The dream of a liberal, democratic China is decidedly dead, and U.S. policymakers are finally beginning to grapple with the reality of having an authoritarian adversary as a global peer.

This thinking remains dangerously underdeveloped and naïve, as reflected in recent speeches by Secretary of the Treasury Janet Yellen and National Security Advisor Jake Sullivan, in which they emphasize narrow concerns about military technology while expressing optimism that our two nations can remain integrated economically. Yellen still envisions “a growing China that plays by the rules” and fosters “rising demand for U.S. products and services and more dynamic U.S. industries,” while Sullivan advocated a policy of “de-risking and diversifying, not decoupling.”

The China challenge is not only, or even primarily, one of national security. It is that too, to be sure. But the fundamental problem is that America’s free market economy is incompatible with China’s state-controlled one, and American liberty and democracy are incompatible with Chinese communism. America must sever its economic relationship with China to protect its market from subversion by the Chinese Communist Party (CCP). Disentangling our economies will be costly, but the alternative of accepting CCP control of our assets and investments, dominance in our supply chains, and influence over our institutions will cost far more. This paper demonstrates how integration with China undermines American economic sovereignty across three critical dimensions and describes the unprecedented policy response necessary.

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