The rule-based liberal order is facing its greatest challenge since the end of the WWII. Some may even argue that it is in mortal danger. Within the camp of Western democracies, the rise of right-wing populism, the election of an autocratic racist to the American presidency, high inequality, rapid erosion of the middle-class, and backlash against migration have resulted in decreasing effectiveness and legitimacy of democratic governance and raised doubts about the future survival of liberal democracies. Besides their internal difficulties, Western democracies are encountering aggressive powerful autocratic regimes, such as China and Russia, that have grown increasingly emboldened to challenge the liberal global economic and security order.

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The twin challenges of revitalizing democracy at home and countering aggressive autocratic powers abroad would have been difficult enough for Western democracies. Today, these two tasks are made even more daunting. The United States, the lynchpin holding together the global liberal order, is probably encountering the most lethal threat to the survival of its liberal democratic system since the end of the Civil War in 1865. Although an independent judiciary, a vigilant press, and an energized opposition party have so far foiled the most dangerous policy moves planned by the administration of Donald Trump, there is no ground for complacency. Trump has violated nearly all the norms of his office and American democracy by attacking the judiciary, demonizing the press, fueling racial tensions, and threatening to jail his political opponent, Hillary Clinton. In the meantime, the Republican Party, now in control of the three branches of the U.S. federal government, has remained seemingly oblivious to the unraveling of American democratic norms and institutions. Unless the Democratic Party takes back at least one chamber of Congress in the mid-term elections in November 2018, the risks of further erosion of American democracy will only mount.

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The combination of an authoritarian-leaning leader in control of the most powerful political office in the world and his explicit pledge to an “America First” foreign policy will deprive the West the critical leadership it needs to defend and revitalize the liberal order in an increasingly dangerous world. To complicate matters further, the dysfunction of democracy in the West coincides with four other global challenges – economic globalization, technological revolution, large-scale migration from developing countries to developed countries, and climate change. The first three of these have placed enormous strains on Western social fabrics as they threaten to eviscerate the middle-class, fuel nativism and make ethnic identity the most salient political cleavage.

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The challenges facing the West are not merely political. Economically, the balance of power has decisively shifted against the West. According to the data provided by the IMF, the developed economies of the West accounted for 64 percent of the global GDP (in purchasing power parity) in 1990. In 2007, the share of the West fell to 50 percent. In 2007, developing economies accounted for 59 percent of the global GDP while the shared of the developed economies of the West fell to 41 percent.

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Emboldened by signs of the decline of Western democracies, the world’s major autocratic regimes, particularly China and Russia, have intensified their repression at home and aggressive behavior abroad. Russia annexed Crimea in 2014 and has been waging a war against Ukraine ever since. China has built large artificial islands in the disputed areas of the South China Sea as a first step to solidify its claims to these areas.

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Buffeted by right-wing populism and nativism at home and aggressive autocratic powers abroad, the fate of the liberal order hangs in balance. Although it is premature to declare the end of the liberal order, its possible unraveling raises many important questions about the future of world peace and prosperity, which the liberal order has sustained since the end of WWII. The possible end of the liberal order would be an epoch-making development. It would undoubtedly give birth to a new world order and force countries to adjust. For the world’s major powers, the end of the liberal order would create both opportunities and dangers.

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It may not be an exaggeration to claim that China would be one of the major powers that could be most severely affected by the end of the world’s liberal order. Since it opened to the outside world in 1979, the Middle Kingdom has benefited enormously from the West-dominated liberal order. Economically, globalization enabled the Chinese economy to gain almost unrestricted access to Western technology, capital, and markets and achieve rapid economic growth in this period. The global public goods provided by the liberal order also included secure sea lanes of communications, conflict management and resolution in developing areas, and maintenance and enforcement of rules that contribute to peace and prosperity. In particular, the security provided by American hegemony allowed China to enjoy a relatively benign external environment.

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Since China has been a net beneficiary of the liberal order in the last four decades, it is tempting to think that its end would be a net loss for Beijing. However, a careful analysis of the potential gains and losses for China from the end of the liberal order suggests that this development would be a mixed blessing for China. Beijing would be definitely better off on the ideological front. The existential political threat posed by successful and dominant liberal democracies would be significantly reduced. In the area of security, China would gain in some areas but also lose in others. But if the world should return to a sphere-of-influence system, China would most likely find itself worse-off. It could face concerted efforts by its neighbors to resist its hegemony. As for Chinese economic interests, the end of the liberal order would be nothing short of disaster. As a catch-up economy that still needs the West more than the other way around, a significant reduction in trade, investment, and technology flows would deal the Chinese economy a painful blow and most likely make it grow more slowly in the coming decades.

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An Ideological Bonanza for Beijing
For China, an unambiguous and tremendous benefit produced by the potential unraveling of the liberal order is the loss of ideological appeal of Western liberal democracy. Despite its ostensibly cooperative ties with the West, the ruling Chinese Communist Party (CCP) has consistently seen Western liberal democracy as an existential political threat. The success of this political system, in which political legitimacy is derived from free and fair elections and the power of the state is constrained by the rule of law, has always provided an alternative political model for China and, indeed, inspired the social and political forces in the country that seek to replace the CCP regime with a pluralistic democratic one.

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Based on historical experience, autocratic regimes are especially vulnerable to internal revolt when Western liberal democracies are strong and successful. In the 1980s, the revitalization of Western democracies was a sharp contrast to the stagnation of the communist regimes in the Soviet bloc. Indeed, it was the evident superiority of one system, liberal democracy, over the failing totalitarian communist regimes that delegitimized the ruling elites in the former Soviet bloc in the 1980s. It is hard to imagine that the former Soviet leader Mikhail Gorbachev would have launched glasnost and perestroika had the Western democracies been mired in internal political dysfunction and economic stagnation.

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Today, unfortunately, the table has been turned on Western liberal democracies – at least on the surface. Western European countries have seen a resurgence of rightwing populism and the evisceration of the political center. The United States faces an even worse political situation: extreme political polarization and gridlock. In contrast, China appears to be thriving under newly resurrected one-man rule. Xi Jinping, the CCP’s general secretary since late 2012, has turned himself into the most powerful leader in the post-Mao era. In the five years since he rose to the top, Xi has not only purged his political rivals but also has implemented a hardline survival strategy. Internally, he has initiated the most far-ranging crackdown on dissent and civil liberties since the end of the Mao era in an attempt to pre-empt any political challenge to the CCP’s authority. Externally, he has championed a nationalist and expansionist foreign policy designed to strengthen his personal prestige and the legitimacy of the CCP.

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It is doubtful whether this hardline survival strategy will be ultimately successful. Its implementation entails enormous economic and moral costs, as curtailment of personal freedoms impair economic dynamism and repression of fellow Chinese citizens seeking peaceful political change conjures up the ghosts of Mao’s totalitarian rule. Additionally, Chinese society has been thoroughly transformed by four decades of super-charged economic development and acquired the favorable structural conditions, such as income, education, physical mobility, and access to information, that have historically proven to be contributing factors for transitions from autocratic rule. In fact, if one compares structural indicators such as income and education, today’s China resembles Taiwan and South Korea in the late 1980s when these two East Asian dragons made the successful transition from dictatorship to democracy.

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The only difference, however, is the external environment. The liberal order was in ascendency in the 1980s, but it is in retreat or even on the brink of collapse today. For the CCP, the external ideological environment at present cannot be more favorable. In short, liberal democracy -- the most plausible and desirable alternative model for replacing one-party rule – has now lost its intrinsic appeal.

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It is no surprise that Chinese official media has been in overdrive to publicize the woes of Western democracies in the era of Trump and Brexit. The political motive behind this propaganda blitz is all too clear. The CCP wants the Chinese public to know that a liberal democracy in China is not only unattainable, but also undesirable. All they need to do is to take a look at the sorrow state of Western liberal democracy and ask themselves whether you want to copy this failing system.

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However, Chinese leaders may be underestimating the self-corrective capacity of liberal democracy, which has weathered similar challenges in the past and emerged only stronger. If the forces arrayed against Western liberal democracies are too powerful for them to deal with this time, then we may have to think the unthinkable. The end of the liberal order would be a calamity for the cause of freedom but an ideological boon for the world’s largest one-party regime.

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China and International Security: Back to the Future?
If the CCP is to pocket a significant gain from the loss of ideological appeal of Western liberal democracies, the security implications of the potential demise of the liberal order are more mixed. China may benefit in some areas but will also likely be worse off in other areas. Like all rising great powers, China’s eventual ambition is to displace the U.S. in East Asia and become the region’s hegemon. Whether a potential demise of the liberal order will create the strategic opportunities for China to achieve its long-term geopolitical objective depends on two contingencies.

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The security dynamics differ fundamentally from the ideological dynamics in the case of the demise of the liberal order. Ideologically, the loss of the appeal of the liberal order should be clear-cut if it collapses due to the irreconcilable social and political conflicts within Western democracies. But the security dynamics are more complex. Should the liberal order come to an end, it is not clear whether the consequences would be beneficial to autocratic powers in general. In the case of China, the most critical variable is the national security strategy of the United States.

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There are two potential strategies Washington can adopt after the demise of the liberal order. The first strategy is to actively confront direct challenge to its security interests even as the United States retreats from its global commitments. In this case, China would almost certainly become America’s primary target for strategic competition, even conflict. Under this scenario, American security posture in East Asia will be likely enhanced. Its forward military deployment would increase as American withdrawal from other regions enables the Pentagon to move more assets to the Western Pacific to counter the growth of Chinese military capabilities. To further increase its odds of success in the U.S.-China strategic competition, Washington would also be incentivized to strengthen its alliance networks in Asia and even expand it to include India and Vietnam, two Chinese neighbors that would be natural American allies. Obviously, China’s security position would be worse off under this scenario.

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Should the scenario of an “isolationist America” materialize, China may gain greater strategic space and achieve its objective of dominating Asia. However, this outcome is unlikely. In the event of an American withdrawal from the Western Pacific, some smaller countries, such as Thailand, Cambodia, and Laos, may fall into China’s orbit, but the middle powers of Asia, such as Japan, Korea, Indonesia, and Vietnam, would most likely form a countervailing alliance for defend their security. They would almost certainly gain the support of two other great powers in the region, India and Russia, neither of which wants to see Asia dominated by China alone. Consequently, instead of becoming China’s sphere of influence, East Asia in the wake of an American withdrawal may resemble Europe on the eve of WWI, with opposing alliances and heightened risks of military conflict. Despite its enormous power, China may actually suffer a reduction in its security when it is faced with a coalition of Asian countries determined to resist Chinese hegemony.

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The final likely cost in terms of security for China should the liberal order collapse is the certain disappearance of global public goods. Specifically, Pax Americana, the core of the liberal order, has been providing global public goods that are crucial to world peace and prosperity. The U.S.-led efforts in nuclear non-proliferation may not be perfect or entirely selfless, but they have curtailed the spread of nuclear weapons. Should the liberal order disappear, it is likely that more states will acquire nuclear weapons for self-defense. This development would undermine Chinese security.

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Another form of global public goods is the security of seal lanes of communication that constitute the trading routes of the global economy. Without the navies of the U.S. and its allies, these vital lanes would be at risk of rampant piracy and state-sponsored aggression. As the world’s large exporter, the Chinese economy would lose its lifeline should its trading routes become insecure. Of course, China may decide to send its own navy to patrol these waters, but this will entail huge economic costs and require the establishment of overseas naval bases for support – a move that in itself may cause tensions with hosting countries and their neighbors fearful of Chinese influence.

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For decades, China has been advocating a “multi-polar world,” in the belief that the end of American uni-polarity would be an unambiguous boon for China’s security interests. Should American uni-polarity actually be replaced with a new multi-polar world order, ironically, China may not be much better off. Indeed, it would be almost certainly worse off as it can no longer free-ride on the public goods provided by a liberal order centered on American hegemony.

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The Chinese Economy in a Post-Liberal World
Security will not be the only area where China is likely to be worse off after the end of the liberal order. Its economy could suffer even more devastating consequences as the global trading system falls victim to economic nationalism and protectionism.

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China’s rapid economic development since the end of its self-imposed isolation from the global economy in the late 1970s would not have been possible without the liberal economic order. To be sure, economic liberalization, private entrepreneurship, and the demographic dividend inside China were the primary drivers of Chinese growth. But it is inconceivable that China could have achieved double-digit growth for more than three decades without nearly unlimited access to Western technology, capital, and markets. In the last four decades, China’s share of global exports increased from less than 2 percent to nearly 14 percent while the total amount of foreign direct investment (FDI) flowing into the country reached $1.71 trillion by 2016, according to official Chinese data. Tens of thousands of foreign companies set up offshore manufacturing facilities in China, helping make it the world’s manufacturing superpower.

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The question is whether China could continue to enjoy the benefits of an open global economy in the event of the collapse of the liberal order.

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To be sure, there are areas where China may gain. For example, the end of the rule-based liberal order may lead to much weaker protection of intellectual property rights. As a catch-up economy, China could benefit because it would no longer have to abide by these rules and thus enjoy greater freedom and pay no penalty in misappropriating valuable intellectual property rights from the West.

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Another benefit China may reap is the establishment of a free-trading area it dominates, such as the proposed Regional Comprehensive Economic Partnership (RCEP), which is China’s answer to the Trans-Pacific Partnership (TPP). In fact, the future of TPP-11, which does not include the U.S., and RCEP, if it becomes a reality, may give us a glimpse of what international trade look like after the demise of the liberal order. From China’s perspective, RCEP will allow it to build an alternative to the open trading regimes such as the World Trade Organization (WTO). Its enormous economic clout would enable it to set and enforce rules, in the same way the U.S. and the European Union do today.

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However, RCEP will be only a fraction of the WTO system. As a result, the economic benefit provided by this free-trade agreement will be limited as well. As the WTO is certain to cease to exist in the event of the fall of a liberal order, global trade will likely be dealt a devastating blow. As one of the world’s largest trading powers, China could lose access to its most important markets, such as the U.S. and Europe, which will erect barriers to Chinese imports.

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The end of the liberal order may claim as its casualties key international financial institutions such as the World Bank and the International Monetary Fund (IMF). At first glance, it is tempting to consider the demise of these Western-led institutions as a victory for China. After all, in recent years the Chinese government has invested huge sums of money to set up rival institutions such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB). Unfortunately, these China-led institutions will not be able to replace the World Bank or the IMF. These institutions are far better capitalized than the AIIB or the NDB because wealthy Western countries own a majority of their shares and can contribute additional capital. Even if we assume that the Chinese economy catches up with the U.S. economy in dollar terms in a decade’s time, it will still be less than half of the total economic output of the West (the U.S., EU, and Japan). Additionally, both the World Bank and the IMF have accumulated vast knowledge and experience in development and economic stabilization that China simply does not have. So it would be unrealistic to assume that the demise of these well-established incumbents would lead to the dominance of China-led international financial institutions.

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A world without the World Bank or the IMF would be far more unstable than it is today. In the case of the World Bank, which provides development financing aimed to alleviate poverty, its demise could mean greater political instability and unrest in the developing world if poverty causes conflict. China would be an indirect victim because it relies on resource-rich poor countries for critical raw materials. In recent years China has also invested heavily in the developing world. In the event of large-scale ethnic or political conflict originating in poverty, China may lose many of its investments. It could also see its access to critical raw materials and energy threatened, even cut off. Should the IMF cease to exist, the global financial system would likely become highly unstable. The IMF provides crucial funding to countries facing balance of payments problems or severe macroeconomic imbalances. Since financial crises tend to spread from one country to another, the global financial system will experience more crisis episodes with more serious consequences if the IMF is no longer there. It is hard to imagine that China would benefit from a world in which financial crises happen on a frequent basis.

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Ahead of the Curve?
If anything, this analysis of how China may fare in a world without the liberal order shows that, on balance, China would be better off in a world under the liberal order. The puzzle, of course, is why the CCP has been wishing its demise. The answer lies in the most serious threat posed by the liberal order to the survival of the CCP regime itself. For China’s one-party state, the liberal order itself represents an existential political threat. Even though China as a nation station has gained enormous economic and security benefits from this order, its ruling CCP regime is incompatible with this order in several crucial respects. Ideologically, the liberal order threatens the political legitimacy of the CCP since the nations that uphold the liberal order are successful democracies that can inspire the Chinese people to seek an alternative political model. Economically, the idea of a rule-based system is at odds with a regime that believes might equals right. As for security, Chinese rulers have no faith in collective security.

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So China may suffer should the liberal order collapse, but this is a price the CCP would willingly pay if such a collapse removes its existential political threat.

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Since China’s rise itself has played a critical role in the weakening of the liberal order, Chinese leaders probably have foreseen the day of its demise. Unlike leaders of Western democracies that believed confidently that the liberal order had the capacity to integrate and socialize China even after it has gained superpower status, Chinese leaders are realists who know well that once they have acquired the requisite economic and military power, they will be able to rewrite the rules set by the founders of the liberal order. If China cannot rewrite these rules, it will simply challenge that order by ignoring its rules or setting up a parallel order dominated by China.

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In an important sense, Chinese leaders may be ahead of the curve. When we examine China’s major strategic moves since the global financial crisis of 2008, we may see a pattern that suggests that Beijing is laying the groundwork for the possible unraveling of the liberal order. Among other things, the building of artificial islands in the disputed areas of the South China Sea, the establishment of the AIIB and the NDB, and push for the “Bridge and Road Initiative” and RCEP, accelerated military modernization (especially the investment in power projection capabilities such as aircraft carriers), and an emerging security alliance with Russia indicate that China is preparing for the day when the liberal order disappears.

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Needless to say, this is a bold and risky strategic decision. If the liberal order indeed falls apart due to its internal strains, China’s bet would pay off handsomely. Even though it will fare, on balance, more poorly, it will be at least more prepared than other countries. However, if Western democracies succeed in reviving themselves and saving the world liberal order, China would have made a costly strategic mistake. Its actions have already raised fears about China as a direct threat to the liberal order. If the liberal order survives, its principal stakeholders – the U.S. and EU – will almost certainly curtail China’s access to the benefits provided by the liberal order. Instead of facing a world without the liberal order, China will find itself embroiled in a conflict with a reinvigorated liberal order – a conflict it will most likely lose.

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Minxin Pei is a professor of government at Claremont McKenna College and a non-resident senior fellow of the German Marshall Fund of the United States. His latest book is China’s Crony Capitalism.