Coexistence or Competition? China’s Evolution in Global Institutional Power

Abstract

China’s engagement with global governance has evolved significantly since 1949, transitioning from outright rejection during its revolutionary isolation (1949–1971) to strategic engagement with key institutions such as the United Nations, IMF, and WTO (1971–2000), and more recently to the creation of parallel institutions like the AIIB and Belt and Road Initiative (2000–present). This paper traces these historical phases to analyze how China has navigated and reshaped global norms, balancing its integration into existing frameworks with efforts to build alternative governance structures. While Hegemonic Stability Theory and Power Transition Theory offer insights into China’s evolving strategy, neither fully encapsulates its pragmatic, adaptive approach. China’s domestic regulatory innovations, such as the Social Credit System and its promotion of cyber sovereignty, increasingly influence its global governance initiatives, reflecting a deliberate effort to export its governance models. Rather than fully integrating into or replacing the U.S.-led liberal order, China employs a dual-track strategy: engaging with global institutions where advantageous while promoting state-centric alternatives to liberal norms. This study argues that China’s historical trajectory underscores its pivotal role in shaping a multipolar world order, where competing governance frameworks coexist and challenge the dominance of Western-led institutions.

1. Introduction: China and the Global Order in Historical Perspective

In the mid-20th century, China stood on the fringes of global governance. In 1949, the newly established People’s Republic of China (PRC) was largely excluded from the major international institutions that structured global politics. The U.S.-led liberal international order, built on institutions such as the United Nations (UN), the International Monetary Fund (IMF), and the General Agreement on Tariffs and Trade (GATT), was designed to facilitate economic cooperation and political stability, but it also reflected the dominance of Western powers (Ikenberry 2011). For over two decades, China remained outside these structures, rejecting them as tools of Western imperialism. However, as China reoriented its economy and diplomacy in the late 20th century, its approach shifted from isolation to strategic engagement.

Today, China is deeply embedded in global governance. It is a permanent member of the UN Security Council, a key player in the WTO, and a dominant force in global finance through its participation in the IMF and World Bank. Yet, even as China integrates into these institutions, it has simultaneously sought to reshape global governance to reflect its own strategic and political priorities (Johnston 2019). Over the past two decades, China has expanded its influence through initiatives such as the Asian Infrastructure Investment Bank (AIIB), the Belt and Road Initiative (BRI), and increasing control over standard-setting bodies in areas like telecommunications and artificial intelligence (Hillman et al. 2021). These efforts have fueled a growing debate: is China attempting to replace the existing order, reform it from within, or establish a parallel system that coexists alongside it?

Understanding China’s evolving approach to global governance is more than an academic exercise—it carries significant political and economic consequences. If China seeks to replace the liberal order with an alternative system rooted in state-led economic models and sovereignty-first governance, it would mark the most profound shift in international politics since the end of the Cold War (Allison 2017). If, however, China is primarily reforming existing institutions to increase its influence without fundamentally altering their structure, then the current order may prove more resilient than critics suggest (Ikenberry 2018). Alternatively, if China is building a parallel set of institutions, then the world may be moving toward a fragmented system in which multiple, competing governance models coexist, raising questions about long-term stability and global coordination (Weiss and Wallace 2021).

This paper seeks to explain how China’s evolving engagement with global governance reflects a broader transformation in international order, and to clarify whether China aims to reform, coexist with, or replace the liberal institutional framework. By adopting a historical approach, it contributes to ongoing debates about rising powers, norm contestation, and the future of global governance. Rather than treating China’s strategy as a static policy choice, it examines how China’s engagement with international institutions has evolved over time, shaped by shifting domestic priorities and external pressures. The analysis is structured around three key historical periods: Revolutionary Isolation (1949–1971): China’s rejection of Western-led institutions and efforts to build alternative international networks. Pragmatic Engagement (1971–2000): China’s gradual participation in global governance, from UN membership to WTO accession. Parallel Institution-Building (2000–Present): China’s efforts to create new global structures while still operating within existing ones.

A crucial component of this analysis is the role of domestic governance innovations in shaping China’s global strategy. China has developed unique regulatory mechanisms, such as its Social Credit System and digital surveillance infrastructure, to manage compliance and economic activity within its borders (Creemers 2018). These governance tools are now influencing China’s approach to global institutions, particularly in areas such as financial regulation, cybersecurity, and digital governance (Feldstein 2019). As China gains influence, the question is not only whether it will reshape global rules but also how its own domestic governance models will diffuse internationally.

This article draws on a wide range of sources, including peer-reviewed academic research, policy reports, institutional data, and official Chinese and international documents. By examining China’s historical trajectory in global governance, this paper provides a foundation for understanding its current and future role in shaping international institutions. China’s interactions with the global order have never been static; rather, they have evolved in response to shifting domestic priorities, external pressures, and broader geopolitical transformations. From outright rejection of the Western-led system during the Mao era to pragmatic engagement under Deng Xiaoping, and finally to the creation of alternative institutions in the 21st century, China’s strategy reflects both adaptation and assertion.

A key challenge in assessing China’s role is determining whether it seeks to replace, reform, or coexist with the liberal international order. Some scholars argue that China’s long-term ambition is to replace the U.S.-led system with an alternative governance model rooted in state-led development, sovereignty-first diplomacy, and non-Western norms (Rolland 2020). Others suggest that China is more interested in reforming existing institutions from within—gaining greater influence in organizations like the United Nations, World Bank, and WTO without fully dismantling them (Johnston 2019; Ikenberry 2018). A third perspective holds that China is building a parallel system that coexists alongside the liberal order, establishing new economic and political institutions (e.g., AIIB, BRI) that operate independently but do not necessarily seek to overthrow the dominant global structure (Weiss and Wallace 2021).

Rather than committing to a single definitive conclusion, this paper explores these competing interpretations through a historical lens, tracing China’s engagement with international governance across distinct periods. It seeks to answer the following research question: is China attempting to replace the liberal international order, reform it from within, or build a parallel system that coexists alongside it? It argues that China’s approach is fluid rather than fixed, shaped by historical legacies, economic imperatives, and strategic calculations. The central thesis is that China pursues a dual-track approach: participating in global institutions where beneficial, while simultaneously constructing alternative governance models that reflect its state-centric priorities. To substantiate this argument, the paper adopts a historical-comparative method, dividing China’s engagement into three distinct phases—Revolutionary Isolation (1949–1971), Pragmatic Engagement (1971–2000), and Parallel Institution-Building (2000–present). It also draws on insights from Power Transition Theory, Hegemonic Stability Theory, and World-Systems Theory to interpret China’s evolving global strategy and assess its implications for the future of international order. By contextualizing China’s actions within this broader historical framework, the paper aims to provide a more nuanced understanding of how China’s evolving strategy interacts with the global order—and what this means for the future of international governance.

2. Revolutionary Isolation and Early Rejection of the Liberal Order (1949–1971)

The founding of the PRC in 1949 marked a major turning point in global politics. Under the leadership of the Chinese Communist Party (CCP), China adopted a revolutionary foreign policy that was fundamentally opposed to the Western-led international order. The Cold War had already divided the world into ideological camps, with the United States and its allies promoting a liberal capitalist order, while the Soviet Union led a competing socialist system. China, however, pursued an independent path, rejecting both Western institutions and, later, Soviet leadership.

One of the earliest and most significant barriers to China’s integration into global governance was its exclusion from the United Nations (UN). The PRC was not recognized as the legitimate representative of China at the UN, as the United States and its allies continued to support the Republic of China (ROC) government in Taiwan (Harding 1992). This exclusion reinforced the CCP’s view that international institutions were biased in favor of Western powers and hostile to socialist states. Instead of seeking participation in these structures, China focused on building alliances outside of the liberal order, particularly with newly decolonized nations in Asia and Africa. However, China’s position was complicated by its eventual rupture with the Soviet Union, which led to a unique foreign policy strategy—neither fully aligned with the socialist bloc nor integrated into the Western system (Lüthi 2008).

2.1. China’s Initial Rejection of the UN and Western Institutions

From 1949 to 1971, China’s exclusion from the UN shaped its broader disengagement from Western-led institutions. The PRC viewed its exclusion as a direct result of U.S. imperialism, particularly given Washington’s diplomatic efforts to block Beijing’s membership while maintaining recognition of the ROC. The UN was seen not as a neutral platform for global governance but as a tool for Western states to suppress revolutionary movements and maintain economic and military dominance (Harding 1992).

China’s rejection of the UN was part of a broader policy of resistance toward the Bretton Woods institutions—the IMF and the World Bank—which it viewed as instruments of capitalist exploitation. While many developing nations saw potential benefits in these institutions, China refused to engage with them, believing that economic independence and self-reliance were the only paths to genuine sovereignty (Chen 2001).

This stance was consistent with Mao Zedong’s ideology of continuous revolution, which framed engagement with the West as a threat to China’s socialist transformation. Rather than integrating into the U.S.-led economic system, China pursued an autarkic model, focused on domestic economic campaigns such as the Great Leap Forward (1958–1962) and state-controlled industrialization (Garver 2016). However, while China distanced itself from global institutions, it actively sought to engage with the developing world, positioning itself as a leader of anti-imperialist struggles.

2.2. The Bandung Conference and China’s Alternative Alliances

China’s early diplomatic efforts were not limited to complete isolation. While rejecting Western institutions, Beijing sought to establish alternative international partnerships, particularly among post-colonial states. A defining moment in this strategy was China’s participation in the Bandung Conference of 1955.

The Bandung Conference, held in Indonesia, was a landmark gathering of Asian and African nations committed to opposing colonialism and promoting non-alignment during the Cold War. China played a crucial role in the conference, with Premier Zhou Enlai leading the PRC’s delegation. Unlike Mao’s confrontational rhetoric, Zhou adopted a more pragmatic diplomatic approach, emphasizing peaceful coexistence and cooperation with non-communist countries (Zhang 2007). At Bandung, China proposed and endorsed the Five Principles of Peaceful Coexistence, which would later become a cornerstone of its foreign policy: mutual respect for sovereignty, non-aggression, non-interference in internal affairs, equality and mutual benefit, and peaceful coexistence (Ministry of Foreign Affairs of the People’s Republic of China 2014).

By engaging with post-colonial states, China expanded its international influence without joining Western institutions. This strategy laid the groundwork for China’s future engagement with the Global South, which remains central to its foreign policy today, particularly in initiatives such as the Belt and Road Initiative (Sheng and Nascimento 2021). However, despite these efforts, China remained largely excluded from formal global governance institutions until the early 1970s.

2.3. The Sino-Soviet Split and Its Impact on China’s Global Position

While China’s foreign policy in the 1950s was closely aligned with the Soviet Union, tensions between Beijing and Moscow escalated in the late 1950s and culminated in the Sino-Soviet split of the 1960s. This ideological and strategic division was driven by several key factors. One of the primary sources of tension was ideological disagreements between the two communist powers. Mao Zedong criticized Soviet leader Nikita Khrushchev’s policy of “peaceful coexistence” with the West, arguing that it compromised revolutionary principles and abandoned the struggle against imperialism (Lüthi 2008). Mao believed that the Soviet Union was becoming revisionist, prioritizing stability over the continued global expansion of socialism, which led to increasing distrust between the two states.

Beyond ideological disputes, military and border conflicts further exacerbated tensions. Clashes along the Sino-Soviet border in the late 1960s escalated into armed skirmishes, particularly in 1969, when fighting broke out on Zhenbao Island, a contested area along the Ussuri River. These conflicts deepened the division between the two nations and turned their ideological rift into a tangible geopolitical conflict. The hostility extended beyond direct military engagements, as both nations began strengthening their defense strategies against each other, despite their shared socialist foundations.

The split also had significant consequences for the global communist movement, as China began challenging Soviet leadership in the developing world. While the Soviet Union had traditionally been the dominant force in shaping global socialist movements, China positioned itself as an alternative revolutionary leader, particularly in Africa and Asia. Beijing provided ideological and material support to communist insurgencies and anti-colonial movements, often competing with Moscow for influence over leftist movements in the Global South (Farnsworth 1966). This led to fragmentation within the international socialist movement, with many communist parties forced to choose between alignment with Beijing or Moscow.

The Sino-Soviet split left China in a unique position—it was neither fully aligned with the Soviet bloc nor integrated into the Western order. As a result, China pursued a more independent foreign policy, emphasizing self-reliance while also seeking new diplomatic openings with non-aligned countries. This shift set the stage for China’s rapprochement with the United States in the early 1970s, as both Washington and Beijing recognized their shared interest in counterbalancing Soviet influence. These diplomatic realignments ultimately culminated in China’s admission to the United Nations in 1971, marking a significant turning point in its engagement with global governance (Garver 2016).

China’s early rejection of Western-led institutions, its efforts to build alternative alliances, and its split from the Soviet Union all contributed to a distinct foreign policy outlook that continues to shape its engagement with global governance today. Many of the key principles that defined China’s Cold War-era diplomacy—sovereignty, non-interference, and skepticism toward Western-dominated institutions—remain central to its diplomatic strategy.

Theoretical perspectives help frame whether this historical trajectory represents continuity or transformation. Power Transition Theory (PTT) posits that global conflict is most likely when a rising power approaches parity with a dominant one, challenging the existing hierarchy (Organski 1958). From a PTT perspective, China’s Cold War-era strategy of supporting revolutionary movements and challenging Soviet leadership reflected an early ambition to shape an alternative world order. Today, while China still operates within the global system, its efforts to build parallel institutions suggest a hybrid strategy—coexistence with, but also competition against, the liberal order.

Similarly, World-Systems Theory helps explain China’s long-term alignment with the Global South. Since the Bandung Conference in 1955, China has positioned itself as a leader of post-colonial nations, an approach that continues today through large-scale infrastructure projects in Africa and Latin America. This raises an important question: is China’s modern global strategy fundamentally different from its Cold War-era approach, or does it reflect a consistent effort to balance engagement with global governance and sovereignty-first diplomacy? The answer to this question is crucial for understanding China’s current and future role in shaping the international order. While China is now deeply embedded in global institutions, its historical experiences of exclusion, ideological competition, and alternative alliance-building continue to inform its approach to global governance today.

3. Pragmatic Engagement and Institutional Adaptation (1971–2000)

Between 1971 and 2000, China’s engagement with global institutions shifted from outright rejection to strategic participation, but this period did not mark full acceptance of the liberal international order. Instead, China’s actions reflected a pragmatic approach—leveraging international institutions for economic and diplomatic gains while resisting deeper political integration.

This phase raises an important question: did China’s institutional engagement in this period signal a transformation in its governance approach, or did it reinforce its historical pattern of strategic adaptation? Hegemonic Stability Theory suggests that China’s participation in institutions like the IMF, World Bank, and WTO indicated acceptance of a U.S.-led order, while Power Transition Theory offers an alternative perspective—China’s engagement may have been a tactical move to gain power within the system before challenging it (Organski 1958; Ikenberry 2008). This section examines three pivotal moments in China’s evolving relationship with global governance: its recognition by the UN in 1971, entry into the Bretton Woods institutions (1980s–1990s), and WTO accession in 2001.

3.1. UN Recognition in 1971: A Shift from Rejection to Strategic Engagement

China’s recognition by the United Nations in 1971 marked its first major institutional breakthrough. After decades of exclusion, the PRC replaced the Republic of China (Taiwan) as China’s official representative at the UN, following the passage of UN General Assembly Resolution 2758. This diplomatic victory was not just a shift in China’s global status but also a strategic adjustment driven by Cold War geopolitics. The Sino-Soviet split and rapprochement with the United States encouraged Washington to support China’s UN bid as a counterweight to Soviet influence (Harding 1992).

Despite joining the UN, China remained skeptical of Western-led governance structures. Throughout the 1970s and 1980s, China consistently opposed UN resolutions that it saw as infringing on state sovereignty, particularly those involving humanitarian interventions and economic sanctions (Foot 2020). This stance reflected a continuation of Cold War-era ideological concerns. China would engage with global institutions, but on its own terms, maintaining a strict non-interventionist doctrine that persists today.

3.2. Joining the Bretton Woods: Economic Integration Without Political Convergence

China’s entry into the IMF and World Bank in 1980 marked a significant shift in its institutional engagement. However, unlike many other developing nations that joined these institutions under strict structural adjustment programs, China successfully negotiated entry on its own terms, ensuring that its engagement served economic modernization rather than political transformation (Lin et al. 2004).

Unlike post-communist states that joined the IMF and World Bank with deep liberalization commitments, China retained sovereignty over its domestic economic policies and resisted Western-imposed political conditionality (Kong 2000). While these institutions provided China with development loans and technical assistance, Beijing maintained tight control over the pace and scope of economic reforms. This strategic flexibility allowed China to selectively benefit from global financial institutions while preventing them from influencing domestic governance.

Under Deng Xiaoping’s economic reforms, China gradually integrated into global markets while preserving a strong state role in economic planning. This period laid the groundwork for China’s hybrid economic model—a state-driven capitalist system operating within global trade structures (Pei 2006). Rather than being shaped by the rules of global finance, China adapted these institutions to fit its strategic goals, setting a precedent for its engagement with future global governance structures.

3.3. WTO Accession in 2001: Did China Change, or Did China Change the WTO?

China’s accession to the WTO in 2001 was the culmination of 15 years of negotiations, marking its deepest level of integration into the global economy. Unlike its earlier engagements with the UN and Bretton Woods institutions, WTO membership required China to make binding commitments to market liberalization, including lowering tariffs, protecting intellectual property rights, and opening key sectors to foreign investment (Bhattasali et al. 2004).

Western policymakers widely assumed that WTO accession would trigger political and economic liberalization, based on the belief that deeper integration into global markets leads to democratic reforms (Pei 2006). However, this expectation proved overly simplistic. Instead of embracing Western economic norms, China leveraged WTO rules to advance its own industrial policies while maintaining state dominance in critical sectors (Zeng and Liang 2013). This strategic adaptation blurred the lines between compliance and defiance, allowing China to integrate into the global trading system without fundamentally altering its governance model.

China’s WTO entry also challenged prevailing assumptions about globalization and institutional convergence. While many expected China to adapt to WTO norms, its participation instead highlighted the limitations of neoliberal trade governance in disciplining a major state-driven economy. China’s use of state subsidies, intellectual property restrictions, and government-backed enterprises led to persistent tensions with Western economies, culminating in disputes over trade imbalances and unfair competition.

China’s UN recognition in 1971 was a major diplomatic victory, but it remained skeptical of Western norms, positioning itself as a champion of sovereignty and non-intervention. IMF and World Bank membership in the 1980s–1990s facilitated economic modernization, but China resisted political conditionality, rejecting the neoliberal prescriptions imposed on other developing nations. WTO accession in 2001 marked the most significant moment of institutional integration, yet rather than conforming to the global trade order, China strategically adapted the system to accommodate its state-led economic model.

This raises a fundamental theoretical question: did WTO membership change China, or did China reshape global trade governance? Hegemonic Stability Theory (HST), as outlined by Keohane (1984), posits that dominant powers like the U.S. create and maintain global institutions to promote stability and cooperation. Applying this framework to China’s gradual integration into the WTO suggests its participation reflects an acceptance of a U.S.-led liberal order, as adherence to WTO norms required significant economic reforms. However, Power Transition Theory (PTT) offers a competing view, suggesting that China’s engagement may have been a strategic maneuver to increase its influence within these institutions while gradually altering the global trade system to align with its state-led economic model (Organski 1958; Ikenberry 2008). The outcome of China’s WTO participation underscores a paradox: while China adopted significant market reforms to comply with WTO requirements, its sustained reliance on state subsidies and industrial policies suggests it leveraged the system to enhance its own economic power, raising questions about the resilience of existing global governance frameworks in accommodating rising powers (Zeng and Liang 2013).

Ultimately, this period set a historical precedent for China’s contemporary global strategy: working within institutions while resisting deep political and ideological convergence. As China’s global influence continues to grow, the long-term impact of its institutional engagement remains a central debate in international relations.

4. Parallel Institution-Building and the Rise of an Alternative Order (2000–Present)

Since the turn of the century, China has actively pursued a strategy of parallel institution-building, creating new mechanisms that both challenge and complement the existing U.S.-led global order. While China continues to participate in traditional institutions like the United Nations and the World Bank, it has simultaneously sought to establish alternative governance frameworks better aligned with its vision. The 2008 global financial crisis was a pivotal moment, exposing vulnerabilities in the Western financial system and accelerating China’s efforts to advocate for reforms in global governance while promoting its own institutions (Womack 2017). There are three notable initiatives that need to be addressed in this period of parallel institution building: the AIIB, The New Development Bank, and The Belt and Road Initiative.

4.1. The Asian Infrastructure Investment Bank: A Challenge to the World Bank?

The establishment of the Asian Infrastructure Investment Bank (AIIB) in 2015 marked a critical step in China’s parallel institution-building. With an initial focus on financing infrastructure projects across Asia, the AIIB aimed to address what many developing countries viewed as the inadequate reach and rigid conditionalities of traditional lenders, such as the World Bank and the Asian Development Bank (ADB). By emphasizing state-led development and flexible lending terms, the AIIB appealed to countries seeking infrastructure funding without the stringent neoliberal conditions typically imposed by Western-led institutions (Callaghan and Hubbard 2016).

Unlike earlier Cold War-era alternatives to Western institutions, the AIIB is notable for its inclusive membership, attracting over 100 members, including major U.S. allies like the United Kingdom, Germany, and France. AIIB, on its official website, indicates that “AIIB is mandated to focus on infrastructure. Operating on the foundations of robust banking principles, high project standards, multilateral governance and backed by a global and diversified shareholder base, we strive for financial and environmental sustainability.” (Asian Infrastructure Investment Bank n.d.). This inclusivity reflects China’s pragmatic approach, signaling that the AIIB is not explicitly anti-Western but rather aims to coexist alongside existing structures. However, scholars argue that the AIIB’s rise challenges the dominance of the World Bank, with early research showing a decline in World Bank infrastructure projects among AIIB members (Qian et al. 2023). While China retains significant influence as its largest shareholder, decision-making processes are designed to enhance multilateralism, distinguishing the AIIB from previous Cold War-era institutions dominated by a single state (Callaghan and Hubbard 2016). This balance of multilateralism and Chinese leadership reflects China’s broader strategy of promoting an alternative order without directly confronting Western-led governance.

4.2. BRICS and the New Development Bank: Alternative Multilateral Cooperation

The formation of BRICS (Brazil, Russia, India, China, and South Africa) and the creation of the New Development Bank (NDB) in 2014 further illustrate China’s commitment to fostering alternative multilateralism. BRICS emerged as a coalition of large emerging economies advocating for greater representation of the Global South in global governance institutions, which they argued were biased in favor of Western powers (Abdenur 2014).

The NDB was established to fund infrastructure and sustainable development projects across BRICS and other developing countries, offering an alternative to traditional Western lenders like the World Bank and IMF. Its creation reflected the collective dissatisfaction among emerging economies with the perceived bias and dominance of Western powers in global financial governance. The NDB adopts a shared governance structure, ensuring that no single country holds a dominant role. Each BRICS nation contributes equally to the bank’s capital and has equal voting rights, reflecting a deliberate attempt to promote a more inclusive and equitable financial model that emphasizes collective decision-making over unilateral leadership (Kanyane 2022). This structure highlights a deliberate attempt by China and its BRICS partners to promote a more inclusive and equitable financial model, emphasizing collective decision-making over unilateral leadership. At the same time, the NDB represents China’s broader strategy of fostering South–South cooperation, reinforcing alliances with other emerging economies while positioning itself as a leader among developing nations (Abdenur 2014). The NDB’s establishment reflects a strategic move by China and its BRICS partners to create a more balanced global financial system, addressing the needs and aspirations of developing countries through inclusive governance and cooperative development initiatives.

Scholars note that the NDB represents a departure from traditional development financing models by offering loans without the political conditionalities associated with the World Bank or IMF (Widjanarko 2024). However, the NDB’s effectiveness remains debated, with some critics questioning its capacity to rival established institutions due to its relatively small capital base (Latino 2017). Nevertheless, the NDB highlights China’s dual strategy of collaborating with like-minded states while promoting an alternative to the U.S.-led liberal order.

4.3. The Belt and Road Initiative: A Global Geopolitical Strategy

The Belt and Road Initiative (BRI), launched in 2013, is China’s most ambitious effort to reshape global governance through a combination of infrastructure investment, trade, and strategic partnerships. Spanning over 140 countries, the BRI encompasses massive projects such as railways, ports, and energy infrastructure, aiming to enhance global connectivity while advancing China’s economic and geopolitical interests (Caskey 2024). A key component of the BRI is the development of transportation infrastructure to improve connectivity and reduce trade costs among participating countries. This includes significant investments in railways, highways, ports, and airports, facilitating more efficient movement of goods and services across regions (Chen and Li 2021). The BRI also emphasizes the importance of trade and investment facilitation, aiming to create a network that boosts economic cooperation and development. By investing in infrastructure and establishing trade partnerships, China seeks to foster economic ties and promote shared growth among participating nations (Belt and Road Portal 2023).

Supporters argue that the BRI addresses critical infrastructure gaps in the Global South, providing opportunities for economic growth that Western-led institutions have failed to deliver. However, critics contend that the initiative fosters debt dependency among recipient countries, allowing China to exert strategic influence in regions such as Africa and Southeast Asia (Hurley et al. 2019). Furthermore, the lack of transparency and environmental sustainability in many BRI projects has raised concerns about its long-term viability. More recent assessments, however, challenge the debt-trap narrative, arguing that claims of deliberate debt dependency are often overstated or unsupported by empirical evidence (IISS 2022).

BRI signals a shift in global power dynamics. By creating new trade routes and strengthening economic ties with key regions, China is effectively redrawing the map of globalization, positioning itself as a central hub of global trade. Scholars argue that the BRI represents China’s strategic move to reshape global power structures, not only by enhancing global trade networks but also by using infrastructure investments to extend its geopolitical influence. Unlike formal institutions such as the AIIB and NDB, which are governed by more rigid frameworks, the BRI operates as a flexible geopolitical strategy, combining economic incentives with political influence.

4.4. Coexistence or Competition? China’s Strategic Approach

China’s creation of parallel institutions like the AIIB, NDB, and BRI reflects a pragmatic strategy of coexistence rather than outright confrontation with the Western-led order. These initiatives are not explicitly designed to overthrow existing institutions but to offer alternatives to countries dissatisfied with traditional structures. The AIIB’s inclusive membership, including U.S. allies such as the United Kingdom and Germany, suggests that China is pursuing an approach that emphasizes cooperation alongside competition (Zhao 2020). Similarly, the multilateral governance of the NDB and BRI’s global reach demonstrate an attempt to engage with and complement the existing international order, rather than replace it outright. Importantly, the BRI has evolved beyond physical infrastructure to encompass digital and environmental dimensions, including the Digital Silk Road (DSR) and the Green Belt and Road. These initiatives promote Chinese digital standards, green technologies, and infrastructure solutions in host country markets, expanding China’s geo-economic influence.

However, tensions persist. While these institutions offer alternatives, they also challenge the norms of transparency, accountability, and governance that underpin Western-led institutions like the World Bank and IMF. For instance, the BRI has been criticized for fostering debt dependency among recipient nations (Hurley et al. 2019), while the AIIB has raised concerns about weakened environmental and social safeguards in its project approvals (Gransow and Price 2019). Critics argue that China’s dual-track strategy—engaging with U.S.-led structures while building its own—reflects a long-term vision of a multipolar world order, where power is distributed more evenly, and China plays a central role in shaping global norms (Zhao 2020). This approach, while not directly antagonistic, subtly erodes the dominance of Western-led institutions by creating parallel systems that attract a growing number of participants.

China’s parallel institution-building efforts raise a critical question: are these initiatives complementary to the existing system, providing necessary alternatives to underrepresented countries, or do they represent a blueprint for a fundamentally alternative global order? While the answer remains contested, these developments underscore China’s ambition to reshape global governance in a way that reflects its economic and geopolitical priorities. Whether this strategy evolves into coexistence or competition will depend on the future interactions between China’s parallel institutions and the Western-led global order.

See

Table 1. Timeline of China’s Approach to Global Governance.

Period	Key Events	Significance
Revolutionary Isolation (1949–1971)	Founding of PRC (1949); Exclusion from UN; Bandung Conference (1955); Sino-Soviet Split (1960s)	Rejection of Western institutions; leadership in the Global South.
Pragmatic Engagement (1971–2000)	UN Recognition (1971); Entry into IMF/World Bank (1980); WTO Accession (2001)	Strategic participation for economic gains without full integration.
Parallel Institution-Building (2000–Present)	AIIB (2015); New Development Bank (2014); Belt and Road Initiative (2013); Cyber Sovereignty Advocacy	Blending participation and alternative frameworks to reshape global norms.

below for a concise timeline of China’s approach to global governance, highlighting key historical phases, major events, and their significance. This timeline demonstrates China’s evolution from revolutionary isolation to pragmatic engagement and, more recently, to parallel institution-building.

While Hegemonic Stability Theory and Power Transition Theory provide important frameworks for understanding the dynamics between rising and dominant powers, they only partially explain China’s evolving strategy. HST may overstate the coherence of the liberal order and underplay China’s efforts to work within it, while PTT often assumes a direct challenge to hegemony that is not fully borne out by China’s behavior. This paper offers an alternative interpretive framework: rather than seeing China as a simple revisionist or status quo power, it argues that China pursues a dual-track strategy, selectively engaging with existing institutions while simultaneously constructing alternatives that reflect its domestic priorities and ideological preferences. This perspective contributes to the literature by reframing China’s foreign policy not as a binary choice between reform and revolution, but as a historically contingent, pragmatic effort to shape global governance from within and alongside the current order.

5. Governing the Future: China’s Domestic Regulatory Model and Its Global Influence

China’s domestic regulatory frameworks are increasingly shaping its approach to global governance, reflecting a deliberate exportation of its internal models to the international stage. This shift is not merely an extension of China’s domestic priorities but a broader effort to reshape global norms and practices in ways that align with its state-centric governance model. This approach complements China’s evolving diplomatic style, which now seeks to portray global leadership through stability, competence, and developmental appeal, rather than ideological confrontation (Yuan 2024). As demonstrated in earlier sections, China’s creation of parallel institutions like the AIIB, NDB, and BRI highlights its pragmatic approach to working within and outside the existing global order. However, China’s ambitions extend beyond institutional building: its domestic innovations—particularly in economic compliance, digital sovereignty, and internet governance—are becoming templates for its global influence.

Studying this phenomenon is crucial for understanding how China projects its regulatory power abroad, offering alternative governance models to countries dissatisfied with the Western liberal order. For instance, mechanisms like the Social Credit System, which regulate compliance domestically, now influence China’s expectations for foreign businesses and contractors operating within its economic sphere. Similarly, China’s Digital Silk Road and advocacy for cyber sovereignty signal its intent to reshape digital governance on a global scale.

This section explores this transformation in detail, examining the exportation of China’s economic compliance models through the Social Credit System, the global dissemination of its digital governance tools via the Digital Silk Road, and its push for a state-centric internet governance model through initiatives like its role in the ITU. Together, these efforts reveal China’s evolving approach to governing the future, not just within its borders but across the global stage.

5.1. Social Credit System and Economic Compliance

The Social Credit System (SCS), launched domestically to regulate businesses and individuals, has become an integral tool for shaping China’s global economic strategy. Initially designed to assess compliance with legal, financial, and ethical standards within China (Creemers 2018; Jakob 2021; European Chamber of Commerce in China 2019), the SCS assigns ratings based on behavior, creating incentives for compliance and penalizing misconduct. Companies operating within China are continually monitored, with their scores adjusted based on adherence to legal, financial, and ethical standards. Non-compliance can lead to blacklisting, restrictions on market access, or even bans from future business opportunities.

China’s SCS serves as a comprehensive framework to regulate corporate behavior by aggregating data, evaluating compliance, and implementing a joint system of punishments and rewards. According to the Congressional Research Service (2020), the SCS uses blacklists to penalize non-compliance and redlists to reward firms with exemplary records, applying these measures across various regulatory domains, including tax compliance, environmental standards, and labor practices. In international contexts, especially when referring to business and trade-related applications, the system is often described as the Corporate Social Credit System (CSCS). While primarily a domestic tool, the CSCS has broader implications for international economic interactions, as Beijing integrates its governance frameworks into initiatives like the BRI. For instance, the State Council explicitly identifies the CSCS as a means of enhancing China’s soft power and international influence, framing “credit cooperation” as a central component of the BRI. By linking regulatory compliance to market access and other benefits, China’s approach under the CSCS illustrates how its domestic governance strategies shape global economic practices and extend influence along BRI partner networks.

5.2. Digital Sovereignty and Surveillance Governance

China’s emphasis on digital sovereignty—the principle that states have the right to control their own cyberspace—has become a cornerstone of its global governance strategy. Through the Digital Silk Road (DSR), a key component of the BRI, China is exporting digital infrastructure and surveillance technologies to developing nations. These projects involve the construction of telecommunications networks, smart city technologies, and AI-driven surveillance systems, often supplied by Chinese companies such as Huawei and Dahua (Feldstein 2019).

For instance, in countries like Ethiopia and Zimbabwe, Chinese firms have implemented surveillance systems marketed as tools for improving urban management and public security (Jili 2022). While these systems promise efficiency and enhanced safety, they also raise concerns about privacy violations and potential misuse by authoritarian regimes. Such projects demonstrate how China’s domestic surveillance practices are being exported internationally, creating new governance models that prioritize state control over individual freedoms. Moreover, in authoritarian regimes, such technologies can easily be repurposed to suppress political dissent, monitor opposition groups, and stifle civil liberties. For example, surveillance systems provided by Chinese firms have been linked to efforts to silence political critics and control public discourse, enabling governments to consolidate power through digital means. In Uganda, a Wall Street Journal investigation revealed that Huawei technicians assisted government officials in spying on political opponents, including intercepting encrypted messages and tracking their locations (Parkinson et al. 2019).

By embedding these systems into the governance structures of developing nations, China not only extends its technological and economic influence but also shapes the global discourse on governance and the role of surveillance in modern society. This expansion of Chinese surveillance technology is occurring alongside rapid advances in artificial intelligence, prompting worldwide debates over how to regulate AI to safeguard fundamental rights, privacy, and values. This raises pressing questions about the balance between technological advancement and individual rights, as well as the long-term implications for global standards of privacy and human freedom.

5.3. Cyber Sovereignty and the Push for Internet Governance

China’s advocacy for cyber sovereignty has extended to its participation in international forums like the International Telecommunication Union (ITU). By promoting the principle that states should have the authority to regulate their own internet infrastructure and data flows, China challenges the multistakeholder internet governance model dominated by the U.S. and EU (Nanni 2024).

One key initiative is China’s push for new internet protocols under the “New IP” framework (Joseph 2020). This approach would grant state-run internet service providers unprecedented control over users’ online activities, enabling more granular monitoring and regulation. Additionally, China’s growing influence over critical infrastructure, such as undersea fiber optic cables, has become a pressing national security concern for democracies. Such developments risk fracturing the global internet into two distinct spheres of influence: one dominated by the U.S., emphasizing openness and multistakeholder governance, and the other led by China, prioritizing centralized control and state sovereignty (Dupont 2020).

China’s leadership in the ITU and its promotion of cyber sovereignty reflect its broader ambition to shape the digital landscape in ways that align with its governance model. By embedding its principles of state-centric control into global norms, China seeks to redefine the rules of the internet in its favor, setting a precedent for other nations to follow.

6. Conclusions: The Future of Global Governance—Coexistence or Conflict?

China’s evolving approach to global governance reflects a dynamic strategy shaped by historical conditions and shifting global power dynamics. Over the past seven decades, China has transitioned from rejection of Western-led institutions during the period of Revolutionary Isolation (1949–1971) to engagement with global governance structures during its Pragmatic Engagement (1971–2000) phase and finally to a period of parallel institution-building (2000–present). Each phase highlights a deliberate balancing act between integrating into the existing global order and asserting its own influence within that framework.

However, no single theoretical framework fully captures the complexity of China’s global strategy. Hegemonic Stability Theory highlights China’s gradual integration into U.S.-led institutions, while Power Transition Theory underscores its attempts to reshape these institutions to align with its state-centric governance model. World-Systems Theory explains its deepening ties with the Global South as an effort to challenge the core–periphery power imbalance. Yet, China’s approach defies categorization, as it remains flexible, pragmatic, and responsive to historical conditions and geopolitical realities.

China’s global strategy demonstrates a complex and multifaceted approach that neither fully replaces nor completely integrates into the U.S.-led liberal order. Instead, it selectively operates within the existing system where advantageous, while simultaneously constructing alternative frameworks such as the AIIB and BRI, which provide opportunities for states dissatisfied with Western dominance. Furthermore, China’s domestic governance innovations, including the Social Credit System, Digital Silk Road, and cyber sovereignty initiatives, are increasingly influencing global regulatory engagement. These efforts reflect the exportation of state-centric governance models, challenging traditional liberal norms of transparency, accountability, and individual freedoms. While the liberal order may not collapse entirely, it is being reshaped by the growing influence of non-Western powers, with China playing a leading role.

Ultimately, the future of global governance hinges on whether China’s strategy leads to coexistence or conflict with the liberal international order. While China’s approach has reshaped the rules and norms of global governance, it has not yet sought to overthrow the existing system outright. The question remains whether this parallel institution-building and regulatory exportation will serve as a complement to the existing order or as the foundation of a fundamentally alternative global system. As China’s influence continues to grow, understanding its historical trajectory and strategic flexibility is essential for predicting how the balance of power and governance norms will evolve in the decades to come.