A new cold war in Asia?

States in Asia do not want to choose between the US and China, but rising tensions between the two great powers are making it harder to avoid doing so.

By Kit Dawnay | 17 October 2016

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The strategic outlook in Asia is changing.  The US-led regional security system is under strain.  The South China Sea in particular has become a fulcrum of tensions between a rising China and a US that upholds the status quo.  States in the region are coming under pressure to choose sides, raising fears of a spilt into two camps – an outcome that could harm business and raises the risk of conflict.

 

Bursting at the seams

The core challenge is China’s growing sway.  China’s economy has grown from about USD1.2 trillion in 2000 to USD11 trillion today.  Beijing is now a regional great power, a loud voice in international conclaves, and a crucial trading and investment partner for its neighbours.  Its military budgets have swollen from USD20 billion in 2002 to more than USD150 billion today.

This rising power, and the apparent prostration of the US after the 2008 financial crisis, has encouraged Beijing to challenge US predominance.  China’s steps have fallen short of overt confrontation, but nonetheless put significant strains on the US-led ‘hub and spoke’ system of bilateral alliances. 

 

The US pivot to Asia

In response, Washington in 2011 launched a “pivot”, or rebalancing, towards Asia – an effort to improve policy coordination so as to shore up security in Asia.  The pivot came, at least in part, in response to demands from states in the region that fear China’s assertiveness and seeming desire for hegemony.

The pivot has a mixed record so far.  Its greatest successes are diplomatic.  The US has enhanced existing alliances, and built new ties with states such as Vietnam.  US allies have also established new ‘spoke to spoke’ links. 

The military dimension has also scored some successes.  Key developments have included a rotating base arrangement in Darwin, Australia, new guidelines on defence cooperation with Japan, an Enhanced Defence Cooperation Agreement with the Philippines, and an agreement to deploy Terminal High Altitude Area Defence (THAAD) radar systems in South Korea. 

[Text Box: Current Intelligence (CI) is Thesigers’ flagship publication, surveying developments in the political and intellectual landscapes of Africa, Asia and the Middle East. Kit Dawnay is Asia Editor for CI, based in Hong Kong. Email: cpd@thesigers.com. Thesigers conducts research and analysis for government, corporate and private clients. For more on the subject of this brief, or to subscribe to our services, contact us directly. © THESIGER & COMPANY LIMITED. All Rights Reserved.] The economic component is the most overt failure so far.  The Obama administration has championed the Trans-Pacific Partnership (“TPP”), a regional trading arrangement excluding China, but it has yet to secure ratification in the US, and elsewhere.  

 

Two armed stockades?

China’s rise and the US pivot are thus changing the strategic landscape.  Washington has denied that China is its target, but Beijing nonetheless believes the pivot is an effort to curtail its rise, its fears driven in part by intense strategic distrust.  Bilateral relations have deteriorated sharply since 2010.      

Worse, neither Washington nor Beijing seems willing to forestall this decline.  The pattern has been of high level meetings halting the downward trend, but only for a short while, and with no change in overall trajectory.   

Both powers now demand support from regional powers.  Most states had sought to evade commitment, but, more and more, they have no choice.  Separate camps are forming.

 

A concert of democracies…

On the one side are the American allies and associates, most of whom are democratic, maritime states.  Most important is Japan, a US treaty partner with troubled ties with China, and which disputes the Diaoyu/Senkaku Islands in the East China Sea.  The problem of North Korea adds to Japanese wariness of Beijing.  Tokyo has thus bolstered its military, amended the Self-Defence Forces’ (SDF) guidelines on overseas support, and could rewrite pacifist Article 9 of its constitution. 

Another long standing ally is South Korea.  Unlike Japan, Seoul had sought stronger ties with China; President Park Geun-hye attended a military parade in Beijing in September 2015.  However, Beijing’s equivocation over North Korean nuclear tests eventually prompted Park to agree in September 2016 to deployment of the THAAD radar system, so angering China.  Park has made her choice.

In Taiwan, the election of President Tsai Ing-wen has tilted Taipei away from the previous government’s policy of cross-Straits rapprochement.  Relations may now worsen, meaning Taiwan will draw more heavily on Washington for its security. 

In South East Asia, China’s assertiveness had brought the main South China Sea disputants, the Philippines and Vietnam, closer to Washington.  That said, the Philippines is now turning away from Washington for domestic reasons, while Vietnam still hedges, with ties to Russia balanced with links to the US. 

Other states, such as Singapore and Indonesia, support the US presence, even if they have no wish to damage links with China.  Myanmar has drawn away from Beijing’s orbit, but retains deep commercial ties with China’s Yunnan province. 

Down south, Australia is another close ally of the US that has struggled to balance trading ties with China and security obligations to Washington.  Of late, though, China’s pushiness has encouraged Canberra to voice its support for the US. 

Finally, New Delhi has a fraught relationship with China, owing to frictions over the Himalayan border and Beijing’s “all-weather” friendship with Pakistan.  Moreover, India’s control of the Andaman Islands near the Malacca Straits provides leverage in the South China Sea, even if New Delhi shuns reliance on the US. 

 

An axis of authoritarianism?

By contrast, China’s camp has an authoritarian, Eurasian flavour.  Beijing’s closest ally is North Korea, which provides a buffer for China’s north east and offers leverage over South Korea and Japan – if at a cost of regional instability. 

In South East Asia, China’s strongest allies are the continental states, Cambodia and Laos, both small dictatorships. More important is Thailand, which has drawn closer to China since a May 2014 coup despite its US alliance, but is preoccupied with domestic instability.  China is also courting Malaysia, Brunei, and perhaps the Philippines.  

China’s key partner, though, is Russia.  These two authoritarian giants have huge differences – Russia’s Primorskii Krai was the fruit of an “unequal” treaty with China.  Yet both sides have nurtured their “quasi-alliance”, carefully managing differences and coordinating efforts to constrain US power.  Russia is now investing heavily in its Pacific Fleet, so adding pressure on the regional balance of power. 

 

What next?

These groups are loose-knit, but the risk of Asia dividing into two camps is nonetheless becoming more likely. Any such development presents serious concerns.  An economic worry is that each group may favour links with its partners, so weakening the international production chains that underpin Asia’s prosperity.

A second concern is that division into opposing camps could encourage states to take risks they would otherwise eschew, or that the great powers treat minor incidents as proxy contests threatening their standing.  This risk is especially salient given the many flashpoints in Asia, such as the East China Sea, the Korean Peninsula, the South China Sea, the Taiwan Straits and Kashmir, any of which could spark a major war. 

 

Conclusion

The risk of Asia dividing into two blocs is growing, and with it the prospect of protectionism or conflict.  Parallels even exist with Europe in 1914, when the emergence of two loose-knit camps helped turn a clumsy Balkan murder into a great power war.  All told, Asia is becoming less stable, a change that businesses and policymakers must take into account in their strategic planning processes, lest they leave their interests exposed to undue risk.  

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Citation: “A New Cold War in Asia?,” Current Intelligence (17 Oct 2016).

Drafted: 2016-10-14. Published: 2016-10-17. Posted online: 2016-10-22.

Keywords:  AUSTRALIA, CAMBODIA, CHINA, HUB AND SPOKE, INDIA, JAPAN, LAOS, PHILIPPINES, RUSSIA, SOUTH KOREA, TAIWAN, THAILAND, UNITED STATES, VIETNAM, SOUTH CHINA SEA, TRANS-PACIFIC PARTNERSHIP, US PIVOT, WAR IN ASIA

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