China is moving inevitably toward first place in global affairs, ending America’s role as top dog. Or so I am told in print and in person, sometimes by those who told me the same thing about Japan two decades ago. I recall a conversation in the immediate aftermath of the Soviet collapse in which I was lectured that if the United States did not immediately institute a Japanese-style system of government-directed industrial policy, “this county will be finished.” This, mind you, at the onset of Japan’s economic “lost decade.”

Skepticism is justified about straight-line projections of China’s rise, as it was about Japan’s. For years I endured blather from many Western leftists (and more than a few on the Right) about the Soviet Union’s inevitable triumph. Indeed, I am old enough to recall when it was Germany (then West Germany) that America must emulate or face the scrapheap of history. Fortunately, my first macroeconomic theory professor had taught me that straight-line projections are always wrong.

A key problem with doom forecasts is that they employ single-entry bookkeeping; they look only at another country’s assets and not its liabilities. If one considers General Motors without its debt service, pension, and healthcare obligations, it is doing fine—but what investor would be such a fool?

A bit of angst is perhaps a healthy counterpoise to the famous American tendency to braggadocio, manifest not so long ago in post-Cold War unipolar triumphal posturing. But we tend to overdo the end-of-American-power hand-wringing, which is as false as underestimating potential adversaries. Former military colleagues reserved scorn for a class of intelligence officers they called “threat inflators.” These could portray a single new Russian submarine as justification for a new class of subs on our side. Where today is the threat worthy of inflation? Only China fits the bill.

For years, the USSR embodied our worst fears—though after six years of service at the Moscow Embassy, including extensive travel around the Soviet Union, the wonder to me was that the Soviet system lasted as long as it did. Ronald Reagan only got it two-thirds right. Evil, check. Imperial, check. But the key factor in the Soviet collapse was irrationality. The Soviet system was structured to make people behave contrary to their rational self interests. The “new Soviet man” had to violate the norms of the system every day in order to survive. The contradictions were pervasive and understood by everyone. The system was structured on lies. When people began to speak the truth openly, the gig was up.

One feature in China’s favor is the comparative realism of Beijing’s leaders. The Chinese are a deeply proud people, and rightly so. But Chinese elites—both in public statements and in closed meetings—are remarkably candid about their country’s shortcomings. They note that two-thirds of China’s people live below the UN poverty line, and many still live below the UN extreme poverty line. This actually represents a stupendous achievement because, under Mao, most of the country was in the extreme poverty category. The fact remains that in GDP per capita China is not in the top 100 countries of the world.

Chinese leaders like to remind their Western guests that every resource there is divided by 1.3 billion and every problem multiplied by the same figure. With China, a bunch of zeros at the end of every statistic tends to obscure the question, what is being counted here? For example, that China (or India) produces so many engineers says nothing. So did the Soviet Union. Many of the degree-holders are little more than mechanics and, in any case, a country with 170 cities of over a million inhabitants needs a lot of engineers just to keep things functioning. In contrast, assessments by Chinese universities themselves of where they stand in global rankings are strikingly modest.

Both Soviet and Chinese regimes spent decades at war with their peasants. Collectivization was a central failure and catastrophe of both Stalinist and Maoist policy, killing untold millions with a destructive legacy enduring to this day. In China, peasants were at the forefront of early post-Mao reforms, but today are often treated by many officials as little better than human fuel for economic development and exploitation.

China’s leaders are clearly worried about the potential for mass unrest among the peasantry, historically the weak spot of the Chinese state. The current effort to improve village life depends on broad economic growth, but it is inherently fragile. Witness recurrent scandals of illegal expropriation of peasant land, shoddy construction of village schools, and lack of due process for “the masses.” In addition, rural China must itself pay for local education, healthcare, and support of the elderly—the big-ticket items for rectifying some of the imbalance of rural and urban life.

Both countries also declared war on nature, in vast state-run projects that defied the realities of climate or topography. Most people know of the destruction of the Aral Sea, but it represents only a particularly visible example of the waste and loss inflicted by Soviet central planning. China today is drinking its northern rivers dry and building a vast infrastructure to shift water from south to north, ignoring the fact the water has vital purposes to serve in the south. If even the more benign predictions of Asian glacier loss prove valid, China’s south may become a region of water scarcity rather than surplus just as the diversion schemes come fully on line. In many countries the pursuit of heroic materialism under a socialist banner has proven a prescription for waste and mismanagement on a heroic scale. China has yet to outgrow this psychosis, compounding its horrendous poisoning of land, air, water, and hence people.

In manufacturing, the Soviet centrally-planned system was so bad it spawned things like a secondary market in used light bulbs. To get a new bulb, you had to turn in a used one, thus creating an unofficial trade in burned-out bulbs. Twenty years on, Russia still manufactures little the outside world wants to buy except weapons (and has pretty much lost its Chinese customer in this field), while ordinary people prefer secondhand Japanese autos to brand-new Russian output.

China, in contrast, is the world’s workshop, with huge export surpluses and increasing market dominance in many products. But the success of China’s export industries should not blind us to the vast state-run industrial sector with all the shortcomings of politically-mandated investment and output. Exploitation of labor is rampant in both state and private sectors. Even the “free market” sector is indirectly run by government at various levels, with regional and local officials the most pernicious. Chinese exports often reflect the final assembly of parts imported from other Asian producers with more genuine market systems and value added. While China is certainly a competitive economy in many ways, it is too soon to characterize it as an open, rule-of-law, contracts-based economy. State-sponsored or ‘crony state capitalist might be more accurate terms.

In one area, the Chinese have apparently learned from the Soviet example. The Soviet Union became a garrison state that consumed in peacetime the resources a country normally commits to the military only in war. Soviet military budgets were not even driven by competition with the United States or NATO. Production lines for tanks and aircraft often fulfilled a Sorcerer’s Apprentice plan of output for its own sake. China is impressively modernizing and expanding its military capabilities, but is doing so at levels that reflect a growing peacetime economy rather than beggaring that economy to satiate the military.

In education, the comparison is mixed. The Soviet Union produced top-quality human talent in many fields, but tended to wall itself off from intellectual developments elsewhere. Even today, a degree from a foreign institution can be a career killer in some Russian professions. In contrast, upwardly mobile Chinese see foreign degrees as the key to advancement. A recognition that the outside world has much to teach is a sine qua non of Chinese development policy. At the same time, the paucity of education resources in the countryside forecloses opportunities for most young people because they happen to live on the land. The new elites of China have created a nomenklatura system that favors their own offspring over those from other origins, regardless of talent.

Of all Washington’s Cold War blind spots, none was more opaque than the pervasive refusal to recognize the demographic trends that ultimately would reduce Russia to a comparative second-class power. The good thing about demographics is they give insight into the near future: you can know how many males of conscription age there will be over the next 18 years. Sadly, policymakers tend not to like demographics, preferring “hard” issues of the here and now. There was also a tendency in Washington to dismiss indications of Soviet population weakness as incompatible with a felt need for the Cold War adversary to be strong and growing ever more dangerous. In my experience, those who recognized the twin crises of Soviet health and demographics were intellectually prepared for the failure of the system, while those who did not were not.

China’s demographics are not at all like Russia’s, but are equally important for the country’s future. There is a key similarity: population trends in both countries are the result of government policies. In China, the one-child policy instituted under Mao has inflicted huge societal costs, especially on rural families where male children are central to continuance of the family line, maintenance of property rights and support for the elderly. (A married female must support her in laws, not her own parents.) The policy has killed untold infant females and produced tens of millions of excess males, who will never marry and hence be a long-term disruptive force in society.

But the key demographic factor is China’s shifting age structure. In recent decades, China has been in a demographic sweet spot in which the working-age population was unusually large and dependents (young or old) comparatively few. This facilitated China’s impressive economic growth and development. But while there were only 16 elderly for every 100 working-age adults in 2005, there will be 32 by 2025 and 61 by 2050. This constitutes one of the steepest and most rapid aging patterns anywhere. China’s life expectancy is also improving to developed world levels, so the vast number of elderly in the offing will live long lives, even as the working-age population shrinks.

China’s leadership recognizes these realities. Indeed, demographics are at the heart of China’s policy “to grow rich before it grows old.” Yet as China grows old, it will do so at income levels comparable to the countries of Southeast Asia rather than to Japan or South Korea. A future China may have the largest GDP in the world, but still be comparatively poor, a huge mixture of developed and developing countries within one state.

Above all, Russia—in its Soviet and post-Soviet iterations—and China are control systems. While personal freedoms in both societies currently exceed the fantasies of those who lived under Stalin or Mao, political freedoms are few and closely monitored. If the Chinese elites learned anything from the Soviet collapse, it is the need to remain vigilant in defense of their power and privileges. In this regard, China’s rulers are perhaps no more Communist than are Russia’s, but reflect historical Chinese elite condescension toward the masses, belief in a top-down direction of society, and fear that disorder can swiftly descend to chaos. Some observers believe China could face the kind of systemic failure we saw in the Soviet Union. I doubt this, but China does not exhibit the flexibility in its politics that it has shown in economics. The Chinese control system is rigid, and in a crisis rigidity can be either strong or brittle.

Perhaps the lesson we should draw from our Cold War rivalry with the Soviet Union is that it is pointless to gauge ourselves against the spectral standard of a potential adversary. America’s future depends on how we manage our own affairs—especially the entitlement mentality of “buy now, pay later”—rather than onwhat China does. We enjoy the healthiest demographics in the developed world plus the most vibrant innovation culture and a capacity to adapt to changing circumstances. The question is our priorities. Nothing coming out of Beijing has the ambition or hubris of the doctrines of American global hegemony advanced by both neoconservatives and neoliberals. We need a greater realism in our foreign and security policies combined with a domestic focus on traditional virtues of public thrift and personal initiative.

The previous century witnessed the end of a Eurocentric world order and the shift of global gravity to America and Asia. The Soviet experiment endangered Russia’s very continuance as a great nation by an obsessive pursuit of great power status. This century will likely be defined by the relationship between the world’s oldest great nation and its youngest. China and America are very different and we face different challenges. We are both great nations, great states and great powers. We will become adversaries only by choice and blunder, not by inevitability.

E. Wayne Merry, a former U.S. State Department and Pentagon official, is now a senior associate at the American Foreign Policy Council in Washington, D.C.