US v China: is this the start of a new cold war?

US v China: is this the start of a new cold war?

Coronavirus has brought the rivalry to a head sooner than expected – and the scope for non-alignment is narrowing.

George Kennan, the US charge d’affaires in Moscow at the end of the second world war and the author of the famous Long Telegram in 1946, captured in his memoir how quickly perceptions in international relations can change.

The man widely seen as the intellectual author of the cold war recalled that if he had sent his telegram on the nature of the Soviet threat six months earlier, his message “would probably have been received in the state department with pursed lips and raised eyebrows. Six months later, it probably would have sounded redundant, a preaching to the converted.”

Now, as the US squares up to China over the coronavirus pandemic, it appears as if many of the world’s democracies are, as rapidly as in 1946, reaching a new perception of the world order. Mike Pompeo, the US secretary of state, has declared the Chinese Communist party to be the number one threat to security, greater than international terrorism, and a growing number of countries seem to agree.

Those who argued that a more economically liberal China would produce a more politically liberal China fear they have found themselves on the wrong side of history. From the airspace over Taiwan to the skyscrapers of Hong Kong, the frozen Himalayas on the border with India and the reefs surrounding the Xisha/Paracel islands in the South China Sea, Chinese assertiveness is prompting a reassessment. The Australian government’s decision on Friday to call out a state-led cyber-attack – without naming China – was only the latest evidence of a new mindset.

The US is demanding that its allies not only admit to previous naivety but join it in an anti-China alliance. China, perhaps less overtly, is lobbying countries to to join its rival power bloc.

Many countries are trying to hedge, but the scope for neutrality or non-alignment is narrowing. India, for instance, long proud of what its former national security adviser Shivshankar Menon calls its strategic autonomy, is reeling at the implications of the brutal Chinese clubbing of its soldiers in the Galwan valley, an act Menon regards as unprecedented in its scope and implications for relations between the two neighbours.

Menon has long argued that India should eschew permanent alliances: “The ideal position for India, of course, is to be closer to both China and the US than they are to each other,” he says. But as the rhetoric and the threats escalate, it is becoming ever harder to navigate between China and the US in this way. It feels instead as if a new cold war is brewing, fought as much through technology and tariffs as with conventional weaponry.

Indeed, the great question for the next six months is the extent to which those countries opposed to the world being divided again into two blocs can prevail, and whether the economic connections across the world are now so dense that the price of the decoupling that America is demanding is too high.

A few years ago, many thought these might be questions for later in the decade. A superpower rivalry had been brewing slowly, after all, under Barack Obama. But it took on a new urgency with the advent of the Trump administration. In the words of one of Donald Trump’s discarded advisers, Steve Bannon, “these are two systems that are incompatible. One side is going to win. The other side is going to lose.” Coronavirus, the Great Accelerator, has brought the issue to a head earlier than expected.

According to Kishore Mahbubani, a fellow at the Asia Research Institute, Trump has prepared for this battle chaotically. “The fundamental problem is that the US has decided to launch a geopolitical contest against China, the world’s oldest civilisation, without first working out a comprehensive strategy on how it is going to manage this contest. It is quite shocking. These are not abstract issues for Korea and Japan. America wants them both to decouple from China, but for them that is economic suicide.”

Mahbubani was Singapore’s lead diplomat at the United Nations, and the county’s current prime minister, Lee Hsien Loong, is equally vehement that Asia does not relish Bannon’s choice. “Asian countries see the US as a resident power that has vital interests in the region,” he said. “At the same time, China is a reality on the doorstep. Asian countries do not want to be forced to choose between the two. And if either attempts to force such a choice – if Washington tries to contain China’s rise or Beijing seeks to build an exclusive sphere of influence in Asia – they will begin a course of confrontation that will last decades and put the long heralded Asian century in jeopardy.”

Loong also urges the US not to see this as a rerun of 1946. “China is far from a Potemkin village or the tottering command economy that defined the Soviet Union in its final years . Any confrontation between the great powers is unlikely to end, as the cold war did, in one country’s peaceful collapse.”

A similar scramble for neutral ground is under way in Europe. Yes, Europe declared China “a systemic rival” a year ago, and most EU countries are looking to diversify their supply chains, limit foreign subsidies, or review how they regulate sensitive Chinese inward investments. But Josep Borrell, the EU foreign policy chief, is reluctant to be dragged into Trump’s all-out war. After video talks with Chinese foreign minister Wang Yi earlier this month he unveiled the Sinatra doctrine – Europe would do it in its own way.

Borrell insisted China was not a military threat and confided Wang had told him China did not like being called a “systemic rival”. Borrell ruminated “Words matter,” before tying himself up in linguistic knots asking “What does ‘rival’ mean? ‘Rival’ on what? Is ‘systemic’ a matter of rivalry between systems? Or is it a systematic rivalry? There are two interpretations”.

For countries such as Germany this is not about a play on words. China bought €96bn (£87bn) of German exports in 2019 – nearly half as much as the EU’s. Volkswagen sold 4.2m cars there in 2017 financial year. If Deutsche Telekom was forced to remove Chinese equipment suppliers from its network – a scenario called Armageddon – it would take 5 years and cost billions. A systematic rivalry is not in Berlin’s interests, or indeed what its people want. In survey after survey they affirm Trump is a greater threat to world peace than Xi.

Similarly, in Latin America some surprising countries are proving to be China-centric. Chile, probably the most free-market economy on the continent, counts China as its main trading partner both in terms of imports and exports.

China’s president, Xi Jinping, has extended his signature foreign policy, the Belt and Road initiative, right across Latin America, signing up 14 of the region’s 20 countries. China has surpassed Brazil as Argentina’s biggest trade partner. Argentina’s president, Alberto Fernández, preaches that “trade relations must be de-ideologised”.

In Brazil, where Jair Bolsonaro’s entourage have sent racist tweets about Beijing’s plans for “world domination”, exports to China rose by 13.1% in the first five months of the year compared with the same period in 2019. A third of Ecuador’s debt – $18.4bn (£15bn) – is owed to Chinese policy banks. Mexico, Venezuela and Bolivia also have strong trading links with China.

Once America’s backyard, Latin America is rapidly becoming China’s frontyard. With the closer economic links come political quiescence. On the issue of Taiwan, Panama, the Dominican Republic and El Salvador have shifted from Taiwan to China since 2017. In return they have secured infrastructure financing and investment.

China has long had Africa sewn up as its biggest creditor. “For Africa there is no other game in town when it comes to financing,” says the historian Niall Ferguson. “We [the west] are not competing in an effective way,” he recently told the Henry Jackson Society.

African countries have borrowed as much as $150bn – almost 20% of their external debt – from China, data collected by Johns Hopkins University shows.

In recent years, China’s lending has grown to exceed the combined loans of the IMF, the World Bank and the Paris Club, according to the Kiel Institute for the World Economy. Yet around 50% of China’s international lending to developing and emerging countries is not included in official statistics. China says that as part of the G20, it will do its bit to ease Africa’s debt burden, suspending payments for at least eight months. But it has not announced details, and the conditions of many of its loans are murky.

“The terms of these loans are very opaque and will take a lot of time to restructure,” says William Jackson, the chief emerging markets economist at the research firm Capital Economics. “There is little negotiating power among African countries. China is in the stronger position.”

China has used this worldwide network to make its long march through the UN’s institutions, enabled by the US’s own shorter march out of the same forums. An early warning for the west came in 2017 when Britain’s candidate to run the World Health Organization was crushed by the Chinese-backed Ethiopian candidate, Dr Tedros Adhanom Ghebreyesus. China itself now heads four of the UN’s 15 specialist agencies. Prior to the election for director-general of the Food and Agriculture Organization (FAO) in 2019, China wrote off $78m in debt owed by the Cameroonian government, whose nominated candidate coincidentally withdrew his bid afterwards. China beat the French candidate, taking 108 of the 191 votes.

After years as a shrinking wallflower, China has also become active in the UN Human Rights Council, sponsoring motions and in July 2019 crushing western criticism of China’s treatment of 1 million Uighur Muslims. That July vote was seen as an acid test of Chinese influence. Twenty-two western nations backed a resolution criticising China, but more than 50 nations signed an opposing letter accusing the west of “politicising human rights” and commending what it called China’s “remarkable achievements” in human rights. Not a single Muslim country backed the west. The so called “Like-minded Group of Developing Countries” all backed China or sat it out. Similarly, a tranche of eastern European countries refused to condemn Beijing.

The episode demonstrated that any assumption that there is an inbuilt majority willing to take on Chinese authoritarianism in the way that the US wants is a fantasy. Mahbubani argues that countries containing 20% of the world population are willing to join an anti-China alliance, but the rest would not. Dr Keyu Jin, an associate professor at the London School of Economics, says there is a global divide: “The attitude of many emerging markets to China is very, very different to rich industrialised nations. They want to learn from and aspire to the China model. They associate China with innovation in technology. Ten years ago during the financial crisis, China was the one to fill in the financial gaps when the US Fed[eral Reserve] had only swap lines with six major advanced economies.”

China has been lucky in its enemy. Just as China has courted its allies, Trump has insulted his. Mira Rapp-Hooper, in her new book Shields of the Republic, documents both how Trump has gloried in the destruction of alliances, and the price the US is paying. She concludes: “Trump does not need legally to sever treaty alliances – by treating them as protection rackets for which the protected parties can never pay enough, he obviates them. By embracing adversaries, he challenges the very notion that his allies share threats.” Not surprisingly some Chinese diplomats would welcome Trump’s re-election, and another swing of the wrecking ball he brings to the western alliance.

Yet at the 11th hour there may be a reversal of fortunes, largely caused by China behaving as foolishly as Trump. For Aaron Friedberg, a counsellor at the National Bureau of Asian Research, China’s behaviour in response to coronavirus could represent a kind of clarifying moment. “It is as if at every stage the unfolding of the crisis has pulled back another curtain, revealing yet more ugly facets of the regime’s character and highlighting the diverse dangers that it can pose to others.”

The threat posed to Hong Kong, and the conflicts on the border with India, are only symptomatic of a series of Chinese steps that have made the life of the non-aligned harder, and have left more traditional Chinese political scientists such as Lanxin Xiang fuming. He argues that China, by indulging in “fantasies of self-glory”, is doing untold damage to itself and relations with the west.

If China is at risk of blowing its chance to lead, then others have calculated that a fleeting chance exists for the middle-power democracies, some with nuclear weapons, to hold greater sway. There is talk of a D10 of democracies – in essence, the G7 plus Japan, India and Korea. It is an idea that might fly if Joe Biden is elected US president. But it would require greater restraint from Washington about how far to push the confrontation with China.

He never got to run an international thinktank, but the Italian communist Antonio Gramsci, reflecting on a previous interregnum, was right: “The old world dying, and a new one struggling to be born. Now is the time for monsters.”

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