Straight talk over coffee: USA and China. What speaks for one side, and what for the other?

History can pretend to stand still for decades and then suddenly speed up. I have a feeling we are watching exactly such an acceleration. Alliances are shifting, countries of the Global South balance between Washington and Beijing, and the institutions of the post-war order are testing how flexible they really are. The old arrangement in which one power set the rules is fading, and a new one has not yet settled. Such transition periods tend to be the most nervous ones.

Before we go further, a word about where I am looking from. I am not a political scientist. I am an investor and an engineer who looks at this through the lens of money and technology. You are welcome to disagree with me, and that is fine.

Money and the dollar

In nominal terms the United States remains the largest economy in the world: GDP of about USD 32.4 trillion versus USD 20.9 trillion in China (IMF forecast for 2026). Measured by purchasing power parity the picture flips: China has 44.3 trillion international dollars and the US 32.4 trillion, which gives them roughly 19.9% and 14.5% of world GDP respectively. These are two different yardsticks and both say something true: China has a huge domestic market, the US has enormous financial power.

The dollar is still the main reserve currency of the world; commodity trade and central bank reserves stand on it. China, also within BRICS, promotes settlement in national currencies and a larger role for the yuan. The yuan has a clear brake, though: capital controls and limited transparency of the financial system. For a currency to become a real alternative, it must be freely convertible and backed by an open capital market.

Central banks have been buying gold for several years. According to the June 2026 World Gold Council survey, 89% of surveyed central banks expect official gold reserves to keep rising over the next 12 months, and 74% expect the dollar's share of reserves to be lower in five years.

In my view this is not a verdict on the dollar, just diversification. A prudent treasurer does not keep all the eggs in one basket, even if the basket is the biggest in the world.

In 2025 the dollar lost almost 10% against major currencies, the most since 2017. At the end of January 2026, as it slid to a four-year low, Donald Trump commented that it was "great" and that "the dollar is doing great". The dollar then had its worst day since April. In my view such rhetoric does not build trust in a reserve currency. A weaker dollar can help exporters, but it has a price: the risk of inflation and capital outflows. It pays to listen closely to what comes out of the White House, because those words weigh more than the communiqués of many central banks.

The construction of the two economies differs as well. The US is services, technology and finance, with a powerful venture capital market that turns knowledge into business. China is a gigantic industrial base and control over important links of global supply chains, including rare earth metals. Trade wars, reshoring and friend-shoring show that security has become as important as low cost. Will the flexible US market or the strongly steered Chinese model prove more resilient? Nobody knows today.

Two models that are starting to resemble each other

This is my favorite paradox. The US, a bastion of the free market, is increasingly willing to support strategic industries. Laws such as the CHIPS Act and the Inflation Reduction Act direct public money to semiconductors, AI, green energy and defense. The state does not replace the market, but points to where capital should flow.

China went the opposite way: since the end of the 20th century it has opened up to market mechanisms, attracted foreign capital and know-how, and private companies grow there at lightning speed. Still, they operate within a framework set by the state, which holds capital, data and key sectors in its hand. Giants such as ByteDance or Ant Group show that global platforms can be built in such a system.

American indices have risen strongly in recent years, pulled by companies from AI and semiconductors. In dollars, with dividends reinvested, the S&P 500 gained about 95% in total over 2021-2025 and the Nasdaq-100 about 102% (on average 14.3% and 15.1% a year), despite the painful year 2022, when they fell by 18.2% and 32.6%. From the start of 2026 to October 2 they added another 13.7% and 22.4% respectively. In my view the American model increasingly combines the free market with a selective state strategy where technological advantage is at stake.

Technology: the fight for chokepoints

This is the hottest front. The winner is not the one with "better technology" but the one who controls the element without which the rest cannot move.

According to a compilation from September 10, 2026 (CB Insights and Hurun), the US has 806 unicorns, that is private companies valued at over a billion dollars. For China the numbers differ depending on methodology: 166 according to CB Insights and 381 according to Hurun. The most valuable private companies in the world today are American AI labs: Anthropic (USD 965 billion) and OpenAI (USD 840 billion).

The US together with partners such as Taiwan and the Netherlands controls the key technologies for designing and producing the most advanced chips. Export sanctions limit China's access to the newest chips, and American lawmakers are pushing for further restrictions. In April 2026 a bipartisan group of representatives and senators introduced the MATCH Act, which would hit the key chokepoints of chip production, such as DUV lithography, and would ban American companies from selling and servicing such machines for factories in countries regarded as US adversaries. Whether and in what form it becomes law remains to be seen.

China answers with self-sufficiency. Beijing has set a goal of reducing dependence on the West, supports its domestic semiconductor industry with state funds and develops its own systems in AI, software and telecommunications. The third edition of the state investment fund for the integrated circuit industry ("Big Fund III"), established in May 2024, raised 344 billion yuan, about USD 47.5 billion. Behind this stands the concept of "dual circulation": strengthen the domestic market and keep controlled contact with world trade.

In my view the road to full self-sufficiency is long and expensive. The newest chips are not just capital but decades of know-how, precision engineering and global cooperation. If China manages to break through these chokepoints, Western companies will feel it most in the most advanced segments. For a technology investor this is one of the key threads to watch.

Education and talent

The US has universities from the very top of world rankings (MIT, Stanford, Harvard), dominates basic research and effectively attracts talent from all over the world, including China. China bets on scale and discipline: the system is centralized and turns out a huge number of engineers and scientists every year. According to a forecast by the CSET center at Georgetown University, Chinese universities were to produce more than 77 thousand STEM PhDs in 2025, versus about 40 thousand in the US.

In my view, if the future is decided by one breakthrough idea, the US has the advantage, because innovation likes freedom of research and diversity. If rapid deployment of technology at enormous scale decides, China may be stronger.

Military and security

The US has a global network of bases and alliances, including NATO, and power projection is its greatest asset. China focuses regionally, modernizes its army, and develops hypersonic weapons and space technologies. Taiwan remains the most flammable point.

In January 2026 Beijing announced an investigation of General Zhang Youxia, vice chairman of the Central Military Commission and Xi Jinping's closest military adviser, and General Liu Zhenli. Earlier, in October 2025, nine other senior commanders were removed. In my view this is a sign of internal tensions and an attempt by Xi Jinping to consolidate power, and the stability of the system can be as important as military strength.

Who writes the rules of the game

The US and China have veto power in the UN Security Council. The US was the architect of the post-war order, China functioned in it for years, and today it increasingly boldly proposes changing it. BRICS, expanded and backed by the New Development Bank, is meant to show that an alternative can operate next to a system dominated by the West. But BRICS is not a single bloc: differences of interests among its members limit its cohesion.

In January 2026 in Davos Donald Trump signed the charter of the Board of Peace, an international organization that he chairs and that is meant to "promote stability" in regions affected by conflict. A permanent member can pay up to a billion dollars; Hungary, Argentina, Israel, Azerbaijan, the United Arab Emirates and Egypt, among others, joined, while France declined. In my view this may be an attempt to gain an edge in the institutional rivalry, because the rules of the game themselves become a strategic tool.

Demographics, the quiet player

According to China's National Bureau of Statistics (data of January 19, 2026, via Caixin), 7.92 million children were born in China in 2025 and 11.31 million people died. The population fell by 3.39 million to about 1.405 billion, the fourth year in a row. The fertility rate is estimated at about 0.96 (the replacement level is about 2.1). People over 60 are already 23% of the population.

In my view this is one of the most serious limits on China in the long term. Fewer people of working age mean pressure on the pension system and healthcare, smaller innovative potential and fewer resources for mobilization. The US is aging too, but immigration softens it, and the inflow of young, educated people supports entrepreneurship.

That is exactly why humanoids and artificial intelligence may play such a large role here. A country whose workforce is shrinking has a strong motivation to replace hands with machines, and AI can take over part of office and service work too. For China this is not a technological curiosity but an attempt to patch a hole that demographics will not let it fill any other way. China also has a good head start: according to Barclays it produces about 85% of the world's humanoid robots, and its machines are on average at least 20% cheaper than foreign ones.

There is, however, a paradox that surprised me. Deploying robotics in China is cheaper in absolute terms: robots and their production cost less there. And yet it can be less profitable than in the US, because profitability depends not on the price of the machine but on how much the human it replaces costs. A worker in the States is clearly more expensive, so an investment in a robot pays back much faster there, even if the robot itself costs more. In my view this is one of the reasons demographics does not decide China's fate: the US has a stronger economic incentive to automate, and China a stronger pressure to do it. It must also be said honestly that demand for humanoids still lags behind production and the use cases are limited so far. IDTechEx analysts nevertheless estimate that with high utilization a robot can pay for itself in about half a year. Who does it more effectively remains to be seen.

A change of guard or a long process?

In The Changing World Order Ray Dalio describes "Big Cycles": turbulent phases of one power taking over dominance usually last 10 to 20 years and are preceded by longer periods of relative stability, on the order of 40 to 80 years. If the symbolic beginning of the current shift was the financial crisis of 2008, then by this logic we are in its final phase, with growing economic, political and geopolitical tensions.

In my view the most likely outcome is a multipolar world. Stories of a quick end of the dollar and American dominance seem exaggerated to me. New alliances, a slow shift of the center of gravity and long competition are more realistic. The Chinese saying about "interesting times" aptly describes our era, but history teaches that a change of hegemon is rarely quick and spectacular. It is a process full of tensions, plot twists and apparent returns to the status quo, which demands patience from participants and observers alike.

And what about the portfolio?

For me the conclusion is practical, though it is an opinion, not a recommendation. If the rivalry lasts decades, it is worth thinking about chokepoints (chips, energy, critical raw materials), the resilience of supply chains, and the fact that sanctions can change companies' revenues in a single moment. I will write about specific companies separately, with a model and assumptions.

What do you think? Tell me what I did not take into account and which of these areas you think weighs the most.

This content is for informational purposes and expresses the author's opinion. It is not investment advice, nor tax or legal advice. Investing involves the risk of losing part or all of your capital. This text does not discuss specific instruments.

Sources (read on 2026-10-05)

• IMF, World Economic Outlook, GDP (NGDPD and PPP), 2026 forecast: imf.org/datamapper
• World Gold Council, Central Bank Gold Reserves Survey 2026, June 16, 2026: gold.org
• NPR, "Trump thinks a weaker dollar is great for America. Is he right?", January 30, 2026: npr.org
• ChartRow, annual returns of the S&P 500 and Nasdaq-100 (SPY, QQQ, data as of October 2, 2026): S&P 500, Nasdaq-100
• CB Insights and Hurun, number of unicorns, compilation of September 10, 2026: secondtalent.com
• FDD, "Congress targets advanced chip-making equipment...", April 3, 2026: fdd.org
• Business Standard, Big Fund III: business-standard.com
• CSET Georgetown, "China is Fast Outpacing U.S. STEM PhD Growth", 2021: cset.georgetown.edu
• Christian Science Monitor, PLA purge, January 29, 2026: csmonitor.com
• EWN, Board of Peace, January 21, 2026: ewn.co.za
• Caixin, NBS data on China's population in 2025, January 19, 2026: caixinglobal.com
• Fortune, humanoids from China (Barclays, Morgan Stanley), June 9, 2026: fortune.com
• IDTechEx via Tech Times, return on investment in humanoids, May 20, 2026: techtimes.com
• Ray Dalio, The Changing World Order (2021)