. It is about whose governance model will structure global prosperity.
Economic interdependence is inevitable; governance interdependence is decisive. The administrative frameworks that organize development finance, data flows, infrastructure, and industrial planning will determine which countries shape global economic behavior.
Brainard is correct about America’s vulnerability, but not because policy is incoherent. The deeper issue is that America has more strategic ambition than administrative capacity. It possesses unmatched economic, technological, and institutional power, but lacks a governance architecture capable of coordinating that power at systems scale.
China turned governance into capital. America still treats it as compliance paperwork.
The next global leader won’t be the country that spends the most. It will be the country that governs the best.
And that contest is not yet decided.
The stakes extend beyond the US–China rivalry. The governance models that win will shape how humanity confronts climate stress, AI disruption, demographic crises, and economic volatility. The question is simple: Will the world solve its hardest problems through control or through coordination? Through closed systems or open architectures? Through optimization or through adaptation?
Democracies win when they treat openness as an operating system, not an ornament. Their advantage lies in agility, in the capacity to experiment, adjust, and innovate through distributed intelligence.
The first step is diagnostic: American policymakers must audit existing governance architecture for systems-level coordination capacity. Which agencies can sustain strategy across electoral cycles? Which mechanisms allow real-time course correction based on implementation feedback? Which structures integrate economic, technological, and diplomatic power without sacrificing democratic accountability? The gaps revealed by this audit become the blueprint for institutional redesign.
The future belongs to those who can govern uncertainty without collapsing under it. And in that contest, governance itself is the new geoeconomics. The final evolution lies in understanding governance as the architecture of global power itself. We will turn to that foundation in the January 20 dispatch, Everything Is Governance: Why the Real Contest with China Is Systemic, Not Economic.