Amid global competition, middle powers face a strategic dilemma due to deep structural embeddedness, whereas Global South countries enjoy greater maneuvering room

Across modern history, great power competition has repeatedly centered on the mastery of the dominant energy and energy transition of the age. The United Kingdom’s industrial hegemony in the 19th century was inseparable from its invention of the steam engine, which transformed coal into the muscle of empire — powering factories, railways and naval fleets that conquered distant territories and expanded markets. In the 20th century, the center of gravity shifted to the United States, whose rise was fueled by the internal combustion engine and the global petroleum system that sustained it. This oil-based energy system and the petrodollar enabled mass transportation, modern warfare and consumer lifestyles, while also helping the US build a vast network of economic and military influence across the world.

Today, a new transition is underway as China positions itself at the forefront of the green energy age, holding a leading position in clean energy technologies, battery technology and manufacturing, supply chains for critical minerals, and electric motor technologies that underpin everything from vehicles to grids and data infrastructure. As steam yielded to oil and oil now in turn gives way, each energy regime has reshaped global power, suggesting that today’s competition is about who defines and controls the energy system of the future.

The post-Cold War international order, once characterized by unipolar US dominance, is undergoing a significant transformation. Rather than a rapid shift toward multipolarity, the international order is increasingly defined by sustained rivalry between the US and China. This competition goes beyond traditional military and security domains, taking shape instead through deeper forms of structural power embedded in global finance, manufacturing and advanced technology. In doing so, it is reshaping an international order long understood through “hegemonic stability” and “structural power in international political economy”, which historically framed US hegemony in the international order.

Today, at the center of this rivalry lie two distinct structural positions within the global system. The US derives its power primarily from its dominance over the global financial system, anchored in the central role of the dollar, while China’s influence is grounded in its advantage within global manufacturing networks and supply chains.

The US’ hegemony rests fundamentally on its control over the global financial system. The US dollar functions as the world’s primary reserve currency, medium of exchange and unit of account for international trade and finance. The central role of the US dollar grants the US disproportionate influence over global capital flows, financial regulation and economic sanctions. Dollar dominance allows the US to project power without direct coercion, shaping international behavior through access to liquidity, payment systems and financial markets. Efforts by rival states to bypass or undermine this system, through alternative payment mechanisms or reserve diversification, have so far failed to meaningfully displace the dollar’s role.

In contrast, China’s power is rooted in its strong position within global manufacturing networks. Over several decades, China has established itself as the central node in international supply chains, producing a vast share of the world’s intermediate and final goods. This dominance extends beyond low-cost manufacturing to increasingly sophisticated industrial sectors. Manufacturing advantage confers strategic leverage by positioning China as an indispensable hub within global production and supply chain networks. Efforts by the US and its allies to “decouple” or re-shore manufacturing face significant economic and logistical obstacles. The scale, efficiency and integration of China’s supply chain ecosystems make rapid displacement implausible.

Both powers are actively seeking to address their structural disadvantage — China by attempting to reduce dependence on dollar-based finance through the internationalization of the renminbi, and the US by pursuing supply-chain diversification and industrial re-Americanization. As a result, neither side is likely to decisively undermine the other’s power foundation in the near term, pointing to a prolonged period of strategic stalemate.

Unlike finance and manufacturing, technological competition remains actively contested. Both the US and China are investing heavily in emerging technologies such as artificial intelligence, semiconductors, quantum computing and digital infrastructure. The outcome of this competition is uncertain, with neither side achieving clear dominance. Technological rivalry intensifies broader competition by intersecting with both finance and manufacturing. Control over key technologies influences productivity, military capability and future economic growth. However, technological ecosystems are fragmented, regulated and sometimes politically securitized, preventing swift resolution in favor of either power.

It is therefore essential to grasp the nature of this competition, the durability of the power structures that sustain it, and its broader systemic consequences for global economic stratification and the actors embedded within these differentiated hierarchies. Of particular significance are the implications for states that lie outside the two-power framework yet remain deeply integrated into financial and manufacturing systems dominated by rival powers. These so-called middle powers, as noted by Canadian Prime Minister Mark Carney in his Davos speech, include Canada, Australia, the UK and the European Union, which increasingly find themselves compelled to navigate competing pressures and, in some cases, to make costly strategic choices. Their vulnerability is not merely transitional but structural, reflecting the persistence of China-US rivalry and its reshaping of global economic governance and geopolitical alignment.

Middle powers are simultaneously dependent on US-dominated financial infrastructure and China-centered manufacturing and supply-chain networks. This dual embeddedness exposes them directly to the instruments of power competition, including financial sanctions, export controls, technological restrictions, and securitization and counter-securitization of supply chains. Because their economies are highly complex, export-oriented and technologically advanced, disruptions in either system impose immediate and substantial costs. Moreover, their close integration into the US-led alliance framework constrains their ability to disengage or maintain strategic ambiguity, making neutrality increasingly difficult to sustain.

Unlike the US, while China’s global economic engagements are not free from national strategic interests, in line with its articulated foreign policy principles, its policy behavior toward trading partners — be they middle powers or Global South states — typically avoids the use of explicit political conditionalities, binding alliance commitments and requisites for strategic alignment.

By contrast, many Global South countries are in a more peripheral position in the international system. While often facing persistent challenges related to underdevelopment, debt and inequality, they are typically less exposed to the central mechanisms through which great power is exercised. Peripheral levels of integration into global financial markets, advanced manufacturing and high-technology ecosystems reduce their susceptibility to targeted coercive measures. This relative marginality can, paradoxically, afford greater strategic flexibility, allowing for selective engagement with the great powers.

In conclusion, the contemporary international order is shaped not only by the rise of new powers but also by the continued resilience of both emerging and established capabilities. The US and China occupy different structural positions — financial and manufacturing — that are deeply embedded in the global system, indicating that their power competition is likely to endure over the long term. Although technological competition adds new layers of uncertainty, it does not fundamentally disrupt this underlying balance of power. In this evolving global landscape, middle powers face a strategic dilemma due to their deep structural embeddedness, while countries in the Global South find comparatively greater room for maneuver.

The author is a Yunshan leading scholar and the director of the European Research Center at Guangdong Institute for International Strategies at Guangdong University of Foreign Studies, and an adjunct professor of international relations at Aalborg University, Denmark.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.