State of Play: Great Power Competition in 2026

KN. Great power competition is often conflated with war and conflict. In reality, it describes a spectrum of interactions ranging from cooperation to confrontation that emerges when a rising power challenges an established one. In this framework, the great powers compete with one another across domains and extra-regionally. The Russia-Ukraine War, now almost in its fourth year, exposed deep structural weaknesses in Russia’s military and defense industrial base, and has effectively entrenched the Sino-American dyad as the main arena of great power competition today. The People’s Republic of China (PRC) and the United States are now competing among various axes, including militarily, technologically, economically, informationally, and politically.

A complex ledger emerges when taking stock of the U.S. and PRC’s respective force structure, arms, defense industrial base, experience, and innovation. According to the U.S. Department of Defense’s annual report to Congress on military and security developments involving the PRC, the People’s Liberation Army (PLA) is rapidly building out its military capabilities and defense industrial base. The PLA is estimated to have doubled their nuclear warheads arsenal since 2020 and continues to improve its long-range conventional strike capability. The PLA has especially invested in its Navy (PLAN) in recent years, which regularly engages in military exercises in the Taiwan Strait and has become increasingly brazen in its operations around Taiwan. The PLA also currently has the largest arsenal of ground-based missiles and leads the world’s most advanced hypersonic missiles arsenal.

The Achilles’ heel of the PLA is its vast inexperience and inability to root out corruption. While the U.S. has been involved in countless wars and special military operations, the PLA has not fought in a war since 1979 when it invaded Vietnam. This additionally signifies that the U.S. military has vast data from its operations that can train AI systems to enhance its capabilities across functions, relevant as we inch closer to forms of agentic war. The PRC hopes to offset its relative lack of military experience compared to the U.S., by, for example, integrating AI into its command-and-control structures. However, the PLA does not possess comparable training data to the U.S., even as it makes rapid progress in both the quantum computing and AI field. This is reflected in the CCP’s 15th Five Year Plan (2026-2030), which prioritizes technological self-reliance and rapid innovation in AI across all domains.

Additionally, corruption remains a significant problem within the PLA, which has led to multiple rounds of purges in recent years. For example, former defense ministers Wei Fenghe, Li Shangfu, and other high-ranking officials have been removed from their positions, including those considered Xi loyalists, such as General He Weidong—the first removal of a sitting general on the Central Military Commission since the Cultural Revolution. It is increasingly clear that President Xi views corruption within the PLA as a systemic issue hindering its development and effectiveness to achieve full military modernization by 2035.

Another key pillar of Sino-American military competition is efficient and scalable defense manufacturing. The Trump administration has recently announced that it will request an additional $1.5 trillion in defense spending for 2027 while simultaneously criticizing defense contractors for slow equipment deliveries. The PRC has dominated manufacturing capacity; it is the world’s largest shipbuilder and has effectively fused its civilian and military manufacturing infrastructure, facilitating factories to pivot from civilian to military production. By some U.S. estimates from 2022, the PRC is acquiring high-end weapons systems and equipment five to six times faster than the U.S.

In the economic domain, competition is characterized by the reconfiguration and coercive use of supply chains, a race for technological dominance, and the use of alliances and partnerships to secure access to the rare earth minerals and other critical resources that underpin much of the technology stack on which the economy and military depend. Both the U.S. and the PRC have increasingly sought to be self-sufficient in critical manufacturing areas and exercise full control over the supply chains that sustain it including by near- and friend-shoring. Supply chains more generally are increasingly used as tools of geopolitical coercion. Export controls, sanctions, and investment screenings have become tools used in economic competition.

For example, the PRC’s AI ambitions are delayed by its difficulty accessing cutting edge semiconductors due to U.S. export controls, which has led Beijing to scale manufacturing capabilities at home. On the other hand, rare earth elements (REEs), critical for the production of nearly all technologies, continue to be monopolized by the PRC’s global and whole-of-government strategy. It has strategically leveraged this near monopoly to negotiate a pause in the Trump Administration’s prohibitive tariffs on Chinese goods. The U.S. is seeking to derisk from the PRC’s chokehold over REEs and announced the Pax Silica Initiative in December, an effort to secure the global AI and semiconductor supply chain and reduce dependence on the PRC. Most recently, Qatar and the UA. joined Australia, Israel, Japan, South Korea, Singapore, and the UK as signatories with India expected to join the initiative next month.

The PRC continues to expand a parallel economic architecture and sphere of economic influence that challenges U.S. interests. Through the Belt and Road Initiative (BRI) and an enlarged BRICS+, whose members account for over 40 percent of global GDP and roughly a quarter of global exports, Beijing has built extensive economic reach, particularly across the Global South. It has developed a host of other global initiatives focused on development, poverty reduction, cultural pluralism, governance and security norms, which all seek to offer an alternative to U.S.-led institutions. This has not only provided access to natural resources and markets for Chinese exports but also enabled robust supply chains and alternative financial channels that reduce exposure to the dollar-centric system.

Economic and military competition are thus logically shaping alliances. The realist nature of interstate competition has translated for the U.S. into prioritizing purpose-built bilateral and minilateral partnerships to further interest and influence, sometimes sidelining legacy alliances. For example, President Trump’s renewed focus on controlling Greenland as a geostrategic asset in the Arctic—framed in terms of competition with Russia and China— at the expense of NATO’s survival indicates this trend. Simultaneously, the Philippines and the U.S. launched Task Force Philippines, a standing joint command to coordinate deterrence in the South China Sea. Nonetheless, some of the current Trump Administration’s trade policies, most notably the imposition of tariffs, have led to highly relevant partnerships in times of Sino-American competition, such as the Quadrilateral Security Dialogue (Australia, India, Japan, US), to have lost traction.

In 2026, technological competition will be the most important trend to watch. The U.S. will almost certainly retain its leadership position in cutting-edge AI models, advanced semiconductors, and quantum computing, while the PRC will continue to leverage its manufacturing capabilities and governance structure to make major leaps in integrating AI across supply chains, economic infrastructure, and the military. Additionally, it is likely that the bifurcation of the semiconductor ecosystem will crystallize, with the two powers seeking to establish secure, robust, and geopolitically aligned AI supply chains. Additionally, we can expect continued military drills and signaling in the South China Sea, and the U.S. to step up defense pacts with allies in the region (TSC).