As the world’s largest trading nation, China has much at stake in the Red Sea. Europe is China’s top trade partner, and more than 60% of that trade by value usually flows through the Suez Canal. With that route disrupted, cargo vessels are diverting around Africa’s Cape of Good Hope, adding up to two weeks in additional travel time and vastly increasing shipping costs. By 25 January, the average cost of shipping a 40-foot container from Shanghai to Genoa spiked to $6,365, an increase of 464% from two months earlier. Insurance rates have also skyrocketed. What’s more, Chinese companies have in recent years poured billions of dollars’ worth of investment into assets in the region, such as the 20% stake in the East Port Said container terminal of the Suez Canal that is now owned by Chinese state shipping giant COSCO. At a time when China’s growth rate is already struggling, the crisis risks imposing a serious further drag on its economy.

Apparently perceiving this vulnerability, Washington has tried to use it as leverage to convince Beijing to help end the crisis. China is the top economic and geopolitical backer of Iran, which in turn backs the Houthis, using them as a proxy to needle Israel, the United States and its allies. Some officials in Washington are convinced that, if it really wanted to, Beijing could quickly pressure Tehran into ending the Houthi attacks. Biden administration officials have “repeatedly raised the matter with top Chinese officials in the past three months”, according to the Financial Times, and US National Security Advisor Jake Sullivan recently flew to Thailand to directly plead the administration’s case in a meeting with Chinese Foreign Minister Wang Yi.

This diplomatic effort seems to have failed. Aside from a tepid public statement calling on “all relevant parties” to “ensure the safety of navigation in the Red Sea”, Beijing appears to have made no move whatsoever to remedy the situation. Instead, it called on Washington to “avoid adding fuel to the fire” in the Middle East. The attacks continue.

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Some in Washington are pouting. Rep. Jake Auchincloss (D-Massachusetts), for instance, slammed China in a Congressional hearing in late January for being “not only missing in action as a purported upholder of international commerce and rules, but… in fact actively undermining the potential for a peaceful resolution to this issue”. This failure to intervene was just “another example of the malign and malicious attempts at global leadership from the Chinese Communist Party”.

But Auchincloss and others of like mind in Washington should perhaps be careful what they wish for. For decades — indeed, arguably for the better part of two centuries — it has been the United States that has served as the world’s “upholder of international commerce and rules”. In fact, it was a determination to protect the flow of maritime commerce from pirates that induced the young United States into its first foreign intervention, the Barbary Wars of 1801 and 1815, and permanently forged its identity as an international actor. If the nation were truly to become and remain a merchant republic that meant that it must, as then-President Thomas Jefferson declared, “superintend the safety of our commerce” through “the resources of our own strength and bravery in every sea”.

Two centuries later, the US Navy was still operating under the slogan of “A Global Force for Good”. Which is to say that the whole image — and reality — of America as a superpower largely rests, like the British Empire before it, on its ability to secure global trade. If there is any remaining shred of the “Pax Americana” on which the whole recent era of globalisation was built, this is it.

It is in this context that Washington officials ought to consider what it would mean if Beijing were to listen to their pleas and actually take over America’s role as a security provider. If the nations of the world were to begin turning to China for “global leadership” rather than the United States whenever their merchant ships were in need of protection, it would decisively mark the transition from an American century to a Chinese one, much as Britain once yielded the seas to its former colony. Washington should count itself lucky that Beijing has so far declined to try out for the role.

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Meanwhile, America’s own effort to perform its old job of securing the sea lanes has proved little more than a fiasco. With the US Navy severely undermanned and overstretched around the globe, it attempted to assemble “Operation Prosperity Guardian”, a multinational coalition of forces under its command meant to patrol the Rea Sea. But this effort functionally collapsed almost immediately when France, Italy and Spain — all of whom Washington prematurely announced would be members — declined to participate, saying they wouldn’t accept US command. No Middle Eastern countries other than Bahrain signed up either. In a throwback to yesteryear, navies are instead each going solo and escorting the vessels sailing under their own flags and titles. What we are seeing, then, is a true breakdown in the “international order” — in the sense of there being any order — that was once imposed by American power. We are returning to an older, more typical world in which there is no world policeman, and everyone is obliged to protect their own national interests.

The Chinese are well prepared to capitalise on this situation. Although COSCO has for now also abandoned the Red Sea route, other smaller Chinese shippers have spotted commercial opportunity and leapt to fill the gap. China United Lines (CULines), for example, has rushed to start up a “Red Sea Express” service linking Saudi Arabia’s Jeddah to Chinese ports. They are able to do so because the Houthis seem to be under strict orders to try to avoid attacking China-linked vessels. Ships still running the straits into the Red Sea now regularly make sure to prominently display Chinese flags and use their satellite identification data to announce that they have Chinese owners, or even just Chinese crew members. The number of vessels transiting the area while preemptively broadcasting that they carry Chinese crew has surged from less than two per day to more than 30 in late January. Apparently this is the magic talisman to keep pirates at bay — though China’s navy has at least three warships in the area to escort its vessels, should it prove insufficient.

The reason Beijing seems so relaxed about the crisis is obvious: this is a situation in which China wins either way. Either the threat continues but shipping is safer for Chinese vessels than for others, in which case sailing under the protection of the red and gold flag may become a coveted competitive advantage, or Beijing finally tells Iran to knock it off, in which case China becomes the principal beneficiary of the security vacuum left by the United States. Both outcomes would be geopolitical coups. No wonder China is willing to accept a little short-term economic pain as the situation plays out.

Meanwhile, the crisis also provides China with a real justification for continuing to rapidly build out a “blue water” navy able to project power far from its own shores. As it happens, this is the same justification traditionally been offered by the United States: that, in the absence of security and stability, it needs the ability to protect global sea lanes and the lives of its citizens abroad. The military base China built in Djibouti in 2016 to enable the deployment of its warships across the Indian Ocean and around the Horn of Africa now looks prudent.

This is how the “world order” has always been shaped and reshaped: by nations and empires acting abroad to protect their own interests — or progressively failing to do so while others move to fill the void. The crisis in the Red Sea is therefore both symbolically and practically meaningful. Unless the United States and its allies can get their act together, we may look back on this as a moment when a vast geopolitical shift was revealed for all to see. As for everyone else, it’s likely that the crisis will serve as a sign that the time to prepare for the harsh realities of a far more “multipolar”, less globalised world has by now well and truly arrived.

That China’s agents would dare to infiltrate the heart of the British government has been widely portrayed as an unprecedented development. “This is a major escalation by China,” one anonymous senior Whitehall source told The Times, which broke the news, adding that: “We have never seen anything like this before.” It is hard to know whether such sentiments are genuine or exaggerated for effect. Either way, they seem rather overwrought.

China has been engaged in extensive espionage operations in Britain, and around the world, for decades. As a 2021 report by the Intelligence and Security Committee stated accurately: “China almost certainly maintains the largest state intelligence apparatus in the world.” Moreover, as the report also noted, China employs a “whole-of-state” approach to espionage, co-opting a range of state and non-state actors, as well as ordinary citizens at home and abroad, to help carry out this work. Chinese students studying abroad, for example, may sometimes be pressured by the government into reporting information back to Beijing — though far more often about the activities of their fellow ethnic Chinese students than state secrets.

It is true that, in recent years, a rising China has escalated its overseas intelligence operations. Since he came to power in 2012, Xi Jinping has made what he calls “comprehensive national security” the central priority for China’s party-state. He has handed China’s premier foreign intelligence service, the Ministry of State Security (MSS), along with its military equivalents in the People’s Liberation Army (PLA), greater authority and more resources both old and new (such as cyber) to more assertively collect intelligence, protect Chinese interests and project Chinese influence worldwide. The result has been the uncovering of a litany of hacks, thefts and scandals. Of these, the Chinese spy balloon that traversed the United States in February may have been the most high-profile, but was among the least successful and consequential (as compared with, say, MSS’s massive 2015 breach of US government security clearance records).

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But this is simply what nation-states, and especially the world’s major powers, do. Though perhaps distasteful, it should hardly be a shock. In fact, Britain should be particularly familiar with the business, given its history as an epicentre of the Cold War spy game. Those who walk the corridors of power in Westminster and think the present situation is unprecedented had best read up on the Cambridge Five.

Of course, Britain and its allies in the Western world are also spying on China — as we taxpaying citizens might reasonably hope they would be, if China really is the security “challenge” our governments say it is. In July, CIA Director Bill Burns did not shy away from saying publicly that the agency had “made progress” in rebuilding and expanding its spy network in China, years after Chinese counter-intelligence managed to identify and kill nearly all of the CIA’s agents operating in the country, following a 2010 intelligence breach (potentially the work of either a mole or cracked encryption).

There is some evidence that our spies have been wildly successful of late — at living rent-free in Xi’s head, anyway. Because whatever the furore in London, it pales in comparison with the escalating level of paranoia about hidden hands and foreign forces that has emerged in Beijing in recent years. Not only is China in the middle of a sweeping ongoing counter-espionage campaign — with the MSS currently calling on the public to engage in a “whole of society mobilisation” to hunt down spies and traitors, and triumphantly highlighting arrests on its new social media account — but more serious, if mysterious, goings-on higher up hint that Xi’s concerns about the loyalty of his people could be playing havoc within the Chinese system.

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The breaking news on Thursday night was that China’s defence minister, Li Shangfu, had been arrested and placed under investigation. The source for this information was, of course, US intelligence. But the fact had already been rumoured in China, as he had not been seen in public in weeks. Li’s fate seems linked to that of two top generals of the PLA Rocket Force (which oversees China’s nuclear weapons) who were hauled away a few months ago. The Force’s deputy commander, meanwhile, allegedly committed suicide. China’s short-lived foreign minister, Qin Gang, also suddenly disappeared and was replaced without explanation this summer.

There is no evidence, to be clear, that any of these officials were engaged in or suspected of espionage. The more likely explanation is old-fashioned corruption. The persistent rumour in China is that the PLA Rocket Force generals had taken money Xi handed them to expand China’s nuclear arsenal and pilfered it instead. Li, who previously ran the PLA’s equipment procurement department, may have been involved. But it seems plausible that the current atmosphere of extreme suspicion regarding foreign infiltration and subversion contributed to these officials’ exposure and removal, with Xi now no longer trusting the reliability of anyone, especially in his national security apparatus. Corruption itself can, after all, open the door to foreign intelligence services willing to wield blackmail or simply offer additional cash.

This distrust is particularly clear in Qin’s case. The ex-foreign minister disappeared after a Phoenix TV reporter strongly hinted that he’d had an extramarital affair (and fathered a secret child) with her while they were both previously stationed in Washington, DC. Since many Chinese officials have mistresses without facing any repercussions, and because Qin was previously considered personally favoured by Xi, some suspect that it was the fact that he’d engaged in his covert indiscretions only a few miles from Langley that was of greater concern. Naturally, the online rumour in China is that the TV reporter, Fu Xiaotian (who has also disappeared), was in fact herself an MSS agent deployed to Washington undercover.

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Whatever the truth of these specific salacious cases, it is absolutely clear that Xi is quite convinced that the West and its agents are hell-bent on infiltrating China and subverting Chinese Communist Party (CCP) rule. Because Western countries “have always regarded China’s development and growth as a threat to Western values and institutions”, he thundered at an assembly of top party leaders in 2016, these countries “have not for a moment ceased their ideological infiltration of China”.

In this, he was merely echoing a long series of similar declarations, as in 2013, when he warned that said “hostile forces” were “doing their utmost to propagate so-called ‘universal values’” with an aim to “vie with us [on] the battlefields of people’s hearts”, split up China “overtly and covertly”, and ultimately “overthrow our socialist system”. For Xi, China is engaged in an “extraordinarily fierce” global ideological struggle with Western liberalism that, “although invisible, [is] a matter of life and death”.

Western leaders don’t necessarily disagree. President Joe Biden regularly describes the United States as engaged in a global “battle between democracy and autocracy”. Former President Donald Trump’s secretary of state, Mike Pompeo, went so far as to insist while in office that the United States must “engage and empower the Chinese people” to enact regime change, because, he asserted, “if the free world doesn’t change Communist China, Communist China will change us”. British Prime Minister, Rishi Sunak, for his part, this week vowed not only to improve security but to “defend our democracy” — implying that undermining it must be Beijing’s actual target, rather than mundane intelligence gathering.

Both China and the West, therefore, not only suspect infiltration by the agents of their foreign competitors, but demonstrably view this as part of a much wider, more threatening, and more enduring struggle between rival systems. The hard truth, then, is that, in a very real sense, we’ve all been thrust back into an era much akin to the Cold War, when constant spying and attempted subversion were simply geopolitical facts of life. It may be best for leaders in Westminster, and indeed in capitals around the world, to come to terms with this not-so-unprecedented reality, and to move forward with open eyes: prepared, serious, and without naivety about what’s happening — but also without any undue shock and outrage. Surely the nation of James Bond, at least, can manage to carry on with good cheer.

Instead, Putin has decided to escalate further, announcing the mobilisation of 300,000 reservists in an effort to salvage Russia’s position as its forces flounder in the face of a sweeping Ukrainian counter-offensive. The mobilisation — along with accompanying threats to use nuclear weapons if Russian territory is endangered — is unlikely to have improved Xi’s mood. Chinese Foreign Ministry spokesman Wang Wenbin immediately called for a “ceasefire”. Foreign Minister Wang Yi later pressed for mediation and “every effort to strive for peace” in the conflict, while China’s ambassador to the UN Zhang Jun urged de-escalation and “a political settlement as soon as possible”.

China’s frustration with Russia is clearly growing. The conflict has left Beijing in an exceptionally awkward position. A short, sharp war that toppled the pro-Western Ukrainian government — i.e. what Putin appears to have originally expected — would undoubtedly have been a big win for China, severely undermining the unity and influence of the Western liberal order that it also seeks to overturn. It’s possible this was the bright future Xi was told to expect when, just before the war, Putin met him in February and the two leaders signed a joint statement declaring there were now “no limits” to the China-Russia partnership. Fast forward to today, however, and the protracted conflict, and the exposure of the Russian army’s simultaneous weakness and brutality, has turned into a serious headache for China.

Diplomatically, Beijing has attempted to straddle the fence on the war by supporting Russia rhetorically and morally even as it refrains from providing it with any of the material support Moscow has begged for with growing desperation. Russia has had to settle for shoddy, second-hand armaments from North Korea and Iran instead of the high-tech kit from China that it probably expected to receive. Even Washington has, almost grudgingly, admitted that China has so far complied with its sanctions on Russia.

The distinctly materialist Marxist-Leninist Chinese Communist Party (CCP) probably assumed its response would be appreciated around the world. Instead, no one is happy: the West has reacted with moral outrage that China hasn’t openly denounced Russia, while the Russians doubtless privately seethe with a sense of betrayal, having discovered that “our Chinese friends are tough bargainers”, as Putin let slip.

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Overall, the war is increasingly turning into a diplomatic disaster for Beijing, helping to drive perceptions of China to record lows around the world. In particular, it has shattered previously close ties with Europe. The European Union is now preparing a series of measures targeting forced labour and “economic coercion” that are likely to limit the EU-China trade relationship. Even the once reliably friendly — some might say naïve — Germans are now rapidly rethinking their tight economic relationship with China. The newly elected Giorgia Meloni, soon-to-be prime minister of Europe’s third-largest economy, is also a ferocious China hawk who has pledged to reconsider Italian support for China’s Belt and Road Initiative and make Taiwan “an essential concern for Italy”. Meanwhile, once-enthusiastic countries in Eastern and Central Europe, led by the Baltic States, have begun to drop out of diplomatic and economic arrangements with Beijing. And with the advent of the war worsening existing concerns about Xi’s draconian zero-Covid policies, China has, as EU Chamber of Commerce president Jörg Wuttke recently pointed out, begun to rapidly lose “its allure as an investment destination” for European companies overall.

For Xi, this could not come at a worse time. China is facing an exceptionally challenging economic outlook, including a worsening real-estate crisis, a debt bubble totalling at least 300% of GDP, an unprecedented level of capital flight, and a youth unemployment rate already over 20% — not to mention the damage inflicted by rolling Covid lockdowns. China simply cannot afford to lose additional trade and investment right now, especially from an economic partner as large as Europe. Meanwhile, the broader inflationary and recessionary pressures unleashed by the war and Western energy sanctions threaten to badly limit the market for worldwide exports at the very moment they are most needed by China’s struggling economy.

Worst of all, China is only two weeks away from the 20th Party Congress, the defining event of the Chinese Communist Party’s cutthroat internal politics. Held only once every five years, this will be the moment the party’s next top leadership is selected — and the moment Xi makes a bid to remain in power beyond his allotted two terms in office, potentially setting himself up to rule for life. For ten years Xi has plotted and manoeuvred to make this opportunity possible, and all he needs now is some stability and the chance to maintain a cultivated image of steady, all-knowing competence. But Putin has helped dash Xi’s hope for an uneventful 2022, opening a chink in his carefully crafted armour.

Last weekend, wild rumours that a coup had deposed Xi swept the internet. Elite military units under the command of a 105-year-old politician had taken over Beijing and placed him under house arrest. Military convoys were on the move across China. Flights cancelled around the country were the result of mutinies or military manoeuvres, not the weather. One of Xi’s rivals was about to take charge; the whole regime was about to collapse.

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All of this speculation was baseless, and Xi soon reappeared to pointedly lead all his top colleagues around a museum exhibit on “Forging Ahead in the New Era”. But the fact that the rumours seemed plausible to so many speaks to a growing view, inside as well as outside China, that events and his own policies may have left Xi vulnerable — or even cost him the “Mandate of Heaven” that legitimises an Emperor’s rule.

Even so, Xi remains in little danger of failing to secure a third term, let alone falling from power. The analysis of a new database of CCP power networks by the Asia Society Policy Institute demonstrates just how completely he and his loyalists have managed to seize and consolidate control over the three crucial levers of hard power in China’s Leninist system — what Mao Zedong famously described as “the gun” (the military), “the pen” (the propaganda organs), and “the knife” (the security and intelligence services).

Xi may be increasingly vulnerable in a different way, however. While his own position appears relatively unthreatened, the same can’t be said for his plan to pack the Politburo (the CCP’s top 25 leaders) with his protégés and factional allies, ensuring his path to lifetime rule and completing his personality cult. Xi’s economic mismanagement and strategic misstep of personally linking himself too closely to Putin have exposed him and his political faction to internal criticism in a manner that was almost unthinkable even two years ago. Xi had clearly hoped to replace his most obvious rival, Premier Li Keqiang (China’s second-ranked leader), with his personal protégé at the Party Congress, but this now looks substantially less probable. It is now more likely that Xi will have to compromise by accepting the elevation of Wang Yang, a senior leader connected to Li’s faction, to this position, as well as permitting the promotion of other reform-minded economic technocrats more sympathetic to Li throughout the system.

There has also been evidence in recent months that pro-Russia cadres within the diplomatic corps are beginning to be sidelined in favour of more pro-Western figures. The formerly high-flying and vocally pro-Russian Le Yucheng, who was once seen as a shoe-in as China’s next Foreign Minister, was suddenly demoted this summer and removed from the foreign affairs system entirely. Those who have emerged as the most likely replacements for the position, including Ma Zhouxu, Xie Feng, and Liu Jieyi, all have deep career ties to Europe, the United States, and international institutions such as the UN.

All this points to the possibility of an impending turn in Chinese policy. This doesn’t mean Xi is likely to throw Putin under the bus anytime soon — their high-profile “friendship” would make doing so disastrous for Xi’s credibility. But Xi’s patience with Moscow is clearly wearing thin. When Russian Defence Minister Sergei Shoigu blithely declared on television last week that “we are at war not only with Ukraine and the Ukrainian army, but with the collective West”, faces in Beijing must have grown pale. This is not something China can afford to be prematurely dragged into right now.

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Instead, regardless of whether he is under pressure from other political factions within China, Xi currently has an incentive to stabilise relations with Europe and the United States as much as is still feasible, and to seize on all available sources of growth for the Chinese economy, at least for the coming year. By contrast, he has little incentive to be generous with Moscow: now that Russia has been largely cut off from Western markets and suppliers, it needs China a lot more than China needs Russia.

It’s at least conceivable, then, that Xi could very well begin to privately pressure Putin to find a way out of the war and back to some semblance of global stability. Even if he doesn’t, unless Russia can turn things around in a hurry, Beijing is more likely to try to cut its losses and take measures to selectively distance itself from Moscow as it prepares to make the best of a world in which Russian power and influence are significantly reduced. We may have already seen an example of this two weeks ago when Xi — just ahead of his meeting with Putin — flew to Astana and pledged that China would “resolutely support Kazakhstan in the defence of its independence, sovereignty and territorial integrity”, effectively evicting and replacing Russia as the Central Asian state’s security guarantor and patron.

China did not sign up for the massive blunder Putin’s adventure in Ukraine has become, and Xi no doubt wishes the whole affair could simply go away. But Russia’s flailing means he will face an increasingly stark choice: either continue to draw away from Russia and its mess, or pivot dramatically and unleash enough Chinese military assistance to make sure Russia can win decisively, setting up an epochal clash with the West. Fortunately, all signs currently point in the direction of the former.