The optimistic assumptions that shaped the wave of globalization at the turn of the 21st century have given way to geoeconomics, also known as economic statecraft, or the use of economic leverage to advance the geopolitical interests of nation-states. In this environment of "weaponized interdependence," corporations have become actors on the frontlines of the U.S.-China rivalry, the Russia-Ukraine war, China-Taiwan tensions, and other national security conflicts in which they are organizationally ill-suited to play a central role, cautions APARC Faculty Affiliate Curtis J. Milhaupt, the William F. Baxter-Visa International Professor of Law and a senior fellow at the Freeman Spogli Institute for International Studies. 

Milhaupt, an internationally recognized expert on comparative corporate governance, delivered a keynote speech titled Corporate Governance in an Era of Geoeconomics at the Corporate Governance Conference in Milan, Italy, on February 12, 2026. He described the era of geoeconomics as representing a dramatic departure from early 2000s thinking, when capital markets were viewed as politically neutral, shareholder identity was considered irrelevant, and scholars predicted global convergence on Western corporate governance models. All three assumptions have collapsed, posing significant repercussions for firm-specific legal risks and governance challenges. Watch Milhaupt's presentation:

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Heightened Compliance Risk

The U.S.-China rivalry has created a particularly complex challenge for corporate governance, says Mihaupt. The United States has enacted multiple laws to curtail technology transfers to China, with China responding in a tit-for-tat fashion. The resulting, rapidly shifting and conflicting legal environment makes it "virtually impossible for a compliance department to comply with both U.S. and Chinese regulations."

Milhaupt introduced the concept of "ESG + G," adding geoeconomics to the Environmental, Social, and Governance framework used by investors and companies to assess a company's sustainability, ethical impact, and risk management beyond mere financial performance. Like ESG, geoeconomics involves corporations taking on roles traditionally played by governments. "I think in many respects private companies have become national security partners of their home country governments," he said.

Milhaupt's review of the disclosures of risk factors in the securities filings of public companies in the United States over the past 20 years shows the dramatic shift in corporate risk perception. Mentions of geopolitical risks related to export controls, the China-Taiwan conflict, and supply chain vulnerabilities have spiked sharply since 2020, with a particularly dramatic increase following Russia's invasion of Ukraine.

Despite these challenges, corporations appear to be unprepared for the exploitation of the vulnerabilities created by economic interdependence in the era of geoeconomics. Only 5% of Russell 3000 companies disclose information on how they monitor geopolitical risk, Milhaupt finds. Among those that do, most provide no details about their strategies. Meanwhile, the expertise necessary for geopolitical risk assessment is declining as a percentage of S&P 500 boards of directors.

Divergent Governance Paths

In the era of globalization, corporate governance systems worldwide largely converged around the liberal vision of shareholder primacy. In today’s geoeconomic era, however, a different kind of convergence may be emerging: one shaped less by market ideology and more by the shared political values and strategic priorities of the home governments of globally active firms. Thus, we are witnessing increasing concern with the national identity of corporations and their shareholders, Milhaupt observes. "The standard legal tests for corporate national identity – jurisdiction of incorporation, or the real seat doctrine – are in danger of being overriden by political determinations such as the one that was applied to TikTok in the United States."

At the same time, Milhaupt argues, we may be witnessing the beginning of a movement in the opposite direction to the Western model of corporate governance: "the spread of what might be thought of as state capitalism in the West." To illustrate this trend, Milhaupt cites the case of the U.S. government's "golden share" in U.S. Steel as a condition for allowing its merger with Japanese company Nippon Steel.

While Milhaupt recognizes the necessity of government actions to protect national security in the corporate sector, he warns against ad hoc informal interventions in the private sector. "I don't think that these are really the answer to competition with Beijing," he said. "I'm particularly concerned about the impact of these government interventions on global investment, which relies on a predictable legal regulatory enforcement regime."

Milhaupt concludes that the era of geoeconomics is "the new normal," and both companies and governments must adapt to a world where economic and national security concerns are inextricably linked.

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At a recent seminar hosted by APARCʼs China Program, Professor Jessica Chen Weiss, the David M. Lampton Professor of China Studies at the Johns Hopkins University's School of Advanced International Studies, presented findings from her forthcoming book, Faultlines: The Tensions Beneath China's Global Ambitions (under contract with Oxford University Press), which examines how domestic politics and regime insecurity shape China’s foreign policy ambitions, prospects for peaceful coexistence, and the future of international order. Drawing on research and fieldwork in China, Weiss argued that understanding Beijingʼs behavior on the world stage requires looking beyond ideology to the contested priorities and political calculations that drive decision-making within the Chinese Communist Party (CCP).

Weiss proposed a framework centered on three pillars that have sustained CCP legitimacy since the late 1970s: sovereignty (nationalism), security (civility), and development. Her analysis reveals that China's objectives are not static but moving targets shaped by competing domestic interests, leadership priorities, and international pressures.

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The Sovereignty-Security-Development Paradigm
 

At the heart of Weissʼs argument is the recognition that the CCPʼs foremost concern is domestic survival. In the face of the collapse of most communist regimes, the Party has remained vigilant against what it calls “peaceful evolution” and democratic contagion.

On issues touching core sovereignty concerns – Taiwan, Hong Kong, and maritime territorial claims – China has been “hyperactive” in making demands, even when doing so invites international censure. Weiss explained that the more central an issue is to CCP domestic legitimacy, the harder it becomes to make concessions, and the more likely international pressure is to backfire.

Yet tensions exist between competing priorities. China has compromised on certain border disputes to shore up domestic security, while its evolving stance on climate change reflects a shift from viewing carbon limits as threats to growth to recognizing the greater threat environmental catastrophes present to the nation’s stability.

Beyond the Monolith: China's Internal Contestation
 

Weissʼs research demonstrates that authoritarian China is far from monolithic. Different geographic, economic, institutional, and even ideological interests shape policy debates, even if most actors lack formal veto power. Local governments can resist central directives, as evidenced during the COVID-19 outbreak, when local officials initially withheld information about human-to-human transmission from the central government to prevent panic from disrupting important political meetings.

This pattern of center-local tension extends to China's international commitments. Local officials often game environmental regulations to juice growth and secure promotions, undermining Beijingʼs pledges on carbon emissions. On issues ranging from Belt and Road investments to export controls, implementation frequently diverges from stated policy as local actors pursue their own interests.

Weiss’s framework distinguishes among issues that are both central and uncontested (such as Taiwan), those that are central but contested (like climate change and trade policy), and peripheral issues where Beijing has shown greater flexibility (such as demonstrated by many UN peacekeeping initiatives). This helps explain why international pressure succeeds in some domains but fails spectacularly in others.

"The more central an issue is domestically, the more pressure the government faces to perform, and the harder it is to defy these domestic expectations," Weiss said. As a result, international pressure on these central issues is more likely to backfire, forcing the government to be seen as defending its core interests. She underscored that "even on these central issues, there's often tension with other central priorities, and managing these trade-offs comes with a number of different risks. It also means that sometimes an issue that touches on one pillar of regime support can yield to another."

Nationalism as Constraint and Tool
 

Weiss described nationalism as both a pillar of the CCPʼs legitimacy and a potential vulnerability when the government’s response appears weak. While large-scale anti-foreign protests have become rare, nationalist sentiment remains active online and shapes diplomatic calculations.

During Speaker Nancy Pelosiʼs 2022 visit to Taiwan, Chinese social media erupted with calls for the PLA to shoot down her plane. One interlocutor told Weiss his 14-year-old son and friends had stayed up past bedtime to watch Pelosiʼs plane land, illustrating nationalismʼs penetration into Chinese society.

Survey research reveals Chinese public opinion is quite hawkish, with majorities supporting military spending and viewing the U.S. presence in Asia as a threat. The government often refrains from suppressing nationalist sentiment to avoid backlash, even when doing so creates diplomatic complications. Weissʼs public opinion survey experiments, however, reveal that tough but vague threats can provide the government with wiggle room for de-escalation, although disapproval emerges when action is not sufficiently tough.

Regime Security Without Ideological Crusade
 

Weiss pushed back against arguments that China is bent on global domination or that ideology drives conflict with the West. While the CCP seeks a less ideologically threatening environment, it must balance this against development and market access.

This pragmatic calculus explains China's constrained support for Russiaʼs war in Ukraine — Beijing fears secondary sanctions more than it values autocratic solidarity. Rather than exporting revolution, China has worked with incumbents of all political stripes in the service of its national interests.

Chinaʼs strategy focuses on making autocracy viable at home, not on defeating democracy globally. This suggests room for coexistence if both sides can reach a détente on interference in internal affairs.

“China's activities are making autocracy more viable and, to the extent that China is succeeding, making China's example more appealing as a consequence. But its strategy doesn't hinge on defeating democracy around the world,” argued Weiss. This implies, to her view, that “there is more room for coexistence between autocracies and democracies if these different systems can find or reach a potential détente in the realm of ideas about how countries govern themselves, and importantly, they need to pull back their efforts in other societies across boundaries.”

Interdependence and Future Trajectories
 

Weiss concluded by outlining how her framework suggests different engagement strategies depending on where issues fall within the centrality-contestation matrix. On central but uncontested issues like Taiwan, pressure proves counterproductive, and reciprocal restraint may be most promising. On central but contested issues like currency, multilateral pressure can influence certain Chinese constituencies against others. On peripheral issues, such pressure is most effective unless powerful domestic constituencies subvert implementation.

Addressing questions about U.S.-China decoupling, Weiss noted that both sides recognize there are interdependencies that don’t have quick solutions. Even in a critical area like minerals, diversification will take at least a decade, and Chinese processing will still dominate globally. The goal of diversification should be to preempt coercion, not to achieve true decoupling.

The January 3, 2026, U.S. “Operation Absolute Resolve” in Venezuela to capture and remove President Nicolás Maduro has raised urgent questions about its repercussions for the U.S.-China competition, Taiwan Strait security, American strategic priorities in the Indo-Pacific region, and U.S. allies and partners.

In two new episodes of the APARC Briefing series, Stanford scholars Larry Diamond, the Mosbacher Senior Fellow in Democracy at the Freeman Spogli Institute for International Studies (FSI) and William L. Clayton Senior Fellow at the Hoover Institution, and APARC faculty affiliate Oriana Skylar Mastro, a center fellow at FSI, join host Kiyoteru Tsutsui, the director of APARC, to unravel what happened in Venezuela and the implications of the U.S. actions in Latin America for Taiwan, security and alliances in the Indo-Pacific, and U.S. relations with stakeholders in the region.

Both scholars agree that the U.S. mission in Venezuela is a precedent that likely emboldens rather than deters China in its Taiwan calculus, warning that the shift it represents in U.S. national security policy might detract from American capabilities in the Indo-Pacific region at a crucial moment. They also provide sobering advice for U.S. allies struggling to adjust to rapidly shifting geopolitical realities under the second Trump administration.

A Shocking Action in World Affairs

There is no dispute that the Maduro government has been deeply authoritarian, deeply corrupt, and deeply illegitimate, says Diamond, author of Ill Winds: Saving Democracy from Russian Rage, Chinese Ambition, and American Complacency. Yet the United States “has probably violated international law to intervene forcibly in the internal affairs of Venezuela and remove its political leader," creating enormous implications for the international community. If it does not pursue a strategy of systemic democratic change in Venezuela, “all of this will have been for naught, and it will have paid a tragic price in terms of international precedent and international legitimacy,” Diamond argues.

Beijing is already using the operation as a "discourse power win," depicting the United States as crushing sovereignty and international law, Mastro notes. Moreover, in addition to Venezuela, President Trump continues to make statements about Greenland, reiterating its importance for U.S. national security and his interest in acquiring the territory, which has alarmed European partners and exacerbated strains with NATO.

“For the first time since WWII, some European countries have declared the United States to be a security threat,” Mastro says. “So I am curious to see if the Chinese try to bring along the Venezuela case as well, to convince U.S. allies and partners to distance themselves from the United States, which would have significant repercussions for the global order and for the United States' role in it.”

A Risky Strategic Reorientation

By unilaterally bypassing international norms to wield power in its own "backyard," the United States may have set a precedent that China can now exploit to justify its own ambitions in Taiwan as a legitimate exercise of regional dominance.

Diamond remarks on this line of thought: “If the United States, as a hegemon, can just do what it wants to arrest and remove a leader, in its kind of declared sphere of influence, what's to stop Xi Jinping from doing the same in his sphere of influence, and with a democratic system in Taiwan, whose sovereignty he does not recognize?” 

On the other hand, many commentators have argued that Operation Absolute Resolve serves as a deterrent to Chinese aggression. Granted, there is no doubt that the operation was a remarkably successful military attack showcasing the capabilities of U.S. special forces, notes Mastro, who, alongside her academic career, also serves in the United States Air Force Reserve, for which she currently works at the Pentagon as deputy director of research for Global China Strategy. Nevertheless, she emphasizes that the United States cannot carry out a similar attack in Asia.

“There is no situation in which we ‘neutralize’ Chinese air defenses and then somehow do some sort of infiltration,” says Mastro, author of Upstart: How China Became a Great Power. The U.S. intervention in Venezuela, therefore, “does not tell us a lot, operationally, about what the United States is capable of in a contingency via China.”

More troubling, Mastro identifies the Venezuela operation as demonstrating a fundamental shift in U.S. strategic priorities, with the raid conducted just weeks after the Trump administration released its 2025 National Security Strategy, which prioritizes restoring “American preeminence in the Western Hemisphere.” Mastro characterizes it as “the one region where U.S. dominance faces no serious challenge.” Thus, Venezuela suggests “the Trump administration means business about the renewed focus on the Western Hemisphere, and, unfortunately, that makes me concerned that there might be strategic neglect of the Indo-Pacific moving forward,” she points out.

Diamond stresses that, virtually throughout the entire presidency of Xi Jinping, dating back to 2012, China has been rapidly building up its military capabilities, prioritizing those specifically suited for coercing, isolating, or potentially seizing Taiwan. Against this backdrop, “I am much more fearful about the future of Taiwan in the week following U.S. military action on January 3 in Venezuela than I was before that action.” 

Mastro agrees with this assessment about the ripple effects of the operation in Venezuela. “I would say that it probably emboldens China.”

Frank Advice for U.S. Allies

For U.S. allies in the Indo-Pacific, including Japan, South Korea, the Philippines, and Australia, as well as allies and partners in Europe, both scholars offer pragmatic counsel for coping with the Trump administration.

Diamond urges U.S. allies to manage Trump diplomatically while staying focused on core interests, namely, prioritizing the preservation of the alliances and strengthening autonomous defense capabilities to demonstrate commitment and hedge against potential U.S. retrenchment.

“It takes constant, energetic, proactive, imaginative, relentless, and in some ways deferential working of the relationship, including the personal relationship between these leaders and Donald Trump [...] The future will be better if the leaders of these countries internalize that fundamental lesson about Trump.”

Mastro is equally direct about the limited alternatives ahead of U.S. allies: "You don't really have an option. That Chinese military – if it gives the United States problems, it definitely gives you problems. There's no hope for a country like Taiwan without the United States. There's no hope for Australia without the United States."

Counterintuitively, U.S. assertiveness may indicate its insecurity about the balance of power with China. “It seems to me that the United States also needs to be reassured that our allies and partners support us [...] And if we had that confidence, maybe the United States would be less aggressive in its use of military force.”

Watch the two APARC Briefing episodes:

🔸 What the U.S. Raid in Venezuela Means for Taiwan and Asia - with Larry Diamond >

🔸 Does Venezuela Provide China a Roadmap for Taiwan? – with Oriana Skylar Mastro >

David Meale, former U.S. diplomat and current consultant, offered a cautiously optimistic perspective on U.S.-China relations at an APARC China Program seminar, arguing that despite significant tensions, there remains substantial room for what he calls “managed rivalry”—a relationship that is neither warm nor easy, but constructive enough for both countries to serve their populations and address global challenges. Drawing on his 33 years in the U.S. Foreign Service, he traced the evolution of U.S.-China relations over the past three decades and assessed current trajectories, bringing both diplomatic experience and fresh insights from private sector concerns to his analysis.

Three Decades of Evolving Relations
 

His entry into China-focused diplomacy came in 1995 when he was assigned to Hong Kong during the handover. During that era and through the early 2000s, U.S. policy operated under the assumption that China would gradually embrace the post-war rules-based international order shaped largely by the United States. The thinking was that China would develop a self-interest in preserving this order, becoming a constructive, if not easy, partner. This belief undergirded the strong U.S. effort to bring China into the World Trade Organization in 2001.

During his service as an Economic Officer in Taiwan in the 2000s, Meale witnessed the merging of talent from Asia and the United States that built China’s electronics manufacturing industry. Five percent of Taiwan’s workforce had moved to the mainland; there were even Shanghainese dialect programs on Taiwanese television at night for those dreaming of seeking their fortunes through cross-strait opportunities. Although there was tension with the Chen Shui-bian administration, there was a surprising amount of positivity in Taiwan about the mainland. That, of course, has now changed.

The Obama administration continued to work within the framework of bringing China into the existing international order, even as concerns grew. The approach aimed to convince China to preserve and, if necessary, shape this order, while using it to constrain China when necessary, as demonstrated by the attempt to resolve the South China Sea dispute involving the Philippines through the United Nations Convention on the Law of the Sea (UNCLOS).

The Trump administration marked a decisive shift. Meale noted that Trump openly discarded the goal of integrating China into the existing order, instead pursuing aggressive trade policies, technology restrictions, and explicit framing of China as a threat. The Chinese hoped the Biden administration would turn this around, but it instead maintained this posture, pursuing an “invest, align, compete” strategy—investing in the United States, aligning with allies, and defining the relationship as a competition.

Trump 2.0 brought “Liberation Day,” which Meale sees as the belief that the U.S. place in the world needs to be corrected; the United States is economically overextended, the trade imbalances and the associated debt cannot continue, and the supply chain vulnerability from COVID must be addressed. Tariffs were ratcheted up, and both sides imposed export controls. 

The Chinese hit back hard; Chinese officials are very proud of China’s pushback against an unchecked Trump. China’s economic growth is forecast at 5 percent this year, and the feeling from China is that it has shown the world the United States cannot push it around.

Looking ahead to 2026, Meale is optimistic. There will undoubtedly be crises that pop up: the Chinese will overreach on rare earth elements, and the United States will take an economic action that the Chinese did not plan on. Meale sees this as the “sine curve” of the U.S.-China relationship. There’s a crisis, tensions rise, there’s a response, and things eventually cool down. The curve goes up and down, but very little gets resolved.

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China's Current Challenges
 

China, Meale noted, effectively contains two economies: one serving approximately 400 million people who are producing world-class products with perhaps the world's best industrial ecosystem and impressive infrastructure, and another economy serving the rest of China's population, which has improved significantly over recent decades but relies heavily on informal work and the gig economy.
China faces deep structural problems, including a property sector crisis that has destroyed significant household wealth, an economy structured excessively around investment rather than consumption, youth unemployment reflecting a mismatch between graduating students and available jobs, and "involution" (neijuan, 内卷)—a race to the bottom in sectors where government incentives have driven overcapacity. China's reliance on export-led growth comes at a time when its overcapacity is increasingly unwelcome not just in developed countries but across the global South.

These challenges, Meale argues, will not result in a financial crisis or recession, but rather chronic headaches that will affect its foreign relations. Growth will continue, albeit at a slower pace, and the country will have significant work ahead to address inequality and structural imbalances.

On the question of Taiwan, Meale pushed back against predictions of imminent Chinese military action, particularly speculation about 2027 as a critical year tied to the 100th anniversary of the People's Liberation Army. He argued that, right now, one of China’s top goals is to avoid being drawn into a Taiwan conflict. China has recently purged nine senior military officials and is dealing with serious problems in its military. Five years from now, however, the situation could look quite different.

Defining End States and Finding Common Ground
 

Meale concluded by outlining what he believes each side seeks as an end state, arguing that these visions, while different, are not irreconcilable. Rather than global domination, he argued China seeks a world that works for what it calls "grand rejuvenation." This means overcoming the century of humiliation, reunifying with Taiwan, and living safely and securely on its own terms. China wants recognition as a global power, dominance in its near seas, freedom from technology containment, elimination of shipping chokepoints, access to markets, and the ability to pursue relationships with ideologically aligned countries.

The United States, meanwhile, accepts that competition with China is permanent but seeks a predictable China. U.S. goals include protecting advanced technology where it has an advantage, avoiding supply chain vulnerabilities, shaping Beijing's choices without attempting to control them, maintaining the Taiwan status quo until it evolves in a mutually and naturally agreed way, and ensuring fair trade to address what it sees as a stacked deck in current trade relationships. The United States also wants to prevent China from enabling adversaries, as seen in Chinese firms rebuilding Russia's military-industrial complex while maintaining nominal neutrality on Ukraine.

These end states, Meale acknowledged, collide in many ways but not in absolute ways. He sees substantial room for leader-driven, managed rivalry that can function constructively. This rivalry will not be easy or warm, but it can allow both countries to serve their populations while cooperating where global interests align.
 

Key Takeaways  
 

• The “integrated China” assumption is over. U.S. policy no longer aims to bring China into the existing international order, marking a fundamental shift from decades of engagement strategy.
• China's economy faces structural challenges, not a crisis. China will continue to grow, but must address inequality, overcapacity, and wealth destruction from the property crisis.
• Taiwan timing matters more to Beijing than deadlines. China seeks to control when and how the Taiwan issue is resolved, preferring not to be forced into premature action.
• Managed rivalry is possible. Despite significant tensions and incompatible elements of each side's goals, there remains space for constructive competition. While the relationship between the world's two largest economies will stay competitive and often contentious, it need not become catastrophic.