China and the US in Asia: Four Scenarios for the Future

By Andrey Kortunov

A few months ago, the author wrote an article for the RIAC website on possible variants of the new international architecture on the European continent that might take shape over the next few years. Arguing that European politics will turn towards Moscow–Brussels relations, the article attempted to construct several scenarios for Europe’s future depending on the possible development trajectories of Russia and the EU through 2024. The scenario matrix for Greater Europe was built along two axes: a weak (fragmented) EU versus a strong (coherent) EU and Russia without reforms (running by inertia) versus Russia with reforms. The outcome was four generalized scenarios (“Eurasian Melting Pot,” “Two-Fold Greater Europe,” “No Man’s Land,” and “New Cold War”).

The article was viewed many times and prompted multiple comments, including questions as to whether the proposed scenario scheme was applicable to other regions, particularly Asia. The text below is a brief sketch of a scenario matrix for Asia, or rather for its greater part. West Asia – from Iran to the Eastern Mediterranean – appears to be an independent sub-system of international relations developing according to its own laws and requires a separate matrix.

Choosing independent variables

Even if we exclude the Middle East, which is hugely important for the region, Asia remains a far greater, far more complex, and far more fragmented continent than Europe. There are no thousands of years of common history, no clearly dominant religion, no apparent analogue to “European values.” Multilateral institutions in Asia are not as well-developed as in Europe and security problems – from nuclear proliferation to border conflicts – are more numerous. Economic paradigms and political regimes in Asia are less homogeneous than in Europe; any choice will be subjective and overlook important bifurcation points in the development of Asian order/chaos.

Nonetheless, we might suppose that development of international relations in Asia in the coming years will be largely determined by two basic factors. First, the dynamic of correlation between the economic, academic, technological, military, strategic, and political potentials of China and the US. The general tendency here is obvious: over at least the last three decades, the balance of power has been steadily shifting toward China. There is no reason to believe that this tendency will change in the near future. Of course, the process is not linear: accelerations, decelerations, halts and even backward movements are possible, This is especially true of the military, strategic, and political components of a national power, as they are less prone to inertia and are more flexible than the economic, academic, and technological components.

Second, Asia’s future largely depends on the correlation between elements of collaboration and conflict, stability and instability, inter-dependence and protectionism, universalism and particularism, moderation and extremism, etc., in the continent’s development. Traditionally, most Asian countries have succeeded in finding an acceptable balance between the imperatives of the region’s economic development and those of the domestic political agenda. However, maintaining this balance in the near future is far from guaranteed. The general growth of nationalism, rise of religious fundamentalism in Asia, increasing military spending, resurrection of old hostile historic narratives, risks of WMD proliferation, and rise of international terrorism suggest considering a “confrontational” scenario for the international system’s evolution as at least possible, if not the most probable scenario.

Combining the horizontal axis (which records the changing balance of power between China and the US) with the vertical one (which measures the correlation between elements of collaboration and conflict in international relations in Asia), we get a matrix of four development scenarios for China-US relations and for the international system on the Asian continent as a whole. Naturally, this matrix is highly schematic and in no way exhausts all the development possibilities of international relations in Asia. Nonetheless, it can serve as a starting point for more comprehensive and more complete scenario forecasts concerning the future of the Asian continent.

Washington consensus 2.0

This scenario is based on the Trump Administration’s success in preserving – at least temporarily – the geopolitical status quo in Asia. In this scenario, the US is able to slow down or suspend entirely those changes to the balance of power between China and the US that are negative for the US. Economic development of the US accelerates while China’s economy decelerates significantly, accumulating fundamental structural problems. The economic pressure Washington consistently puts on Beijing bears fruit. The deficit in US-China trade decreases significantly. Trump succeeds in wringing concessions out of China on other fronts as well (currency exchange rates, non-tariff restrictions, intellectual property, etc.). There are no dramatic shifts in China’s favor in the military strategic balance between the two countries either: the consistent increase of China’s military spending is parried by large-scale efforts to modernize the US military, including its Navy.

At the same time, military political tensions on the Asian continent generally deescalate. Pyongyang freezes its nuclear and ballistic programs and the North Korean conflict gradually becomes less critical. Territorial disputes in the South China Sea remain unresolved, but they do not provoke bitter political crises in Southeast Asia. Economic interdependence between Asian states deepens and the expanding middle class in most Asian countries becomes the foundation of Asia’s political stability. The US returns to the idea of joining the Trans-Pacific Partnership, taking into account new bilateral economic and trade agreements already signed with partners in the Asia Pacific. The Regional Comprehensive Economic Partnership promoted by China is stalled by numerous multilateral and bilateral disputes on specific issues. Political extremism and international terrorism in Asia are on a downward trend. The arms race between Asia’s leading countries slows down, and in its place is competition in the economy and competition between social development models.

This scenario means preserving and, in some areas, bolstering American influence in Asia. The Pacific and Indian Oceans remain free for navigation, including navigation by the US and its allies’ Navies and Air Forces. Traditional American allies remain loyal to Washington even though they actively develop economic collaboration with China. US–China cooperation continues and expands in the G1.5 format rather than the G2, with the US the senior partner setting the rules of the game. It is even possible that the US and China will reach some agreements on nuclear arms control, although the US has a decisive nuclear advantage (particularly in sea- and air-based nuclear strategic forces).

On the other hand, the US continues to put pressure on China on such issues as human rights, civil society development, and Internet freedom. This pressure resonates with certain groups within China, particularly among educated urban youth and the growing Chinese middle class. Preservation and bolstering of America’s positions in the Pacific and Indian Oceans compel Beijing to pay greater attention to resource and transit options afforded by continental Eurasia, thereby increasing the significance of Russia and Central Asia for China’s strategy.

China–India Axis

In this scenario, the US does not succeed in slowing down further growth of China’s power in any of its manifestations: economic, research, technological, military, strategic, and political. Moreover, a new cyclical crisis in the American economy (2019–2020) speeds up the shift in the balance of power between the US and China in the latter’s favor. Washington’s positions in Asia are also undermined by the profound and ongoing domestic political crisis in the US that prevents Washington from conducting a consistent foreign policy. The US political establishment remains deeply split on the country’s optimal strategy regarding China: proponents of consistent “containment” of Beijing are opposed by adherents of “engagement.” At the same time, the US’s harsh unilateral policies toward their partners and allies in Asia accelerate the relative decline in American presence in Asia. Washington’s rejection of the Trans-Pacific Partnership has long-term negative consequences due to the US’s inability to exert a decisive influence on shaping new rules in Asia Pacific. On the other hand, China achieves major successes in structural revamping of its economy without sacrificing either sociopolitical stability or its high growth rate. China’s economy opens up, especially toward neighboring Asian states. China takes the place of the US as the chief proponent of free trade in Asia and in the world in general. The Regional Comprehensive Economic Partnership steadily progresses; the free trade zone in Asia extends beyond its original geographic boundaries and gradually turns into a continent-wide integration project.

Asia’s military and political situation develops along the lines of the first scenario: elements of international cooperation come to exert ever greater dominance over elements of confrontation. A major military political crisis in Beijing-Washington relations is avoided; territorial and border conflicts gradually become less of an issue; the logic of economic interdependence wins over that of the geopolitical balance of power. The “reset” in China-India relations gains particular significance, comparable in its consequences to the “reset” in Russia-China relations in the late 20th and early 21st centuries. China, on the rise and confident in its power, agrees to significant concessions to India on border issues, recognizing India’s strategic leadership in South Asian trade and economic relations. India joins China’s “One Belt – One Road” project. The degree of India’s involvement in Asian trade increases rapidly.

Ultimately, Asia’s life is being determined by the emergent China–India axis, similar to the central role the Berlin-Paris axis played in West European integration in the second half of the 20th century. China–India cooperation is primarily economic but gradually spreads into the political. The US endeavors to balance the Beijing–New Delhi axis by boosting military political cooperation with India, but as India’s relations with China improve, New Delhi needs the US security umbrella less and less. Russia also nudges China’s leadership toward more active cooperation with India, since it is highly undesirable for Moscow to have to choose between Beijing and New Delhi. At the same time, additional risks emerge for Russia owing to Beijing possibly revising its economic and strategic priorities in favor of South Asia at the expense of Russia and Central Asia. Transforming the China-India axis into a fully-fledged China-India-Russia triangle remains Moscow’s strategic objective, primarily economically.

Since Washington loses positions in continental Asia, it has to rely mostly on its traditional allies on the periphery of the Asian continent, from Japan to Australia. With each passing year, these traditional allies find it increasingly hard to combine their pro-American military and political orientation with an economic reorientation toward China and the consolidation of Asia as a whole.

Multipolar balance of power

The scenario is based on preserving US hegemony on the continent (as in the first scenario), but under a significantly escalated military political situation in Asia. Increasing socioeconomic problems in most Asian countries, including China and India, lead to a rise in nationalism and political radicalism. Border conflicts and other territorial problems become the focus of national priorities, and populists bolster their positions in both democratic and authoritarian states on the continent. The arms race in Asia proceeds on an ever greater scale. Numerous attempts to agree on multilateral confidence-building military measures fail. From time to time, the continent is rocked by critical political crises and border clashes. Plans for economic unification of Asia fail under the onslaught of protectionism and bitter fights for resources.

Chronic political instability, separatist movements, religious conflicts, and numerous terrorist attacks prevent major infrastructural projects from being implemented on the continent. As a result, China’s “One Belt – One Road” project is realized in a reduced form with limited consequence for Asian countries. Instead of developing a single Asian economic space, most Asian states in their trade and economic strategies are oriented toward external markets (North America and Europe). Asian countries are locked in a fierce struggle over US and EU markets, allowing the West to secure profitable terms of trade with the East.

In such circumstances, the US can afford to play the role of an “offshore balancer”, maintaining a multilateral balance of power on the Asian continent and conducting a policy of “mediated” containment of China by providing incremental support to its real or potential opponents on the continent, including Japan, South Korea, ASEAN countries, Australia, New Zealand, and India. India is the principal, though not the only, counterbalance to China, and enters into a de-facto alliance with the US (or even becomes a de-jure American ally). Shipments of US arms to Asian countries increase. Bilateral and multilateral agreements with old US allies are renewed.

Containment of China, naturally, does not exclude Washington’s selective cooperation with Beijing, just as it does not exclude using the “Chinese menace” to further consolidate US positions in the Pacific and Indian Oceans. China’s relative weakness and the numerous tensions among Asian countries allow Washington to minimize its immediate involvement in conflicts in Asia while maintaining a complex multilateral balance of power in Asia. In other words, Washington implements the strategy that the British Empire tried to implement with varying success in continental Europe in the 19th century (China’s closest analogue in this case being the Russian Empire).

New bipolarity

The fourth scenario entails a simultaneous rise of China (as in the second scenario) and a general slump in socioeconomic, military, and political stability in Asia (as in the third scenario). Growing challenges to national security in Asian countries make it increasingly difficult to preserve the freedom of political maneuver, and the countries face a harsh choice between Beijing and Washington. As a result, Asia and the international system as a whole is divided into “Chinese” and ”American” blocs locked in a political, military and strategic, and possibly economic confrontation. Like the Soviet-American bipolar world of the 20th century, this new bipolarity gradually establishes new rules of the game acceptable to both parties, adopting the requisite agreements and generating new mechanisms for arms control. One could even imagine emergence of some new “non-aligned movement” and countries defecting from one camp to the other.

The crucial question in this scenario is the location of the “great Asian rift.” If the US succeeds in enshrining today’s tendency of India-US strategic rapprochement, the rift will divide “maritime democracies” from “continental autocracies.” If the US fails, the rift will run between the Asian continent and the island states of the Pacific. On the other hand, India may take a stance similar to that of De Gaulle’s France: while remaining within the general framework of the “maritime democracies” partnership, it will not immediately participate in anti-China military alliances (as in 1966, when Paris withdrew from NATO’s military structure).

The new bipolarity will increase Taiwan’s strategic significance for the US, and the American strategy will counteract attempts at economic integration and political unification of Taiwan and China. The Japan-China confrontation will not only be preserved, butwill gain additional impetus. With regards to Russia, the emergence of a new bipolarity will increase Russia’s dependence on China, since attempts to retain a “diversified portfolio” of political investment in Asia by expanding cooperation with Japan, South Korea, Vietnam, Indonesia, and India will inevitably run into the harsh logic of bipolar confrontation.

It is hard to say how the new bipolarity will work in a globalized and interdependent world. Will the parties succeed in separating economic collaboration from political confrontation? Will they discipline their “junior partners” and non-state actors in global politics? Will they agree on joint approaches to global problems? Today, hardly anyone is ready to offer answers to these questions. One thing is clear: the new bipolarity of the 21st century would, in any case, be less stable and dangerous than the old bipolarity of the past century. It would apparently, sooner or later, evolve toward one of the three preceding scenarios.

“Black swans”

Any forecast should contain references to “black swans.” These are critical events with hard-to-predict probability that can fully or greatly change the forecast. Several such events may be mentioned in creating a forecast for the Asian continent.

A large-scale military conflict in Asia. Although such a conflict does not appear particularly probable, the possibility cannot be entirely discounted. Setting aside the probability of violence escalating in certain Asian countries (Afghanistan, Myanmar, etc.) and of the situation destabilizing in one of the Central Asian states, we should keep in mind at least three variants of a large-scale war on the continent: (1) a war on the Korean peninsula involving the US and China; (2) naval clashes between China and the US or land clashes between China and India; (3) another border conflict between India and Pakistan escalating into a full-blown regional war. This conflict would have different impacts on China-US relations and on the situation in Asia as a whole but, in some way, would push the continent toward new strife and bipolarity and would limit the possibilities for economic unification of the continent.

The rise of Islamic radicalism. The Muslim population of Asia, even without the Middle East, will grow at rates outstripping the overall population growth of the continent. Islam is gaining particular influence in Southeast Asia, where some countries (Indonesia, Malaysia, the Philippines) already have a network of international terrorist cells. A series of major terrorist attacks or attempts to seize power would have a great influence on both the political agenda in some Asian countries and on the priorities in their cooperation. For China, equally major challenges would be Islamic radicalism joining forces with separatist movements in the Xinjiang Uyghur Autonomous Region and growing discrimination against ethnic Chinese in Southeast Asia. The common threat could become an additional stimulus to multilateral cooperation in security, but ethno-nationalism and religious intolerance will impose strict limits on such cooperation.

An unexpected and severe financial and economic crisis that far exceeds the Asian crisis of 1997–1998 and the global financial crisis of 2007–2008 in both scale and depth. Shaken foundations of Asian economies would lead to major adjustments to the continental balance of power, changes to the macroeconomic strategy of leading Asian countries, and negative consequences for sociopolitical stability in some countries. Such a crisis could result in a relative weakening of the “Asian periphery” and strengthening of the “Asian nucleus”, primarily China. Another possible outcome of financial turmoil would be another “fine-tuning” of the global monetary financial system. It appears unlikely, however, that if the monetary and financial dominance of the West is preserved, Asia would gain anything substantial from such “fine-tuning.” Rather, Asian countries would have to shoulder major expenses to emerge from the crisis.

A major technological breakthrough of global significance. A technological revolution in one of the principal areas of today’s economy (energy, transport, artificial intelligence, robotics, biotechnologies, e-commerce, 3D-printing) is capable of changing significantly the established rules of the game in global economic relations. For instance, it could create opportunities for bringing much industrial production back into Europe and the US from Asia, cutting sharply the need for Asian labour force in individual manufacturing and non-manufacturing sectors and radically changing the geography of global investment. Economic and social consequences of a major technological breakthrough would have a significant impact on the entire world, but the biggest players in new forward-looking technologies would reap the major benefits. China remains such a player, and, with qualifications, so do India and Japan. Foreign political influence would further shift from traditional instruments (military power, raw materials, and energy resources) to non-traditional (human capital, education, innovations). At the same time, Asia might become the main victim of the next generation of international cybercrime, more comprehensive and larger in scale than previously recorded.

“An economic miracle” in Russia or Japan. Russia and Japan are two large Asian countries that, for a long time, have been developing much more slowly than their dynamic neighbours on the continent. The “relative weight” of Russia and Japan in Asia’s economy is steadily falling and so are, accordingly, their long-term possibilities for influencing the future of Asia’s political space. Russia and Japan also have similarly severe demographic problems not typical of most other countries on the continent. A further drop in the “relative weight” of the two countries on the continent is considered by leading actors both in Asia and beyond. The presumption is that, should current trends remain, Japan will follow in the wake of US policies in the Asia Pacific and Russia will follow that of China’s Asian policies. Even so, if Japan’s “Abenomics” or Russia’s “economic spurt” strategy during Vladimir Putin’s fourth presidential term succeed, the situation might change drastically. The configuration of continental balances will become far more complex and the new continental order is likely to be more stable.


RIAC

22.06.2018

 

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