Donald Trump has been busy throughout his disastrous presidency slashing and burning trade and investment agreements which the United States had carefully crafted over many years. Meanwhile, China has been equally busy creating a powerful arsenal of trade and other accords with key partners. This process moved a significant stage further forward with the reaching of the Comprehensive Agreement on Investment (CAI) between China and the European Union on December 30, just one month after Beijing signed the Regional Comprehensive Economic Partnership (RCEP) with 14 partner nations. As Hung Tran at the Atlantic Council in Washington says: “In addition to the CAI, the RCEP and China’s growing trade and investment relationships with developing countries – especially those carried out under the Belt and Road Initiative umbrella – have constituted a vast and viable economic living space for China.” And this, adds the former executive managing director at the Institute of International Finance, and former deputy director at the International Monetary Fund, has “ enabled China to build up political influence and support, especially among developing countries, as it faces protracted strategic contention with the United States and the West in general”. Thus, however successful President-elect Joe Biden may be in repairing the damage done to US interests by the Trump administration, Asia’s economic landscape seems likely to be dominated more by China than the US during Biden’s term. Trump’s bungled trade and investment policies will be seen in retrospect as having hastened an inevitable process of decline in market economies and in democratic polities: namely their relative failure to appreciate the need for (and their inability to implement) long-term investment strategies. Personality-driven rather than strategy-driven administrations (of which Trump’s has been one of the most egregious examples) jump from one short-term tactic to another and end up losing the game – rather like a player who makes speed-chess moves against a carefully deliberating grandmaster. Biden’s America will be playing catch-up with China The outgoing US president tried an opening gambit of tariffs and trade restraints to achieve a quick checkmate, only to find that his own pieces were being captured. He then resorted to other ill-considered moves, only to find that his opponent was surrounding him. This is where things stand now in the US-China economic relationship. The US finds itself surrounded in Asia by China’s pieces – an analogy perhaps better suited to the game of go than to chess but still broadly applicable. Biden may well respond to the “China threat” with a kind of “if you can’t beat them, join them” approach, which could prove constructive or destructive depending upon how it is applied. As Grant T. Harris, a political strategist who also writes for the Atlantic Council, says: “To expect US companies to match China’s resources and withstand its tactics without the full support of the US government is a farce.” Washington, Harris argues, “needs a new approach”. Such a new approach will have to be a radical one. Public support for strategic industries (China-style) will surely be essential. But in a mixed economy like the US, this may be seen as subsidising shareholders of private-sector enterprises. This will pose a systemic and ideological dilemma. China’s digital currency will end threat of US dollar trap The dilemma is one that is likely to dominate debate in market economies throughout the early 2020s as state capitalism confronts market capitalism. The demand for mega investment in sustainability projects will prove which system is the more effective and more resilient. The US approach has been to use trade and investment agreements to engineer “market friendly” structural change in partner economies (à la the Trans-Pacific Partnership or TPP , for example) whereas China’s approach has been chiefly to foster cross-border commerce (à la the RCEP and now the CAI). Increasingly, Washington is operating or negotiating from a position of weakness even as Beijing’s encircling slow-chess strategy is changing the shape of the economic playing field in Asia – and where the rules of the game are governed more by pragmatism than ideology. The European Union is somewhere between the American and Chinese positions in this regard, but Brussels’ decision to enter into the Comprehensive Agreement on Investment with Beijing has clearly created alarm in the Biden camp as it waits to enter office later this month. It is being seen by Biden appointees and advisers as pre-empting and perhaps undermining a new trade agreement which the US will need to reach with China, as the threadbare fabric of the Trump-era relationship or “cold war” is exposed to the winds of economic competition in Asia and elsewhere. Rather than criticise the EU for taking a softer line on China than the US desires (even though the agreement includes concessions to Europe), the Biden administration will need to recognise the growing challenge to US dominance in Asia and focus more on strengthening its own framework – a major challenge for the new year. Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs