Features
Victoria’s Budget: The Illusion of Surplus and the Reality of Debt
Published
1 month agoon
On May 5, the Victorian Labor government announced in its 2026/27 budget that it had achieved its first fiscal surplus in seven years, describing it as the result of “disciplined financial management.” Official figures indicate that the state expects a surplus of approximately AUD 1.048 billion, while emphasising that no new taxes have been introduced this year in an effort to ease cost-of-living pressures.
From a political messaging perspective, this narrative is clearly appealing: a post-pandemic fiscal recovery, maintained public services, and no additional tax burden. For voters, this combination is naturally attractive. However, when this “surplus” is examined within the broader fiscal structure, it reveals a far more complex reality—one shaped by underlying debt pressures and long-term fiscal risks.
Where does the surplus come from?
From a structural fiscal perspective, the so-called “surplus” is not the result of a sustained improvement in the government’s financial position. Instead, it relies largely on two types of one-off or non-recurring revenue.
The first is additional funding from the federal government. Budget figures show that Victoria received around AUD 4 billion more in federal transfers than originally expected this financial year. Under Australia’s federal system, state governments are already highly dependent on such transfers, particularly in areas like healthcare, education and infrastructure. While legitimate, this funding essentially represents external support rather than a reflection of Victoria’s own economic strength.
The second source is one-off revenue from assets and licensing arrangements, particularly in the gambling sector. For example, the operator of Keno and The Lott paid approximately AUD 1.15 billion to the state government in exchange for extending its licence for another 40 years. In simple terms, this approach brings forward revenue that would otherwise have been collected gradually over decades.
From a fiscal standpoint, such income does not improve the government’s long-term financial capacity. It merely shifts future revenue into the present, making the current balance sheet appear stronger than it actually is.
As such, this “surplus” is less a sign of improved fiscal health than a timing adjustment—an accounting outcome created by bringing future income forward.
The real issue: debt and future fiscal pressure
The budget does not fully reflect Victoria’s overall fiscal position. Major infrastructure spending is not directly accounted for in the operating balance, as it is largely funded through borrowing. This allows headline figures to appear relatively stable, even as total debt continues to grow.
According to budget projections, the government expects to borrow an additional AUD 40 billion over the next four years, indicating that debt has not yet peaked and will continue to expand. By 2029–30, net debt is projected to reach approximately AUD 199.3 billion, with annual interest payments rising to around AUD 11.8 billion—equivalent to roughly AUD 32 million per day. In other words, even without any new spending, the government will still face a substantial daily cost simply to service past borrowing.
Historical comparisons make the trend even clearer. In 2014, Victoria’s net debt stood at around AUD 21.8 billion. By 2029–30, it is expected to approach AUD 200 billion—an almost tenfold increase. Over the same period, annual interest payments are projected to rise from approximately AUD 2.1 billion to AUD 11.8 billion, more than five times higher.
To manage these pressures, the government is relying heavily on continued growth in future tax revenue. Payroll tax—currently the largest revenue source—is projected to increase by around 15% by 2029–30, while land tax revenues are also expected to rise.
However, this reveals a deeper structural issue. Much of the economic activity driving higher tax revenues is itself supported by debt-funded infrastructure spending. In other words, employment growth and revenue increases are, to a significant extent, built on borrowing rather than purely organic economic expansion. As a result, even rising revenues struggle to keep pace with the compounding growth of debt and interest obligations.
In effect, fiscal pressure has not disappeared—it has simply been deferred into the future. As for how this debt will ultimately be repaid, the government has yet to provide a clear plan. Treasurer Jaclyn Symes has not outlined any concrete timeline for repaying principal, instead stating that the current priority is to “stabilise” debt rather than reduce it.
How did Victoria reach such high debt levels?
To understand Victoria’s current debt position, it is necessary to look back to the period under former Premier Daniel Andrews. At the time, interest rates were historically low, making borrowing relatively inexpensive. The government adopted an approach that treated debt as an “investment tool”: as long as borrowed funds were directed toward infrastructure capable of generating long-term economic returns, short-term borrowing was seen as justified.
Under this logic, the government accelerated a range of major infrastructure projects, including the Metro Tunnel, the Level Crossing Removal Project, the North East Link, and later the Suburban Rail Loop. These projects aimed to address long-standing infrastructure gaps, improve transport efficiency, and stimulate employment and economic activity in the short term.
However, most of these investments were not funded through current revenue, but through long-term borrowing—effectively shifting the cost burden into the future.
The problem is that economic conditions do not remain static. As interest rates rise, previously manageable borrowing costs can escalate quickly. This model came under further strain during the COVID-19 pandemic. Faced with prolonged lockdowns and economic disruption, the government significantly increased spending to support businesses and employment, relying heavily on debt as a short-term stabilisation tool. While this helped cushion the immediate impact, it also accelerated the growth of public debt to one of the highest levels in the country.
Victoria’s fiscal structure further compounds the issue. Unlike resource-rich states such as Western Australia, which benefit from substantial mining royalties, Victoria relies heavily on property-related taxes and payroll tax. This makes government revenue more sensitive to fluctuations in the housing market and economic growth, weakening its capacity to manage high debt levels during downturns.
In modern public finance, high debt is not inherently problematic. What matters is whether borrowed funds generate sustainable long-term returns and whether there is a credible plan for repayment. The issue is not simply how much is owed, but why the debt was incurred and how it will be repaid. On this front, Victoria has yet to provide a clear and convincing answer.
Relief measures: shifting the focus
Rather than directly addressing structural fiscal challenges, the government has shifted its policy focus toward cost-of-living measures aimed at improving public perception. These include free or discounted public transport, vehicle registration rebates, and the continuation of vision care services for school students. These policies are highly visible and easily felt by the public, offering immediate relief in daily life.
At the same time, the budget sets aside approximately AUD 5 billion in reserves, part of which is expected to be used to reach wage agreements with teachers—likely to minimise the risk of industrial action ahead of the November state election.
These measures can be seen not only as social support, but also as a strategic allocation of resources—prioritising short-term, tangible benefits to maintain public support in the lead-up to an election, even as longer-term fiscal pressures remain unresolved.
The government has also emphasised that “no new taxes” have been introduced this year. While this is politically appealing, the broader context tells a more complex story. Since Labor came to power in 2014, Victoria’s overall tax burden has risen significantly. Data shows that combined state and local government tax revenue per capita increased from around AUD 4,066 to approximately AUD 6,605—an increase of more than 60%, making Victoria one of the highest-taxed jurisdictions in Australia.
In recent years, the government has expanded its tax base through various measures, including higher payroll taxes for large businesses to fund mental health services, the introduction of a windfall gains tax, additional levies on businesses to repay COVID-19 debt, as well as increases in land tax and the expansion of emergency services levies.
Against this backdrop, the claim of “no new taxes” is less a sign of tax relief than an indication that the government may have reached the limits of its capacity to impose further tax increases.
What should a responsible government do?
As Opposition Leader Jess Wilson has argued, the budget reveals a cash deficit of approximately AUD 7.7 billion, alongside rising debt, increasing tax burdens and growing interest repayments. This stands in clear contrast to the government’s emphasis on a “surplus,” and highlights the absence of a coherent plan to address underlying fiscal challenges.
In the face of expanding debt, a responsible government should not focus on presenting favourable headline figures or shifting attention elsewhere. Instead, it should openly acknowledge the scale of the problem and clearly communicate the associated risks and trade-offs to the public. Without transparency about where debt comes from, how it is being used, and how it will be repaid, the issue becomes not just economic, but one of public trust and governance.
A credible fiscal strategy should include clear timelines and pathways—outlining how debt growth will be managed, when and how principal repayments will begin, and how the revenue base can be strengthened without placing excessive burden on taxpayers. At the same time, greater transparency is needed in explaining the relationship between borrowing and spending, so the public can distinguish between long-term investments and short-term fiscal support.
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What had happened in Beijing on 4 June 1989 altered the course of many people’s lives.
In the aftermath, the Chinese government implemented a ‘memory-erasing therapy’ strategy to remove the numbers ‘89’ and ‘64’ from Chinese society; to this day, this can be considered a ‘success’, as China’s younger generation either remains unaware of this incident or regards it as historical incident with no bearing on their own lives. Hong Kong, however, was still under British rule at the time of the 4 June incident. Based on the information they received, Hongkongers came to regard 4 June as a patriotic democratic movement, and commemorative events have been held every year. To this day, 8964 remains in the hearts of the majority of Hongkongers.
Two weeks ago, in the case where the Hong Kong Alliance in Support of Patriotic Democratic Movements in China was charged by the government with violating the National Security Law, Tonyee Chow Hang-tung, the Alliance’s vice-chairperson and a co-defendant, delivered a well-reasoned and measured closing statement. The arguments put forward by Tonyee Chow continue to weigh heavily on my mind; I cannot shake them from my thoughts. In this issue’s feature, I invite readers in Australia to reflect together on this significant event, which has similarly shaped the lives of overseas Chinese communities.
Though still a child when the June Fourth incident occurred, Tonyee Chow has attended the commemorative events organised by the Alliance in Victoria Park every year alongside her parents; these gatherings have once drawn crowds of over millions of Hong Kong residents. These annual June 4th gatherings in Victoria Park, calling for an end to one-party rule and the vindication of the June 4th incident, were never regarded as a threat to national security. After Hong Kong’s handover in 1997, right up until 2020, the Chinese government and national leaders never suggested that these commemorative events posed a threat to national security. This indicates that, at the time, Chinese leaders considered such commemorations to be permissible in Hong Kong. However, since 2020, these commemorative events have been deemed by the Hong Kong government to be in breach of the National Security Law.
The Hong Kong government is, of course, entitled to enact legislation or interpret the law to deem certain acts occurring in Hong Kong to be illegal. However, as someone living in Australia, if I were to continue to express my personal views on the 4 June incident here, or to hold individual or collective commemorative activities in my home in Melbourne or within my local community, or to write feature articles and commemorative pieces on the subject – provided these are not carried out in Hong Kong – I believe this would not contravene the national security laws of either Hong Kong or China. In Australia, questioning the government’s administration, or holding opposing views on policies and actions taken by the government today or in the past, is a fundamental right of citizenship, provided it is not expressed through violent or unlawful means. Hence, we have the Mabo court case on Indigenous land rights, the amendment of the White Australia immigration policy, the reversal of the ‘Stolen Generations’ policy, and the subsequent national apology by Prime Minister Kevin Rudd. This is because the Australian government maintains a clear distinction between the political parties vying for power, the policies they implement, the government that holds executive authority, and the nation itself, which is composed of its people.
Having settled in Australia, what I cherish most is that I still have the right to stand by what I believe to be true. I am grateful that we still have the courage today to publish this feature on Tonyee Chow’s closing statement in the Hong Kong Alliance case.
Mr Raymond Chow
Features
From the Alliance Case: Constitutionalism and Fragmentation
Published
1 week agoon
June 3, 2026
Recently, the trial of Lee Cheuk-yan and Chow Hang-tung in the case involving the “Hong Kong Alliance in Support of Patriotic Democratic Movements of China” (the Alliance) for incitement to subversion of state power has lasted more than 20 days. The core of the case remains the allegations under the National Security Law, which argue that the two were involved in organising the candlelight vigil commemorating the 30th anniversary of the June Fourth incident and promoting the slogan “end one-party rule.”
From the court’s perspective, the Alliance’s actions and demands are considered “subversion of state power.” Chow Hang-tung, however, firmly maintains that she and her colleagues were merely exercising freedoms granted under the Constitution, peacefully expressing political views.
As the case is expected to enter judgment in July, Hong Kong society continues to debate whether the defendants should face such charges for participating in a peaceful assembly. But the deeper question is: what exactly is the constitutional dispute at the heart of this case? And what does this complex situation mean for Hong Kong people both overseas and those still in the city?
What is a “constitution”?
The definition and historical evolution of “constitution” differ fundamentally between East and West, and this gap is central to understanding the conflict in this case.
In Western liberal-democratic traditions, a constitution is primarily about limiting power and forming a social contract. Its essence is constitutionalism. For example, in the UK, although its constitution is unwritten and derived from laws and conventions dating back to the 1215 Magna Carta, it is guided by principles of parliamentary sovereignty and the protection of individual rights. The constitution functions as a boundary between the governed and the governing, designed to prevent the over-expansion of power. Within this framework, advocating peaceful political change or criticising the system is seen as a fundamental civil right, not a threat to the state.
The nature of the Constitution of China, however, reflects a very different logic of state-building. In its current framework, the Constitution is not only the fundamental law of the state, but also a legal foundation establishing “the leadership of the Communist Party of China” as the defining feature of socialism. Constitutional legitimacy and party leadership are deeply integrated. As a result, when the Alliance calls for “ending one-party rule,” it may be seen in Western common-law terms as protected political expression, but in China’s constitutional logic it becomes a direct challenge to the state’s fundamental system, and therefore an act of “subversion.”
This structural and historical divergence has led to entirely different legal assumptions between prosecution and defence. The defence, grounded in common law and international human rights norms, argues that political ideas without violence should not be criminalised. The prosecution, however, adopts a preventive national security logic, viewing any mobilisation that weakens institutional legitimacy as a threat—even without violence.
This trial is therefore not only a legal dispute, but a collision between two constitutional civilizations: one that treats the constitution as a shield for dissent, and another that treats it as a sword for defending the system.
The misalignment of constitutional function
From the intersection of legal logic and political reality, Chow Hang-tung appears to be in a paradoxical position—both “right” and “wrong.”
She is “right” in the sense that she operates within classical liberal constitutionalism, where the constitution protects citizens from arbitrary punishment. From this perspective, advocating the end of one-party rule is a legitimate political opinion. Without violence, criminalising such speech would conflict with traditional common-law requirements distinguishing intent and action.
However, she is also considered “wrong” within the current Hong Kong constitutional order, because she underestimates the paradigm shift in legal interpretation. The Chinese Constitution not only protects rights but also establishes Party leadership as foundational. Since the 2018 constitutional amendment enshrined Party leadership in the Constitution, challenges to one-party rule are effectively interpreted as attacks on the constitutional order itself.
Chow’s reasoning reflects her rigorous academic training and Western legal education. With studies in physics at Cambridge and law at the University of Hong Kong, she approaches law as rational, principled, and aligned with international human rights standards. In her framework, law should protect citizens and uphold procedural justice.
Yet this very commitment leaves her and her co-defendants at odds with the current legal environment. The prevailing approach is no longer one of protecting dissent, but of “defensive democracy” and preventive national security. Under this logic, even non-violent “soft resistance” is treated as opposition, and ideological mobilisation itself may be considered subversive.
Thus, invoking constitutional freedoms to challenge a constitutionally entrenched system becomes, within this framework, a legal contradiction.
Why silence is a warning sign
More broadly, the case highlights a troubling development: increasing constraints on public expression regarding sensitive historical events.
In traditional legal systems, stating historical facts is generally protected speech. Chow argues that prosecution has “inverted truth and falsehood,” turning the act of stating facts into “incitement.” However, under current legal reasoning, the court has treated decades of commemoration of June Fourth as potentially constituting “hate speech” or “subversion.”
Efforts to present historical evidence in court have repeatedly been restricted as irrelevant. This effectively limits the space for historical narrative within legal proceedings.
For the Chinese Communist Party, the 1989 crackdown remains a politically sensitive historical burden. Public acknowledgment of wrongdoing could trigger broader demands for political reform. From this perspective, suppressing commemorative activity is not only about present stability but about controlling historical narrative.
The removal of candlelight vigils is therefore not simply about banning an event, but about reshaping collective memory. Once historical symbols are redefined as security threats, the law becomes a mechanism for defining acceptable historical interpretation.
The shrinking of Hong Kong’s public space
Beyond this case, Hong Kong has also experienced a broader contraction of public expression.
In the late colonial period and early post-handover years, public discussion of June Fourth and political criticism was widely tolerated. Candlelight vigils, academic events, and public reporting were commonplace.
However, since 2019 and the introduction of the National Security Law and related legislation, the boundary of expression has shifted from “peaceful conduct” to “national security risk.” Even personal expression is increasingly reassessed through a security lens.
Recent incidents, such as police intervention in residents displaying banners in their homes, illustrate how the boundary between public and private expression has become blurred.
What was once considered private autonomy is now subject to heightened scrutiny. As legal lines become less clear, self-censorship becomes more common.
A generational restructuring of values
Different generations are experiencing this shift differently.
Older generations (60–70s), who lived through 1989, feel a profound sense of loss as their political ideals collapse.
Middle-aged groups (40–50s) tend to adopt pragmatic adaptation, prioritising stability, careers, and family security.
Younger generations (20–30s), shaped by liberal education and local identity, experience the greatest cognitive dissonance, as their legal and moral frameworks clash with present realities, leading many to emigrate or withdraw.
What does the future hold?
With expanding national security laws, self-censorship is becoming a practical norm. Over time, historical memory itself risks fragmentation, as younger generations may only encounter events like June Fourth through official or limited narratives.
This creates a break in historical transmission, where memory shifts from public discourse to private discussion.
For those overseas, particularly in democratic societies such as Australia, the contrast highlights the value of political freedom and expression. The question becomes not only how Hong Kong is changing, but how those outside it choose to respond—whether through remembrance, participation, or active engagement in preserving open civic values.
Features
China–US Summit: Searching for a Manageable Relationship Amid Rivalry
Published
3 weeks agoon
May 20, 2026
On May 14, US President Donald Trump began his first state visit to China since 2017, holding a leaders’ meeting with Chinese President Xi Jinping at the Great Hall of the People in Beijing.
At a time when China–US relations remain strained over tariff disputes, artificial intelligence competition, tensions across the Taiwan issue, and broader geopolitical rivalry, the “Xi–Trump summit” drew global attention from the moment it was announced. Observers were especially focused on whether Beijing and Washington would send any new political signals regarding the sensitive Taiwan issue.
In the end, however, the summit produced few concrete breakthroughs and limited substantive outcomes. Yet compared with the increasingly confrontational tone that has defined China–US interactions in recent years, the dialogue and interactions between Trump and Xi nevertheless suggested that both sides are still attempting to maintain a relationship that is “manageable rather than uncontrollable” despite their intense competition.
A Meeting Marked by Mutual Gestures of Goodwill
Both sides deliberately cultivated a friendly diplomatic atmosphere during the visit.
When Trump arrived in Beijing, Chinese Vice President Han Zheng personally greeted him at the airport, a gesture widely interpreted as a high-level welcome from Beijing.
After the talks, Xi accompanied Trump on a visit to the Temple of Heaven, making Trump only the second sitting US president to visit the site after President Gerald Ford in 1975. As an imperial ceremonial complex reserved for Ming and Qing emperors, the Temple of Heaven visit was viewed by many as Beijing’s attempt to accommodate Trump’s appreciation for symbolism and personal diplomacy, thereby creating a warmer atmosphere.
The Temple of Heaven also symbolizes the traditional Chinese concept of harmony between heaven and humanity, as well as the ancient worldview of cosmic balance and coexistence. Beijing’s arrangement for Trump to visit the site was therefore interpreted as a cultural signal that China and the United States need to seek a new balance and framework within the existing international order, maintaining stability and coexistence amid competition.
Trump’s overall demeanor during the visit also appeared relatively restrained. His interactions with Xi were notably polite and cooperative. At the start of the meeting, Trump described Xi as “a great leader” and said it was an honor to meet him. During the state banquet, he unusually followed prepared remarks while reflecting on the history of China–US relations, rather than relying on his typical improvisational style.
Of course, with multiple international crises intersecting — including tensions surrounding Iran — Trump’s primary objective during the trip was negotiation. As a result, he appeared more inclined to cultivate a stable and friendly atmosphere in hopes of creating greater room for bilateral bargaining. At the same time, China’s high-profile reception seemed to encourage Trump to adopt a comparatively pragmatic and restrained posture on certain issues, temporarily lowering the intensity of direct public confrontation and establishing a limited sense of stability and trust amid strategic rivalry.
Beijing Draws a Red Line on Taiwan
On the Taiwan issue — the topic most closely watched by outside observers — the summit did not reveal any significant breakthrough. However, Xi Jinping’s remarks on Taiwan were noticeably tougher than in previous meetings with US leaders.
During the talks, Xi again described Taiwan as the “most important and sensitive core issue” in China–US relations, warning that if handled properly, bilateral ties could remain stable, but if mishandled, they could lead to “collision or even conflict,” potentially pushing relations into “an extremely dangerous situation.” He also reiterated that “Taiwan independence” and peace across the Taiwan Strait are fundamentally incompatible.
Compared with Xi’s language in previous meetings with American presidents, his tone this time was significantly stronger. Terms such as “collision” and “conflict” stood out sharply in what was otherwise a highly formal and friendly diplomatic setting. This was not merely a routine restatement of Beijing’s position, but rather appeared to be a formal red line directed at the Trump administration: if China and the United States hope to establish what they call a “strategically stable relationship,” the Taiwan issue will remain unavoidable at its core.
On the American side, Trump deliberately avoided directly addressing Taiwan during the visit, while the White House summary released afterward made no mention of the topic. Secretary of State Marco Rubio later stated that US policy toward Taiwan “has not changed,” emphasizing that although China raised the issue, it was not the central focus of the meeting.
However, Trump later told Fox News that he did not want to see Taiwan declare independence and believed Beijing could generally accept maintaining the status quo. Although the remarks did not alter official US policy, they were nevertheless interpreted by some as a warning to pro-independence forces in Taiwan, signaling that the Trump administration does not wish to enter into direct military conflict with China over the issue.
In addition, aboard Air Force One on the return flight, Trump acknowledged that he and Xi had discussed arms sales to Taiwan, saying they “might approve them, or might not.” Merely admitting publicly that Taiwan arms sales had been discussed with Beijing sparked controversy in both the United States and Taiwan, because under America’s “Six Assurances” to Taiwan, Washington is not supposed to consult Beijing in advance regarding such decisions.
As a result, Taiwan remains one of the most sensitive and difficult issues in China–US relations, with little likelihood of near-term consensus. The coming months may prove critical in shaping the future direction of bilateral interactions. If Washington exercises restraint in military support and official exchanges with Taiwan, Beijing may interpret this as a goodwill gesture toward stabilizing relations. But if US–Taiwan interactions intensify further, the temporary easing atmosphere created after this summit could quickly collapse back into tension.
Consensus on Iran?
Compared with the Taiwan issue, the White House devoted considerably more attention in its post-summit summary to Iran.
According to the US side, both countries agreed that the Strait of Hormuz must remain open to ensure the free flow of global energy supplies. Xi also reportedly expressed opposition to militarizing the waterway or imposing fees on shipping passage. The White House further stated that China intended to increase purchases of American oil to reduce dependence on the route, and that both sides agreed that “Iran cannot possess nuclear weapons.”
Trump later revealed in an interview that Xi had assured him China would not provide military equipment to Iran. This suggested that Trump succeeded in obtaining at least some degree of Chinese cooperation and political signaling on Iran — one of the few tangible diplomatic gains of the trip.
However, compared with the White House version, China’s official readout mentioned the Middle East only briefly, stating simply that the two sides exchanged views on regional issues without disclosing details.
Limited Economic Achievements

Before the visit, many had expected more significant progress on economic cooperation, especially since Trump traveled with 17 American business leaders, including Elon Musk, Jensen Huang, Tim Cook, and Kelly Ortberg. This raised expectations in financial markets, yet the actual economic outcomes remained limited.
In agriculture, China had earlier extended export permits for more than 600 American slaughterhouses through 2029, which was seen as a goodwill gesture. However, restrictions were later reimposed on parts of the list, and permits do not necessarily translate into actual purchases, leaving uncertainty about practical progress. Beef exports themselves also remain relatively limited in scale.
Regarding soybeans, China had already committed under the “Busan Agreement” framework to purchasing roughly 25 million tonnes annually between 2026 and 2028. No additional commitments were announced during this visit, making the arrangement more of a continuation than a breakthrough.
On aviation, Trump claimed China had agreed to purchase 200 Boeing aircraft, though this fell below earlier expectations of between 300 and 500 planes. Meanwhile, China’s new Boeing orders have declined in recent years as the country increasingly turns toward Airbus, suggesting deeper structural changes remain underway.
In trade, both sides floated preliminary concepts such as lowering tariffs on certain non-sensitive goods or creating mechanisms allowing some Chinese investments to bypass US foreign investment reviews through CFIUS. However, these discussions remained conceptual and did not produce concrete agreements or timelines.
There was likewise no breakthrough on technology and semiconductors. Although reports briefly emerged suggesting the US might ease export restrictions on Nvidia H200 chips, no clear progress materialized, and Washington emphasized that export controls were not a central topic of the summit.
Overall, while the summit emphasized “cooperation progress” at the narrative level, most outcomes amounted to extensions of existing arrangements or symbolic gestures rather than major substantive breakthroughs.
The “Thucydides Trap”: Can China and the US Avoid Great-Power Conflict?

More than the summit’s tangible outcomes, outside observers focused on Xi Jinping once again invoking the concept of the “Thucydides Trap.”
Speaking at the Great Hall of the People, Xi said the world was undergoing “accelerated changes unseen in a century,” and that China and the United States must think together about how to “transcend the Thucydides Trap.” He argued that a rising power and an established power are not inevitably destined for conflict, and that both countries should stabilize bilateral relations while jointly addressing global challenges.
Xi further stressed that China and the United States share more common interests than differences, and that each country’s success can also represent an opportunity for the other. He proposed that the two nations should “create a new model of major-power relations” and jointly complete what he called the “answer sheet of our era.”
The “Thucydides Trap” originates from the ancient Greek historian Thucydides and his account of the Peloponnesian War. At the time, Athens rapidly expanded its economic, military, and naval power, causing fear and anxiety in Sparta, the existing dominant power, ultimately leading to nearly three decades of war. Later, Graham Allison of Harvard University used the concept to describe how a rapidly rising power challenging an established hegemon often creates structural tensions and risks of conflict. In contemporary international politics, the phrase is frequently used to characterize China–US relations.
The core of the “Thucydides Trap” may not simply be war itself, but rather the fear experienced by an established hegemon toward a rising challenger. In today’s China–US relationship, this anxiety can be seen in America’s unease regarding China’s rise. That fear itself may gradually push both sides toward confrontation, with potentially catastrophic consequences.
Xi’s renewed reference to the “Thucydides Trap” therefore appeared to carry a dual message: first, that China now sees itself as a power capable of standing on equal footing with the United States; and second, that although China seeks to reshape its place within the international order, it does not wish for China and the United States to descend into total confrontation or a zero-sum struggle.
The Real Trap Behind the “Thucydides Trap”

Yet perhaps the most important warning contained in the “Thucydides Trap” is not war itself, but how such rivalries historically end.
In the Peloponnesian War, even though Sparta eventually defeated Athens, it failed to establish a lasting and stable hegemony. Prolonged internal exhaustion and warfare weakened the entire Greek world, which was later conquered by the rising Kingdom of Macedon. In other words, when great-power rivalry spirals out of control, the outcome may not be a true victory for either side, but rather mutual weakening that ultimately allows a third force to rise.
Chinese history contains similar examples. After years of warfare, the Northern Song dynasty and the Liao dynasty signed the Chanyuan Treaty, creating a kind of balance between equals: the Song possessed strong economic and cultural influence, while the Liao maintained military and cavalry superiority. Although both sides remained wary of each other, they also sustained a long period of peace and trade.
Yet the force that ultimately reshaped the region was neither Song nor Liao, but the rise of the Jin dynasty. The Jin first destroyed the Liao and then defeated the Northern Song. Later, after years of rivalry between the Jin and the Southern Song, both were ultimately swallowed by the even more powerful Mongol Empire.
Viewed through today’s geopolitical landscape, these historical parallels become especially thought-provoking. The United States faces mounting strategic and resource pressures from tensions surrounding Iran, while continuing to respond to the Russia–Ukraine war and the evolving Indo-Pacific security environment. China, meanwhile, remains highly focused on Taiwan and the South China Sea while expanding its influence through economic development and technological competition, sustaining an ongoing strategic rivalry with Washington.
As both powers devote vast resources to multiple fronts simultaneously, observers are beginning to ask whether prolonged China–US confrontation and exhaustion could eventually create space for another emerging force to reshape the global order between them.
Trump: “This Is the G2”
Returning to China for the first time in nine years, Trump’s visit attracted significant diplomatic attention, and he repeatedly emphasized its achievements. Yet compared with the past, the international environment and the structure of China–US relations have changed substantially. As China’s influence in the global economy and geopolitics continues to rise, bilateral relations increasingly display structural characteristics of simultaneous competition and engagement.
In interviews, Trump again referred to the “G2” framework, reflecting his apparent recognition of China and the United States as two co-equal superpowers dominating the global order.
Overall, while the Beijing trip lacked major substantive breakthroughs, the carefully managed atmosphere of stability and restraint established during the visit may nevertheless have created a more controllable tone for future relations. China–US interactions are expected to remain intensive throughout the year, including a planned White House return visit by Xi and his wife on September 24, the APEC summit in Shenzhen in November, and the G20 summit in Miami in December.
As these diplomatic engagements unfold, the future trajectory of China–US relations will continue to command global attention.
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