Last October, China's President Xi Jinping delivered the most consequential speech since Mikhail Gorbachev stepped before cameras to formally dissolve the Soviet Union. Addressing the Communist Party's 19th Party Congress, Xi made clear that China is ready to claim its share of global leadership. The implications of this step are global.
As he begins his second five-year term, Xi has consolidated enough power at home to redefine China's external environment and set new rules within it. His timing is perfect: China is stepping forward just at the moment that a politically embattled and distracted U.S. president is scaling back his country's commitment to traditional allies and alliances. The U.S. has created a vacuum, and China stands ready to fill it.
For decades, Western leaders have assumed that a new Chinese middle class would force China's leaders to liberalize the country's politics. Instead, it is Western democracy that now appears under siege as citizens, angry over the toll that globalization has taken on their lives and livelihoods, demand change and governments fail to deliver. Democracy itself is threatened by a weakening of public confidence in traditional political parties, the reliability of public information, and the inviolability of the voting process.
By contrast, China's leaders have delivered steady advances in the country's prosperity and a rising sense of China's importance for the world. Old problems like repression, censorship, corruption and pollution remain, but measurable progress in many areas of life has given China's people a confidence in their leaders that many Americans and Europeans no longer have.
What does this mean for the world? China is now setting international standards with less resistance than before. This is important in three main areas. First, for trade and investment, China is the only country with a global strategy. With its vast Belt and Road Initiative and its willingness to invest -- without political precondition -- in developing countries in every region, China is scaling up its ambitions even as Europe focuses on European problems and trade becomes a dirty word in U.S. politics. Governments across Asia, Latin America, Africa and the Middle East are now more likely to align with, and imitate, China's explicitly transactional approach to foreign policy.
Second, there is the global battle for technological dominance. In particular, the U.S. and China are now leading the charge on investment in artificial intelligence. For the U.S., leadership in this area comes from the private sector. In China, it comes from the state, which directs the country's most powerful companies and institutions in ways that serve state interests. As with its trade and investment strategies, other governments, especially those most fearful of social unrest within their borders, will find this development model attractive. China's economic clout will align tech sectors within smaller nations with Chinese companies and the technical standards they would like to set.
Finally, there is the question of values. China's appeal is not ideological. The only political value Beijing exports is the principle of non-interference in other countries' affairs. Yet, that is attractive for governments that are used to Western demands for political and economic reform in exchange for financial help. With the advent of President Donald Trump's "America first" foreign policy and the many distractions for Europe's leaders, there is no counter to China's non-values-driven approach to commerce and diplomacy.
There are obvious limits to China's international appeal. It will be decades before China can exert the sort of global military power that the U.S. can. China remains a regional power, and the military spending gap continues to widen in the U.S. favor. Nor are China's neighbors comfortable with Beijing's ability to project force near their borders. But conventional military power is less important for international influence today than it has ever been, given the threats to national security posed in a globalized world by the potential weaponization of economic influence and the unclear balance of power in cyberspace.
In 2018 and beyond, the global business environment will have to adapt to new rules, standards and practices advanced by China, not just within that country's borders but in other countries where Chinese companies are increasing their presence and China's government is expanding its influence. We should also expect Japan, India, Australia and South Korea to work together more often to limit China's regional power, creating risks of friction and even conflict. Depending on the state of U.S.-China relations, the Trump administration might become more active in the region as well. Finally, it is possible that Xi's grand ambitions will leave him vulnerable to rivals within the party, particularly if China suffers embarrassing setbacks at home or abroad.
But the world will be watching over the coming year and comparing the Chinese and Western models. For Americans and Europeans, China's system holds little appeal. For most everyone else, the China model offers a plausible alternative. With Xi ready and willing to offer that alternative, this is the world's biggest geopolitical risk in 2018.
Ian Bremmer is the president of Eurasia Group and author of "Superpower: Three Choices for America's Role in the World."