#15 The G2 Is Already Here

Washington and Beijing are steadily, surely, yet haltingly being pushed and pulled towards a great power duopoly. The rest of the world is being arranged around it.

Xi Jinping invoked the Peloponnesian War at the summit with Donald Trump (Beijing; May 14) stating, “China and the US must overcome the Thucydides Trap”. Whether he was referring to China or the US as a rising power is unknown, but it was clearly a call for mutual respect and reduction of the probability of war. Is this the emergence of a ‘live and let live’ G2, a concept defined by Bergsten (2005/08) as a joint geo‑economic stewarding of the global order? Or, are China and the US, building a clean division of strategic, geographic and economic influence, as in the Cold War? I can count seven prominent reasons to declare that a G2 has arrived, more out of a balance of competing interests and comparative advantages.

First: Largely Resilient Bilaterals. The G2 impulse has recurred across administrations. In 2008-09, US-China coordination stabilised the global financial system. In 2015, the Obama-Xi bilateral compact at COP21 made the Paris Agreement possible - rest of the world ratified a deal already concluded between G2. In 2023, Biden and Xi at Woodside produced the fentanyl framework. On 5 February 2026, New START expired, ending US-Russian strategic force limits for the first time in 50 years. In contrast, the US-China agreement to exclude AI from nuclear launch decisions, initially agreed by Xi-Biden and extended at the Beijing summit, stands as the most significant G2 security co-management signal.

At Busan in October 2025, after a bruising trade war, the Kuala Lumpur Joint Arrangement led to US overturning tariff escalations, down from 145% to 10%, and semiconductor export controls, and China pausing rare earth restrictions, resuming soybean purchases, and a US-China drug enforcement working group, which met in Colorado Springs in February this year. In November 2025, Pete Hegseth and PLA Admiral Dong Jun agreed to establish dedicated military-to-military communication channels, a structural parallel to the 1963 US-Soviet hotline.

The Beijing summit last month deepened the architecture with a bilateral AI safety protocol, a Treasury-to-Vice Premier economic channel, and extension of fentanyl co-governance. Simultaneously, China’s 15th Five-Year Plan announced a domestic demand rebalancing that Washington had demanded for a decade. The G2 has shown that when stakes are high enough, the G2 reconvenes and the world arranges itself around the outcome.

Second: US Accommodation Over Taiwan. In January 2026, Washington announced a $14 billion sale of missiles and air defence systems to Taiwan, which never made it to Congress. At the summit, Xi told Trump that Taiwan was the most important issue in China-US relations, and if mishandled, they could “even enter conflict”. Post‑summit, Trump publicly signalled that Washington would not underwrite Taiwanese independence, leaving details ambiguous.

Another indicator of respect in G2 is data of PLAAF’s violations of Taiwanese airspace. A distinct decline was noticed from February 27, a day before the attack on Iran, incursions collapsing in frequency, intensity and reach. As soon as Trump announced the delay of the Xi-Trump summit, 27 planes visited Taiwanese airspace on March 16. As soon as the next date for the summit was declared, air incursions fell again into insignificant territory. Most eastern observers see this as Beijing’s pre-summit diplomatic offering.

Third: Chinese Accommodation Over Iran. When US and Israeli forces killed Iranian Supreme Leader Khamenei in late February, Beijing, Iran’s closest great-power partner, holder of a 25-year strategic cooperation agreement, broker of the 2023 Iran-Saudi normalisation, oddly chose calibrated restraint. Also, with reduced intensity of aggression over Taiwanese airspace, China took the steam out of a potential diversionary tactic of intensified overflights, which could have diluted American focus on Iran.

Apart from several diplomatic statements supporting Iran in form, in substance China did not veto but only abstained from UN Security Council Resolution 2817 (March 11), providing Washington some needed multilateral cover. Yet, one day before the ceasefire framework was finalised, China with Russia, vetoed the April 7 resolution. Seen from a distance, it appears that China was willing to allow initial support to degrade Iran’s nuclear or military prowess, but not to the extent US-Israel had done by April 7. A sign of calibrated support to a G2 framework, leaving us a question - was Taiwan a US offering in return for China’s Iran offering?

Fourth: US Diminishing Anti-China Groupings. Trump has refused every Quad leaders’ summit since January 2025, reducing it to a foreign ministers’ meetings voicing platitudes. AUKUS, which was to supply American nuclear submarines, and has earned the ire of existing French suppliers, is under parallel strain. Further, on June 16, Washington renamed USINDOPACOM (US Indo-Pacific Command) back to USPACOM, reversing Trump regime’s upgradation in 2018 – seen at the time as formal recognition of India and the Indian Ocean’s centrality to America’s Asia policy. This reversal and the US bombing of an Iranian submarine in the IOR, just off Sri Lanka, proved China’s foreign minister right when he had dismissed the re-naming as an idea that will “dissipate like sea foam”.

Fifth: US Retraction from Multilateral Trade Alliances. The US has acquiesced to BRI expansion across the Global South, with near-abandonment of its much-acclaimed Blue Dot counter-framework. In Asian trade blocs, China-led RCEP was signed in 2020, while the US, having withdrawn from Obama’s TPP in 2017 (later CPTPP), could only respond with a timid IPEF (Indo‑Pacific Economic Framework), which remains a set of nascent non-tariff agreements. In addition, the US has vacated immense fiscal space in Africa, Asia, South America and the Small Island States, having used the guillotine on USAID and withdrawal from multilateral development finance.

Sixth: Unsanctioned Chinese Payment System. Washington has allowed China’s parallel payment system CIPS to grow without sanction in a possible ‘division of economic space’, allowing a window for those avoiding SWIFT. CIPS now processes ~10 trillion yuan daily, with 65% annual growth. While the US dollar is miles ahead of the yuan, the tolerance for an unhindered alternative has added to the theory of G2 accommodation.

Seventh: New Technology. In all new and emerging technologies (NEST, CET, etc) like bio-weapons, AI models, robotics, data centres, quantum, and weaponisation of space, the G2 are acquiring all existing and new domains, shared in a ‘contested, yet respectful manner’. If the Thucydides Trap does pan out, each has the power to destroy a sizable segment of the other’s possessions. And China has taken the global lead in climate with Trump vacating that space as leader of 66 global organisations that set standards, safety protocols, and settled supply‑chain governance processes.

Conclusion

Since the 2000s, Henry Kissinger had spoken of the US and China as “the defining relationship for the world of the 21st century”, stating in 2020 that both powers had “no more than 5 to 10 years” to reach an accommodation, before rivalry tipped into disaster. Perhaps this G2 is just that – not an alliance, just a respectful division of the world.

However, Zbigniew Brzezinski, former NSA to Jimmy Carter, was more sceptical of Chinese prowess, writing in 2012, “if the United States declines and ceases to be able to play a pre-eminent role, the world then….will not be Chinese, but chaotic”.

Five years ago, this blogger could have said: ‘time will tell’, but today, I would be happy to hail Kissinger for his foresight and look for more signs of a world divided between two great powers - more out of competition than coordination.

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