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In their rivalry for global supremacy, the U.S. and China both flex their hard power, in the form of military might. But they are also competing in the realm of soft power, and new research suggests China is catching up.
Soft power is generally defined as the ability to influence others through appeal and persuasion rather than coercion. The Global Soft Power Index 2024, published by UK-based consultancy Brand Finance, ranks the U.S. number one, but China has overtaken Germany to take the number three spot. China is the index’s fastest mover, with a 6.2-point score improvement over 2023, showing the country’s significant edge in business and trade attributes, which feed into the final assessment of soft power.
China’s ascendance as a soft power tallies with its growing status as an economic force and underscores the link between soft power and the harder-nosed world of business.
It’s easy to see the relevance of soft power to diplomacy, cultural exports and tourism. But it comes heavily into play with trade and investment as well. A country's soft power can impact positively on its economic prospects by influencing perceptions, building trust, and creating a positive environment for investors and trade partners.
Countries that perform well in the Global Soft Power Index also top foreign direct investment league tables and are among the world’s most powerful economies. These include not just the U.S., China and Germany but also the U.K. and Japan, which make up the top five in the 2024 index. Additional research by Brand Finance found that soft power correlates with a 34% variation in global FDI inflows and 60% in trade flows.
Other studies support the link. Researchers from Mexico’s EGADE Business School and Universidad de Monterrey and Iowa’s Morningside University affirmed the linkages in a recently published article in the International Area Studies Review.
“In rising economies, economic influence is a crucial component of soft power. As the economies of these nations continue to expand, they are becoming increasingly significant trading partners and investors on the international stage,” writes Dr. Ricardo E. Buitrago, a research professor at EGADE Business School and co-author of the study. “This could result in a more substantial impact on international organizations and trade discussions.”
Whether by causation, correlation or coincidence, there does appear to some sort of virtuous circle, with strong soft power helping to boost trade and investment while success in trade and investment enhances soft power. Unfortunately, it can also work against countries that have poor soft power combined with low levels of inward investment and exports; it is a loop that is hard to escape from, though not impossible.
Whatever the direction of the relationship between soft power and business, it appears to be getting stronger as the global economy gets weaker. At times of heightened uncertainty, economic clout — and the sense of stability it implies — becomes even more attractive. This is why the 2024 index and its explanatory report highlights a growing importance of business and trade attributes in perceptions of nations’ soft power, with a strong and stable economy cited as by far the strongest driver of both influence and reputation.
As China’s economy stumbles, its rampant growth slows and its FDI inflows decline, the question is whether its rise as a soft power will be maintained at its current pace. The veer of economic safety can be easily eroded.
However, the soft-power standings look to be headed toward a two-nation race between the U.S. and China, in tandem with the countries’ competition over military and economic supremacy.
